Chapter 3

Commercial Document
Objectives

• Identify documents used in international trade

• Distinguish between the similar documents with different names and

functions

• Analyze the application of these documents in different transactions of

international trade
The Purposes of Documents

The general purpose of all categories of international

trade documents is to facilitate, control, and keep track
of international cargo movements
 Documents in International Trade and Payment

Commercial Documents Financial Documents

Transportation Documents Insurance Documents Commercial Documents Bill of Exchange

Bill of Lading Insurance Policy Invoice Promissory Note

Cheque
Certificate of Origin
Seaway bill Certificate of Insurance
Card
Packing list
Insurance Broker’s
Airway bill Note
Inspection Certificate

Other documents

Other documents

4
 TRANSPORTATION DOCUMENTS

- Bill of Lading B/L

- Sea Waybill (SWB)
- Air Waybill (AWB)
- Multimodal Transportation Bill of Lading
 B/L – Bill of Lading
- A Bill of Lading is a contract between a carrier and consignor for the
transportation of goods, it is a receipt issued by a carrier to a consignor for the
goods received for transportation, and evidence of the title to the goods in case
of dispute.
- A Bill of Lading is a document that a transport company possesses
acknowledging that it has received the goods, and serves as a title for the
purpose of transportation. It is primarily a receipt for goods delivered to a
carrier.

title to the goods: chứng từ sở hữu hàng hóa evidence of title to the goods
6
6
 Bill of Lading
- The Consignor: The party deliver the goods to the carrier. The consignor is usually the
seller but can also be any one of a variety of agents, brokers, forwarders or others.
- The Carrier: The party accept legal responsibility to provide transportation. The carrier
may be the transportation company itself but it also may be an entity assuming the legal
responsibility of a carrier but arranging actual transportation by another company.
- The Consignee: The party receive the cargo. This may be the buyer, the seller, a bank,
an agent or anyone entitled to delivery on arrival. The consignee may or may not be
changed after be B/L is issued
 The Contents Bill of Lading
- The points of origin and destination
- The name, address, and telephone number of the carrier that should be contacted
in relation to the transportation of the shipment
- The agreed date or period of time for pickup of the shipment and the agreed date
or period of time for the delivery of the shipment
- The maximum amount required to be paid at the time of delivery to obtain delivery
of the shipment when the transportation is to be performed on a COD basis and
- Evidence of any insurance coverage sold to or procured for the shipper including
the amount of the premium for such insurance
 Important Functions of Bill of Lading
1. As a receipt: shipped on board in apparent good order and condition
2. As contract of carriage: contract itself made before bill of lading is
issued
3. As evidence of title: Document of title to the goods, transferring
ownership to the holder, who may collect the goods from the carrier
at the destination port.
4. It is a negotiable instrument accepted by banking institutions
 How to receive the goods at port of destination?

- When the consignor delivers the goods to the carrier, the carrier
issues the original documents and give all of them to the exporter.

- The consignor delivers full set of original documents to the consignee

and after that the consignee has to present full set of original B/L to
the carrier to receive the goods.
 Classify Bill of Lading

Straight B/L Through B/L

Bearer B/L Order B/L

Clean B/L Foul B/L

Shipped on
Received B/L
Board B/L
13
 Straight Bill of Lading
- Straight Bill of Lading is the Bill of Lading which names one specific
consignee to whom delivery must be made.
- The carrier is responsible for making certain that it delivers the goods to
the right consignee named on the Straight Bill of Lading and should
obtain proof in the form of a delivery receipt signed by the consignee or
its agent.
- A Straight Bill of Lading is also called a direct consignment because the
shipment must be delivered directly to the named consignee.
 Order Bill of Lading
- The Order Bill of Lading is written (drawn) “To Order” of the consignee
and is, therefore, a negotiable-instrument of title. Ownership of goods
can be transferred by one party to another by signature (endorsement)
and delivery of the B/L.
- Goods are shipped under “To Order” B/L which is of two types: (1) To
Order, Blank Endorsed: not consigned to any named party
 Order Bill of Lading
- The Order Bill of Lading can be used to help protect the shipper from
the nonpayment of goods. The shipper can ship the cargo to him/herself
as consignee and only endorse the shipment over to the buyer when the
payment is made. If the payment is never made, the shipper retains
possession and title to the goods. In this case the shipper is originally
both the consignor and the consignee
 Bearer Bill of Lading
- If the original consignee merely endorses the Order Bill of Lading
without naming a new consignee, the Bill of Lading becomes a Bearer Bill
of Lading and anyone who presents the original to the carrier may claim
the cargo.
 Through Bill of Lading
- Often a number of carriers are involved, each providing transport for on
leg of a journey. These carriers may have an agreement between
themselves or there may be an agreement made by a freight forwarder,
for a single B/L to contract for all transportation. Such a B/L will cover the
journey from the port of origin to each intermediate carrier in tern, all
the way to the destination. This B/L is called a Through Bill of Lading.
 Clean/Unclean Bill of Lading
- Before a B/L is issued, a representative of the carrier will inspect the
shipment for damage to make certain that the contents of the shipment are
represented correctly. If no apparent damage can be noted and the contents
of the shipment match the Bill of Lading, a Clean Bill of Lading will be issued.
- If any damage can be seen or if the contents are not what were represented,
a notation will be made and the document is then called a Foul Bill of
Lading. If no exceptions are noted on the B/L, it is assumed to be a clean
B/L.
 Received, Shipped on board Bill of Lading
- A B/L will note the location of the cargo as of its issuance. If the B/L
marked received, the cargo has been delivered to the carrier but not
yet loaded on the conveyance.
- If it is marked on board, the cargo has been loaded on the conveyance
but the conveyance has not yet begun its journey. An on board B/L is
the most common type.
 SWB – Sea Waybill
- A Sea waybill is a transport document for maritime shipment which
serves as evidence of the contract of carriage and as a receipt for
the goods, but is not a document of title.
- The sea waybill indicates the on board loading of the goods and can
be used in cases where no ocean bill of lading and no other
document of title is required.

23
23
 How to receive the goods at port of destination?

- When the consignor delivers the goods to the carrier, the carrier issues a sea
waybill.

- At the port of destination, the goods can be delivered to the person identified in
the document, and they will simply have to verify their identify instead of
presenting a full set of original documents as B/L.

- When shipment is loaded, the shipper receives a SWB as a reference. In this case,
neither the shipper nor the importer are obligated to submit any additional
documents to the carrier, and therefore the cargo is released as soon as it is
available at the port.
(?) What are differences between B/L and SWB?

(?) In which case, SWB is used to replace B/L?

 AWB – Airway bill
- Airway bill is a transport document issued by a carrier for air transportation.
If issued by the actual carrier, it is a master air waybill. If issued by an air
freight consolidator or forwarder, it is a house air waybill.
- The airway bill is issued in three originals and is not negotiable and non
endorsable. So, it does not evidence title to the goods. It indicates only
acceptance of goods for carriage.
- In order to maintain some control of goods not paid for by cash in advance,
sellers often consign air shipments to their sales agents, or freight
forwarders’ agents in the buyer’s country.
26
26
(?) Why is an airway bill not negotiable document?
 Multimodal Transportation Bill of Lading

- Multimodal Transport Bill of Lading is transport document covering

transport by more than one mode of transport.
- Multimodal Transport Bill of Lading is mostly printed on International
Federation of Freight Forwarders Associations (FIATA) standard pre-printed
bill of lading forms.

28
28
Multimodal Transportation Bill of Lading

- There is only one (single) contract; There is only one freight for carriage;
There is only one transportation document; There is only one carrier who is
responsible for the entire carriage (he is called a multimodal transport
operator – MTO).
- Multimodal Transportation Bill of Lading is a negotiable document.

29
29
Commercial Invoice
- Request for quotation
- Quotation
- Pro forma invoice
- Terms and conditions of sale
- Purchase order
- Order acceptance and confirmation
- Sales contract
- Commercial invoice 30
30
Request for Quotation
- Buyers and sellers can exchange any number of letters, telephone calls and
fax and email messages as the initial steps of an international transaction.
This will normally lead to a Request for Quotation. This can be a simple fax
or other form of message.

31
31
Quotation
- The exporter would logically follow with a Quotation, which is basically the
price for which he/she can supply the goods with the specified shipping and
payment terms. All the costs, and his/her profit or commission, must be
included.

34
34
Pro forma Invoice
- Sometimes an importer will want a more forma document that will help
him/her get an import permit or foreign exchange authorization and/or to
open a letter of credit, she may go one step farther and ask for a Pro Forma
Invoice.
- This looks like a regular commercial invoice, except that it says “Pro
Forma” at the top. It is not the actual commercial invoice but is almost
exactly what the real invoice will look like.

36
36
Purchase Order and Order Acceptance and
Confirmation
- If the importer is satisfied with the quotation and/or pro forma invoice,
he/she may place an order. This can be a simple oral or written statement
such as “We hereby order as per your pro forma invoice number 627”.
- The exporter should reply with a simple statement such as “We accept your
Purchase Order No.291/91, dated May 2, 2001.

38
38
Commercial Invoice
- An Invoice is a document that provides information about the terms and
conditions of a sales transaction. A number of different types of invoices are
used in international trade: Commercial Invoice, Pro forma Invoice,
Provisional Invoice, Certified Invoice, Consular Invoice, Detail Invoice,
Custom Invoice.
- A commercial invoice is used for most purposes. It is simply a document
prepared by the seller on its own form that sets forth the names of the
parties, the type of merchandise sold, the price and other information the
seller deems relevant
40
40
 INVOICE
Seller: (1) Invoice No. and Date: (3)
Seller’s Reference:
Buyer’s Reference:
Consignee: (2) Buyer (if not Consignee):
Country of Origin of Goods: Country of Destination:
Terms of Delivery and Payment: (4) Vessel/Aircraft etc.:

:
Marks and numbers Numbers and Kind of Packages; Quantity Price Amount (State Currency)
Description of Goods

(5) (6) (7)

Total (8)
Freight and Insurance: (9) Name of Signatory:
Place and Date of Issue: (3)

It is hereby certified that this invoice shown the actual price of the goods Signature: (10)
described,that no other invoice has been issued,and that all particulars are true and
correct.

9/23/2021 43 43
 MEDIA NYLON COMPANY LIMITED
Room 2203, ,Shun Tak Centre, central,.

Tel:2858 3266 Fax:2858 3193

INVOICE
To: CHIHA JOINT STOCK COMPANY Marks:
ADD:MINH KHAI, LA PHU,HOAI DUC, NYLON 6 DTY
HA TAY,VIET NAM
Contract No.: 08MDEY127 Invoice No.: 08EY-125
Shipped per:BO SHI JI 362/V.080315000000 Sailing date: MAR 15,2008
From: JIANGMEN,CHINA To: HAIPHONG PORT,VIETNAM
Description Quantity Unit Price Amount
“DRAWN UNDER BANK FOR AGRICULTURE HATAY BRANCH, CREDIT NUMBER.2200ILS080300021 DATED MAR 07,2008.”

USD USD
CIF HAIPHONG PORT,VIETNAM ,INCOTERMS 2000
NYLON STRETCH YARN
DTY 78DTEX/24F/1/SD’Z’ B GRADE 7,004.86 KGS 3.24 22,695.75

7,004.86 KGS 22,695.75

MANUFACTURER : MEIDA NYLON COMPANY LIMITED

ORIGIN : CHINA

DOLLARS TWENTY TWO THOUSANDS SIX HUNDRED NINETY FIVE AND CENTS SEVENTY FIVE ONLY.**
9/23/2021 44
Certificate of Origin
- What is C/O?
- What are the purposes of C/O?
- Who issues C/O?

45
45
Certificate of Origin
- As per WCO’s (World Customs Organization) definition, a proof of origin is
a document or statement (either in paper or electronic format) which serves
as a prima facie evidence as to the origin of the goods. A proof of origin
may be a certificate of origin, a self – issued certificate of origin, a
declaration of origin.
- According to ICC, a certificate of origin is an important international trade
document that certifies that goods in a particular export shipment are wholly
obtained, produced, manufactured or processed in a particular country. They
also serve as a declaration by the exporter.
46
46
Certificate of Origin
- The government authority or body empowered to issue this C/O is usually a
Chamber of Commerce in the issuing country.
- A Chamber of Commerce is an organization setup to promote, protect and
represent the interests of the various businesses in the community or area in which
they are present.
- An exporter can apply for two types of Certificate of Origin:
+ Non – Preferential C/O: certifies that the country of origin of the goods
does not qualify for any preferential treatment. This is the most common type of
C/O.
+ Preferential C/O certifies that goods are subject to reduced tariffs or
exemptions when they are exported to countries extending these privileges. This
C/O may be needed to comply with L/C, foreign Customs requirements or a buyer’s
47
request. 47
(?) What are the purposes of C/O?
Case study: The Malayan Fishing Company
- An Malayan Fishing Company, specialized in frozen shrimps has
understood that there are marketing opportunities for their type of shrimps
in Europe. Limited buying power in the homemarket has let to cut-throat
margins, so the company needs immediate export business and profits.
- There was no specific consignee named in the market but they issued a
straight Bill of Lading and conveyed the cargo to the carrier. The cargo was
loaded on the first available vessel to leave for Europe. A representative of
the carrier had an inspection on the cargo and found out that there was a
damage on few cartons and after the inspection a clean bill of lading was
issued. 49
49
Case study: The Malayan Fishing Company
- The commercial invoice, the packing list and the certificate of origin
accompanied the goods.
- Upon arrival of goods to one of the buyers, he asked for a quality inspection
certificate or he said he would do it himself and buy the goods in open-
account terms. The Malayan Company had no other choice but accept this
payment terms as they had no inspection certificate which is a must in
European countries.
- Other buyers got their goods as well and paid at open account terms basis.
This has been a good trial business for the Malayan Company but not a
profitable one
50
50
Case study: The Malayan Fishing Company
Questions:
1. Do you see anything wrong with the preparation of the B/L?
2. What do you think about the issuance of clean Bill of Lading?
3. Why did the buyer ask for an inspection certificate?
4. What do you think about the method of payment in this case?
5. What are your comments about the overall performance of the Malayan
Company?

51
51
Insurance Documents

? Why do importers/exporters need cargo insurance for their goods?

52
52
Insurance Documents
- There are three types of insurance documents:
+ Insurance Policy: The insurance policy sets out all the terms and
conditions of the contract between the insurer and insured.
+ Certificate of Insurance: It is an evidence of insurance but does not
set out the terms and conditions of insurance. It is also known as “Cover
Note”.
+ Insurance Broker’s Note: It indicates insurance has been made
pending insurance of policy or certificate. However, it is not considered to be
evidence of contract of insurance.
53
53
Cargo insurance policy

54
Certificate of Insurance

55
1 – Reduce exposure to financial loss.
If you’re an exporter who has not been paid for the goods at the time of shipment, or an importer who has paid for all or part
of the goods prior to receiving them, you run the risk of suffering a financial loss if the goods are lost or damaged during
transit.
2 – General Average – Expedite the release of your cargo.
You may be required to post a bond and/or cash deposit in order to obtain release of your cargo following a general average –
even though there was no loss or damage to your goods. By purchasing insurance, your insurance company assumes the
responsibility and expedites the release of your cargo. General Average is an internationally accepted principle where if
certain types of accidents occur to the vessel, all parties share in the loss equally.
3 – Contractual Requirement
Your sales contract may obligate you to provide ocean cargo insurance to protect the buyer’s interest or their bank’s interest.
This is especially true when selling goods CIP or CIF. Failure to do so cannot only subject you to financial loss if there is loss or
damage to the goods, but non-compliance with the terms of your contract with the buyer can lead to loss of sales and legal
problems.
4 – Coverage for limited carrier liability
The carriers, by law, are not responsible for many common causes of loss that occur in transit (for example, acts of God,
general average, etc.). And, even if they are liable, carriers’ liability in the event of a loss is limited – either by contract in the
bill of lading or by law. In most cases, you will only recover cents on the dollar from the carrier.
5 – Have more control over insuring terms
Relying on the buyer’s or seller’s insurance may be a viable option, but you must be satisfied that the insurance has in fact
been purchased and that the insuring terms, valuation, and limits provided by each insurer on each shipment are adequate to
meet your needs. And, if there is a claim dealing with a foreign insurance company, perhaps in a different language, it can be
time consuming and frustrating. If there’s a claims issue, you’re often dealing with courts in a foreign country.