International Trade  DocumentationsPresented by :    Vikas GuptaDate         :   12th June 2011
IntroductionInternational market involves various types of trade documents that need tobe produced while making transactio...
What is Export DocumentationThe paperwork that is required for an export sales transactionThe means by which the shippin...
Purpose of Export Documentation Export documentation provides evidence that  the negotiated terms between the buyer and  ...
Steps in the Documentation process Receive the order under accepted terms & consult  with a banker or a freight forwarder...
Steps in the Documentationprocess….. Transport goods to port of export Complete Customs documentation Transfer goods to...
The terms of Sale ... INCOTERMSUnderstanding the Incoterms, also called the terms of sale, is the first step inresponding ...
The Thirteen INCOTERMS   EXW          :   Exported when removed from Works   FCA          :   Free Carrier   FAS       ...
EXW: Exported when removedfrom Works EXW signifies a precise location where the product is made ready to the buyer. When...
FCA {Free Carrier (named place)}FCA signifies a precise location where the product is turned over to a carrieror person wh...
FAS : Free Alongside ShipFAS signifies a precise ocean port location where the product is turnedover to a carrier, and the...
FOB : Free On BoardWhen offering an “FOB” quotation: the shipper / seller places theproduct over the ship’s rail.      FOB...
C&F : Cost & FreightC&F signifies that the seller loads the product on board a carrier, clears thegoods for export, arrang...
CIF : Cost Insurance & FreightCIF signifies that the seller loads the product on board a carrier,clears the goods for expo...
Frequently used Documents in  International TradeThe following is a list of documents often used in international trade: ...
Air Waybills
IntroductionAir Waybills make sure that goods have been received for shipment by air. Atypical air waybill sample consists...
Principal requirement for an Air  Waybill The proper shipper and consignee must be mention. The airport of departure and...
Bill of Lading (B/L)
IntroductionBill of Lading is a document given by the shipping agency for thegoods shipped for transportation form one des...
Basic FeaturesThe bill of lading must be signed by the shipping company or itsagent, and must show how many signed origina...
Basic FeaturesTo be acceptable to the buyer, the B/L should : Carry an "On Board" notation showing the actual date of  sh...
Main parties involve in Bill of  Lading Shipper The person who send the goods Consignee The person who take delivery o...
Requirements of the credit as wellas compliance with UCP 500The bill of lading must meet all such requirements: The corre...
Certificate of Origin
IntroductionThe Certificate of Origin is required by the customauthority of the importing country for the purposeof imposi...
Principal requirement for a  Certificate of OriginThe certificate must provide that the information required by the credit...
Combined Transport   Document
IntroductionCombined Transport Document is also known as Multimodal TransportDocument, and is used when goods are transpor...
Principal requirement in aMultimodal Transport documentMultimodal transport document would normally show : That the consi...
Commercial Invoice
IntroductionCommercial Invoice document is provided by theseller to the buyer. Also known as export invoiceor import invoi...
Principal requirement in aCommercial InvoiceThe invoice must : Be issued by the beneficiary named in the credit (the sell...
Bill of Exchange
IntroductionA Bill of Exchange is a special type of writtendocument under which an exporter ask importer acertain amount o...
Persons involved in Bill ofExchangeFollowing persons are involved in a bill of exchange:Drawer: The person who writes or p...
Types of Bill of ExchangeOn the basis of the due date there are two types of bill ofexchange: Bill of Exchange after Date...
Insurance Certificate
IntroductionAlso known as Insurance Policy, it certifies that goods transportedhave been insured under an open policy and ...
Principal requirement in aInsurance CertificateThe requirements for completion of an insurance policy are as follow : The...
Packing List
IntroductionAlso known as packing specification, it contain details about thepacking materials used in the shipping of goo...
Inspection Certificate
IntroductionCertificate of Inspection is a document prepared on the request of sellerwhen he wants the consignment to be c...
Negotiation of Shipping     Documents
NegotiationNegotiation means the purchase by the nominated (negotiating)bank of drafts and shipping documents under a comp...
Instructions for opening  Letter of CreditItems usually included in the instructions to open an L/C An Irrevocable letter...
Instructions for opening Letter of Credit Coverage of marine insurance: All Risks, WA, FPA, War Risks, Warehouse  to ware...
Documents for NegotiationDocuments to be required for negotiationCommercial invoicePacking listMarine insurance policy ...
Examination of Letter of CreditWhen a letter of credit is received, exporter must: Examine the conditions and documents s...
Common Discrepancies of LC(1) Draftsa.    Draft amount is different from invoiceb.    Draft tenor is different from the L/...
Common Discrepancies ofLC….(3) Packing Lista.   Different description of merchandise from the L/Cb.   Different number of ...
Common Discrepancies of LC….(5) Ocean Bill of Ladinga.    Less than a full set of original B/L is presentedb.    The B/L n...
Negotiation with DiscrepanciesIn case discrepancies are found by negotiating bank, exporter must correct thediscrepancies....
Presentation of Documents     Draft and all shipping documents must be presented to a negotiating bank      together with...
Presentation of Documents…The notice must state    The bank is refusing to honor or negotiate    Each discrepancy    Th...
Presentation of Documents… If a bank does not follow these negotiation and notice provisions,    The bank cannot claim t...
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  1. 1. International Trade DocumentationsPresented by : Vikas GuptaDate : 12th June 2011
  2. 2. IntroductionInternational market involves various types of trade documents that need tobe produced while making transactions. Each trade document is differ fromother and present the various aspects of the trade like description, quality,number, transportation medium, indemnity, inspection and so on. So, itbecomes important for the importers and exporters to make sure that theirdocuments support the guidelines as per international trade transactions.A small mistake could prove costly for any of the parties. For example A trade document about the bill of lading is a proof that goods have been shipped on board, while Inspection Certificate, certifies that the goods have been inspected and meet quality standardsSo, depending on these necessary documents, a seller can assure a buyer thathe has fulfilled his responsibility whilst the buyer is assured of his request beingcarried out by the seller
  3. 3. What is Export DocumentationThe paperwork that is required for an export sales transactionThe means by which the shipping process is facilitated and recorded.Documentation is essential for moving goods through the channels of distribution, transferring responsibility or possession, clearing goods through customs, and facilitating payment according to the agreed upon terms
  4. 4. Purpose of Export Documentation Export documentation provides evidence that the negotiated terms between the buyer and the seller have been complied with This is essential if the seller wishes to get paid Export documentation provides important information that is used by the seller, the freight companies, governments, and the buyer
  5. 5. Steps in the Documentation process Receive the order under accepted terms & consult with a banker or a freight forwarder. Begin organizing information for required export documents and export license applications. Evaluate modes of transportation, requirements for perishable products, and cost of various alternative modes. Prepare goods for shipping (marking / labeling, packing, consolidating / containerizing, insuring) Complete and forward required export documents
  6. 6. Steps in the Documentationprocess….. Transport goods to port of export Complete Customs documentation Transfer goods to carrier Ship goods and forward appropriate export documents Unload goods at foreign port. Clear customs. Transport goods from foreign port to intermediate and/or ultimate consigneeNote: Responsibility for different steps in the documentation & shippingprocess depends on the terms of sale & the method of payment and collection
  7. 7. The terms of Sale ... INCOTERMSUnderstanding the Incoterms, also called the terms of sale, is the first step inresponding to a trade lead or starting to prepare a quote.Definition: An international rule for pricing terms which represent differentlevels of financial responsibility for the buyer and seller in an export transactionThe INCOTERMS establish :  the geographical location where the buyer becomes responsible for the goods  payment of shipping, handling, insurance, inland freight, etc.  the point where ownership of the goods or the title for the goods changes ownershipNote: The terms of sale should always be followed by a physical location sothat the buyer cannot surprise the seller and select a costly or infeasiblelocation
  8. 8. The Thirteen INCOTERMS EXW : Exported when removed from Works FCA : Free Carrier FAS : Free Alongside Ship FOB : Free On Board C&F or CFR : Cost (of the Product) & Freight CIF : Cost, Insurance and Freight CPT : Carriage Paid To CIP : Carriage & Insurance Paid to DAF : Delivery At Frontier DES : Delivered Ex-Ship DEQ : Delivered Ex-Quay DDU : Delivered Duty Unpaid DDP : Delivered Duty Paid
  9. 9. EXW: Exported when removedfrom Works EXW signifies a precise location where the product is made ready to the buyer. When offering a “EXW” quotation: the price includes only those costs involved up to an agreed point of origin, usually the shipper’s factory. The shipper / seller places the product at the control of the buyer at a concurred place, date, time, etc. EXW costs can include:  Raw or processed product  Standard packaging  Pallets, banding, shrink-wrap, slip sheets, slings, one-ton-big-bags  Special labeling  Translation and printing  Inspection certificates (Phytosanitary, Health, Quality, or Export License)  Bracing or inspecting a container  Export packaging
  10. 10. FCA {Free Carrier (named place)}FCA signifies a precise location where the product is turned over to a carrieror person who will ensure carriage, and the goods are cleared for export.When offering a “FCA” quotation: the price includes those costs involvedup to that agreed point, including transportation and loading if requiredFCA costs can include ( in addition to the EXW costs): Loading on board carrier Transportation to the carrier Insurance coverage to carrier (optional)
  11. 11. FAS : Free Alongside ShipFAS signifies a precise ocean port location where the product is turnedover to a carrier, and the goods are cleared for exportWhen offering an “FAS” quotation: the shipper/seller places theproduct alongside the vesselFAS costs can include ( in addition to the FCA costs): inland transportation (from your plant to the port) port charges (including Terminal Handling or Receiving Charges, or stevedore, wharf age, forklift, off-load, etc.)
  12. 12. FOB : Free On BoardWhen offering an “FOB” quotation: the shipper / seller places theproduct over the ship’s rail. FOB only applies to sea or watertransportationThe costs associated with FOB include: loading on board ship heavy lift chargesThese costs are correct in theory, but actually the loading and heavy liftcharges will be included in the shipping cost from the port to the finaldestination which the buyer will pay
  13. 13. C&F : Cost & FreightC&F signifies that the seller loads the product on board a carrier, clears thegoods for export, arranges and pays the ocean freight and other charges.The risk during carriage is transferred to the buyer, and the goods changehands when they pass the ship’s rail at the port of shipment. (the finaldestination)The charges associated with CFR include (in addition to the FOB costs): Ocean Freight Fuel Adjustment Factor Currency Adjustment Factor Destination Delivery Charges or Container Service Charges
  14. 14. CIF : Cost Insurance & FreightCIF signifies that the seller loads the product on board a carrier,clears the goods for export, arranges and pays the ocean freightand other charges.The seller insures the shipment, and the goods change handswhen they pass the ship’s rail at the port of shipmentCosts associated with CIF include (in addition to C&F); Marine cargo insurance
  15. 15. Frequently used Documents in International TradeThe following is a list of documents often used in international trade: Air Waybill Bill of Lading Certificate of Origin Combined Transport Document Draft (or Bill of Exchange) Insurance Policy (or Certificate) Packing List / Specification Inspection Certificate
  16. 16. Air Waybills
  17. 17. IntroductionAir Waybills make sure that goods have been received for shipment by air. Atypical air waybill sample consists of three originals and nine copies. The first original is for the carrier and is signed by a export agent; The second original, the consignees copy, is signed by an export agent; The third original is signed by the carrier and is handed to the export agent as a receipt for the goodsAir Waybills serves as: Proof of receipt of the goods for shipment An invoice for the freight A certificate of insurance A guide to airline staff for the handling, dispatch and delivery of the consignment.
  18. 18. Principal requirement for an Air Waybill The proper shipper and consignee must be mention. The airport of departure and destination must be mention. The goods description must be consistent with that shown on other documents. Any weight, measure or shipping marks must agree with those shown on other documents. It must be signed and dated by the actual carrier or by the named agent of a named carrier. It must mention whether freight has been paid or will be paid at the destination point.
  19. 19. Bill of Lading (B/L)
  20. 20. IntroductionBill of Lading is a document given by the shipping agency for thegoods shipped for transportation form one destination to anotherand is signed by the representatives of the carrying vesselBill of landing is issued in the set of two, three or more. Thenumber in the set will be indicated on each bill of lading and allmust be accounted for. This is done due to the safety reasonswhich ensure that the document never comes into the hands ofan unauthorised person.Only one original is sufficient to take possession of goods at portof discharge so, a bank which finances a trade transaction willneed to control the complete set
  21. 21. Basic FeaturesThe bill of lading must be signed by the shipping company or itsagent, and must show how many signed originals were issuedIt will indicate whether cost of freight/ carriage has been paid ornot : Freight Prepaid: Paid by shipper Freight collect: To be paid by the buyer at the port of discharge The bill of lading also forms the contract of carriage
  22. 22. Basic FeaturesTo be acceptable to the buyer, the B/L should : Carry an "On Board" notation showing the actual date of shipment, (Sometimes however, the "on board" wording is in small print at the bottom of the B/L, in which cases there is no need for a dated "on board" notation to be shown separately with date and signature.) Be "clean" have no notation by the shipping company to the effect that goods/ packaging are damaged.
  23. 23. Main parties involve in Bill of Lading Shipper The person who send the goods Consignee The person who take delivery of the goods Notify Party The person, usually the importer, to whom the shipping company or its agent gives notice of arrival of the goods Carrier The person or company who has concluded a contract with the shipper for conveyance of goods
  24. 24. Requirements of the credit as wellas compliance with UCP 500The bill of lading must meet all such requirements: The correct shipper, consignee and notifying party must be shown The carrying vessel and ports of the loading and discharge must be stated The place of receipt and place of delivery must be stated, if different from port of loading or port of discharge The goods description must be consistent with that shown on other documents Any weight or measures must agree with those shown on other documents Shipping marks and numbers and / or container number must agree with those shown on other documents It must state whether freight has been paid or is payable at destination It must be dated on or before the latest date for shipment specified in the credit It must state the actual name of the carrier or be signed as agent for a named carrier
  25. 25. Certificate of Origin
  26. 26. IntroductionThe Certificate of Origin is required by the customauthority of the importing country for the purposeof imposing import duty.It is usually issued by the Chamber of Commerce andcontains information like seal of the chamber, detailsof the good to be transported and so on
  27. 27. Principal requirement for a Certificate of OriginThe certificate must provide that the information required by the credit and beconsistent with all other document, It would normally include: The name of the company and address as exporter The name of the importer Package numbers, shipping marks and description of goods to agree with that on other documents Any weight or measurements must agree with those shown on other documents It should be signed and stamped by the Chamber of Commerce
  28. 28. Combined Transport Document
  29. 29. IntroductionCombined Transport Document is also known as Multimodal TransportDocument, and is used when goods are transported using more than one modeof transportation. In the case of multimodal transport document, the contractof carriage is meant for a combined transport from the place of shipping to theplace of delivery. It also evidence receipt of goods but it does not evidence onboard shipment, if it complies with ICC 500, Art. 26(a).The liability of the combined transport operator starts from the place ofshipment and ends at the place of delivery. It need to be signed withappropriate number of originals in the full set & proper evidence whichindicates that transport charges have been paid or will be paid at destination
  30. 30. Principal requirement in aMultimodal Transport documentMultimodal transport document would normally show : That the consignee and notify parties are as the credit The place goods are received, or taken in charges, and place of final destination Whether freight is prepaid or to be collected The date of dispatch or taking in charge, and the "On Board" notation, if any must be dated and signed Total number of originals Signature of the carrier, multimodal transport operator or their agents
  31. 31. Commercial Invoice
  32. 32. IntroductionCommercial Invoice document is provided by theseller to the buyer. Also known as export invoiceor import invoice, commercial invoice is finallyused by the custom authorities of the importerscountry to evaluate the good for the purpose oftaxation.
  33. 33. Principal requirement in aCommercial InvoiceThe invoice must : Be issued by the beneficiary named in the credit (the seller) Be addressed to the applicant of the credit (the buyer) Be signed by the beneficiary (if required) Include the description of the goods exactly as detailed in the credit Be issued in the stated number of originals (which must be marked "Original”) and copies Include the price and unit prices if appropriate State the price amount payable which must not exceed that stated in the credit include the shipping terms
  34. 34. Bill of Exchange
  35. 35. IntroductionA Bill of Exchange is a special type of writtendocument under which an exporter ask importer acertain amount of money in future and the importeralso agrees to pay the importer that amount ofmoney on or before the future date. This documenthas special importance in wholesale trade wherelarge amount of money involved.
  36. 36. Persons involved in Bill ofExchangeFollowing persons are involved in a bill of exchange:Drawer: The person who writes or prepares the bill.Drawee: The person who pays the bill.Payee: The person to whom the payment is to be made.Holder of the Bill: The person who is in possession of the bill
  37. 37. Types of Bill of ExchangeOn the basis of the due date there are two types of bill ofexchange: Bill of Exchange after Date: In this case the due date is counted from the date of drawing and is also called bill after date Bill of Exchange after Sight: In this case the due date is counted from the date of acceptance of the bill and is also called bill of exchange after sight
  38. 38. Insurance Certificate
  39. 39. IntroductionAlso known as Insurance Policy, it certifies that goods transportedhave been insured under an open policy and is not actionable withlittle details about the risk covered.It is necessary that the date on which the insurance becomeseffective is same or earlier than the date of issuance of thetransport documents. Also, if submitted under a LC, the insuredamount must be in the same currency as the credit and usually forthe bill amount plus 10 per cent
  40. 40. Principal requirement in aInsurance CertificateThe requirements for completion of an insurance policy are as follow : The name of the party in the favour which the documents has been issued The name of the vessel or flight details The place from where insurance is to commerce typically the sellers warehouse or the port of loading and the place where insurance cases usually the buyers warehouse or the port of destination Insurance value that specified in the credit Marks and numbers to agree with those on other documents The description of the goods, which must be consistent with that in the credit & on the invoice The name and address of the claims settling agent together with the place where claims are payable Countersigned where necessary Date of issue to be no later than the date of transport documents unless cover is shown to be effective prior to that date.
  41. 41. Packing List
  42. 42. IntroductionAlso known as packing specification, it contain details about thepacking materials used in the shipping of goods. It also includedetails like measurement and weight of goods.The packing List must : Have a description of the goods ("A") consistent with the other documents Have details of shipping marks ("B") and numbers consistent with other documents
  43. 43. Inspection Certificate
  44. 44. IntroductionCertificate of Inspection is a document prepared on the request of sellerwhen he wants the consignment to be checked by a third party at theport of shipment before the goods are sealed for final transportation.In this process seller submit a valid Inspection Certificate along with theother trade documents like invoice, packing list, shipping bill, bill oflading etc. to the bank for negotiationOn demand, inspection can be done by various world renownedinspection agencies on nominal charges
  45. 45. Negotiation of Shipping Documents
  46. 46. NegotiationNegotiation means the purchase by the nominated (negotiating)bank of drafts and shipping documents under a complyingpresentation by advancing or agreeing to advance funds to thebeneficiaryAn exporter presents a draft (a bill of exchange) and shippingdocuments specified in the letter of credit to a nominated bank orany bank if there is no nominated bank, which becomes anegotiating bank, to get paid
  47. 47. Instructions for opening Letter of CreditItems usually included in the instructions to open an L/C An Irrevocable letter of credit subject to Buyer’s country regulations The name and address of the beneficiary - in favor of exporter Whether the L/C is to be transferable or not Terms of payment such as at sight or usance Where negotiation or payment is to be effected Whether the payment is to be made in U.S. dollars or other foreign currency What trade terms are to be used: FOB, CFR or CIF?
  48. 48. Instructions for opening Letter of Credit Coverage of marine insurance: All Risks, WA, FPA, War Risks, Warehouse to warehouse or any special coverage such as a rejection clause Whether partial shipments are allowed or not Whether transshipments are allowed or prohibited Presentation period / date: A period of time for presentation of documents after shipment Ports of loading and unloading The latest shipping date The expiry date
  49. 49. Documents for NegotiationDocuments to be required for negotiationCommercial invoicePacking listMarine insurance policy or certificateOcean bill of ladingOther documents requested by the buyer and accepted by the seller
  50. 50. Examination of Letter of CreditWhen a letter of credit is received, exporter must: Examine the conditions and documents specified in the L/C and determine whether he can meet them or not. If there are any conditions he cannot meet, request his buyer to amend the L/C before he starts manufacturing export goods. If the L/C calls for a time draft, have the L/C specify that the discount interest for the time draft shall be for account of importer, when agreement was a sight draft but L/C is opened with a time draft (4) Hold off shipping the order until he receives an amendments to the L/C as requested
  51. 51. Common Discrepancies of LC(1) Draftsa. Draft amount is different from invoiceb. Draft tenor is different from the L/Cc. Wrong drawee(2) Commercial invoicesa. Different merchandise description from the L/Cb. Invoices is not issued by the beneficiaryc. Insufficient copies are presentedd. Incorrect accountees name and address are statede. Different prices from the L/Cf. Terms of trade such as FOB, CFR or CIF different from the L/C
  52. 52. Common Discrepancies ofLC….(3) Packing Lista. Different description of merchandise from the L/Cb. Different number of unit, net weight and gross weight from the L/C(4) Marine Insurance Certificate or Policya. Different coverage from the L/Cb. Insufficient coveragec. Not the same currency as the L/Cd. Different merchandise descriptione. The effective date later than the shipping datef. Brokers cover note presented instead of insurance certificate or policy
  53. 53. Common Discrepancies of LC….(5) Ocean Bill of Ladinga. Less than a full set of original B/L is presentedb. The B/L not properly endorsedc. The B/L not marked with "On Board“ notation, if B/L contains the indication “intended vessel” or "Received for shipment"d. In the case of CFR or CIF, the term "Freight Prepaid" is not markede. Merchandise description is different from the L/Cf. Different ports of loading and / or unloading from the L/Cg. Notations on the B/L that the merchandise or packages are damagedh. The B/L indicates the "On Deck" shipmenti. Stale B/L : Not presented within time limit after shipment as stipulated in the L/Cj. Late shipment: The bill of lading date marked later than the shipping date specified in the L/C
  54. 54. Negotiation with DiscrepanciesIn case discrepancies are found by negotiating bank, exporter must correct thediscrepancies.If exporter cannot correct them such as the shipping date, then exporter shoulda. request the issuing bank to amend the letter of credit to cover discrepancies or authorize to pay in lieu of discrepanciesb. At the same time, inform the buyer of the discrepancies and request his acceptance and amendment to the Letter of Credit.c. Release shipping documents to issuing bank after the L/C is amended. Buyer’s acceptance of discrepancies are not enough. The Letter of Credit must be amended.d. Do not send the shipping documents to the issuing bank on a collection basis.
  55. 55. Presentation of Documents Draft and all shipping documents must be presented to a negotiating bank together with the original letter of credit. Presentation must be made within a specified period of time after shipment in the L/C, but not later than 21 days after shipment A bank must determine whether or not presentation is a complying presentation in 5 banking days In case discrepancies are found by negotiating bank, exporter must correct the discrepancies If a nominated (negotiating) bank, a confirming bank, if any, or the issuing bank determines that a presentation does not comply,  it may refuse to honor or negotiate, then  it must give a single notice to presenter no later than the close of the 5th banking days
  56. 56. Presentation of Documents…The notice must state The bank is refusing to honor or negotiate Each discrepancy The bank’s disposal of shipping documents:  The bank is holding documents pending instructions from the presenter or  The issuing bank is holding documents until it receives a waiver from the applicant & agrees to accept it or  The bank is returning documents or  The bank is acting according to the previous instructions from the presenter
  57. 57. Presentation of Documents… If a bank does not follow these negotiation and notice provisions,  The bank cannot claim that the documents do not constitute a complying presentation.  The bank must honor or negotiate. A document presented but not required by the Credit will be disregarded. If a Credit contains a condition without stipulating the document to indicate compliance with the condition,  Banks will deem such condition not stated and will disregard it.
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