International trade finance

1. UNIT IV: DOCUMENTATION IN INTERNATIONAL
TRADE
Export Trade Documents: Financial Documents – Bill of
Exchange- Type- Commercial Documents -
Proforma,Commercial, Consular, Customs, Legalized
Invoice, Certificate of Origin Certificate Value, Packing
List, Weight Certificate, Certificate of Analysis and
Quality, Certificate of Inspection, Health certificate.
Transport Documents -Bill of Lading, Airway Bill, Postal
Receipt, Multimodal Transport Document. Risk
Covering Document: Insurance Policy, Insurance Cover
Note. Official Document: Export Declaration Forms, GR
Form, PP Form,COD Form, Softer Forms, Export
Certification, GSPS – UPCDC Norms.

2. Bill of exchange
An instrument in writing containing an unconditional
order signed by the maker directing a certain person to
pay certain sum of money only to or to the order of a
certain person or to the bearer of the instrument.
Main features of the Bill of exchange
 It must be in writing
 It must be signed by the maker
 It must be unconditional order to pay
 The maker must direct a certain person to pay a certain
sum of money.

3. The parties of Bill of exchange
1. Drawer – The person who draws / writes the bill is
known as drawer.
2. Drawee – The person who is liable to pay the amount
of bill is known as drawee.
3. Payee – The person who receives the amount is known
as payee.

4. Types of Bill of exchange
 Sight Bill of Exchange: In this Bill of Exchange, also
known as demand Bill of Exchange, the drawee has to
make the payment, on presentation.
 Usance Bill of Exchange: In case of Usance or Time Bill of
Exchange, payment is to be made on the maturity date,
after a certain period, known as tenor. When the
calculation of period is made with reference to the sight
of bill, the bill is known as ‘ after sight usance bill’.
Sometimes, the maturity date is calculated with reference
to the date of bill of exchange, it is known as ‘after date
usance bill’.

5.  Clean Bill of Exchange: A clean Bill of Exchange is one
when the relative shipping documents do not
accompany with it. In this case, the relative shipping
documents i.e. Bill of Lading is sent directly to the
importer to enable him to take delivery of the cargo.
 Documentary Bill of Exchange: A documentary Bill of
Exchange is one where the relative shipping
documents such as Bill of Lading, marine insurance
policy, invoice and other documents are sent along
with the Bill of Exchange. This is the common form in
export trade.
Types of Bill of exchange

6.  Letter of Credit - An instrument issued by a bank, at
the request of the applicant, promising to pay the
beneficiary upon his presentation of stipulated
documents in accordance with the terms and
conditions of the credit.

7.  “CONFIRMED”: A letter of credit issued by one bank to
which another bank added its irrevocable
confirmation to pay, thereby obligating itself in the
same manner as the opening bank.
“STAND-BY”: A letter of credit that generally
guarantees payment due for an unfulfilled obligation
on the part of the applicant or another party. It is
payable upon presentation of a draft, as well as a
signed statement or certification by the
beneficiary that the applicant has failed in his
obligation.

8. Commercial Invoice
 A commercial invoice is a bill for the goods from the
seller to the buyer. These invoices are often used by
governments to determine the true value of goods
when assessing customs duties. Governments that use
the commercial invoice to control imports will often
specify its form, content, number of copies, language
to be used, and other characteristics.
Commercial Documents

9. COMMERCIAL INVOICE
The accounting document claiming payment from the buyer.
Normally an export invoice would include:
- Seller’s name and address
- Buyer’s name and address
- Issue Date
- Invoice Number
- Shipping marks and numbers
- Term of Sale: e.g. FOB, etc.
- Shipping information
- Info required by L/C
- Country of Origin
- L/C number
- Merchandise description, P.O. number, unit price, and total
price

10.  Pro Forma Invoice
 Exporter’s formal quotation: description of the
merchandise, price, delivery time, method of shipment,
ports of exit and entry, and terms of sale
 A pro forma invoice is an invoice prepared by the
exporter before shipping the goods, informing the
buyer of the goods to be sent, their value, and
other key specifications. It also can be used as an
offering of sale or price quotation.

11. CONSULAR INVOICE
 For exchange control and balance of payments
reasons, some countries do not allow the import of
merchandise unless accompanied by a certificate
issued by one of its officials in the exporter’s country.
 These certificates evidence that the shipment meets
certain statutory or other regulations of the importing
country. A visaed invoice is an original or copy of an
invoice, which has been originally signed and/or
stamped by a consulate
official.

12. Customs Invoice
 The invoice is prescribed by the customs authorities of
importing countries and the invoice is called Customs
invoice. This is the requirement in US, Canada and
Australia. An exporter can obtain copies of this invoice
from any shop selling government publications and
forms.
Legalized invoice
 It is the same as consular invoice. This term is in use in
countries like Turkey, Liberia, Taiwan, Latin American
countries etc.

13. CERTIFICATE OF ORIGIN
 A signed statement certifying the country of origin of
the goods being sold is sometimes required by
regulation in the buyer’s country.
 This document may be as simple as a certificate
signed by the seller. Certain countries may require it
to be issued by a third party such a Chamber of
Commerce, or be notarized, legalized, or visaed by
their Embassy or Consulate.

14. CERTIFICATES OF ORGIN
 The Certificate of Origin (CO) is required by some
countries for all or only certain products. In many
cases, a statement of origin printed on company
letterhead will suffice. The exporter should verify
whether a CO is required with the buyer and/or an
experienced shipper/freight forwarder or the Trade
Information Center.
 For textile products, an importing country may require
a certificate of origin issued by the manufacturer. The
number of required copies and language may vary
from country to country.

15. INSPECTION CERTIFICATE
 An independent firm would usually conduct the
inspection to ensure that the merchandise conforms to
the buyer’s criteria.
 Inspection certificates should be based on quantifiable
criteria.
 When an L/C is the method of payment, the criteria
should be specifically spelled out in the letter of
credit.

16. Inspection Certificate
 An inspection certificate is a document to certify the
goods traded to ensure conditions as quality and quantity.
The institution carrying out inspection can be either
official authorized or private.
 The inspection certificate can be taken for the following
purpose:
 Firstly, a certificate for delivery of goods between the
importer and the exporter;
 Secondly, a document in settlement;
 Thirdly, a document for export declaration and import
clearance and reference for evaluating of certain
commodities;
 Lastly, a certificate of indemnity and compensation.

17.  10.2.1.2 Classifications
 Inspection certificates are various. The
following kinds are the most commonly used:
Inspection Certificate of Quality, Inspection
Certificate of Weight/ Quality, Veterinary
 Inspection Certificate, Sanitary Inspection
Certificate/ Inspection Certificate of Health,
Disinfection Inspection Certificate, Inspection
Certificate of Fumigation, Inspection
Certificate for Raw Silk Classification and
Conditioned Weight, Inspection Certificate of
Analysis, Society General de Surveillance S. A.,
BV Certificate（Bureaus Verita）.

18.  WEIGHT LIST OR CERTIFICATE
Not synonymous to a packing list. This document
breaks down the shipment by weight. This is generally
needed only if a “certificate” is required.

19.  PACKING LIST
A mirror of the merchandise covered by the invoice,
the packing list omit prices, but itemizes the
merchandise by number of cartons, packages, etc.,
and the contents of each..

20.  Export Packing List
 Considerably more detailed and informative than a
standard domestic packing list, an export packing list
lists seller, buyer, shipper, invoice number, date of
shipment, mode of transport, carrier, and itemizes
quantity, description, the type of package, such as a
box, crate, drum, or carton, the quantity of packages,
total net and gross weight (in kilograms), package
marks, and dimensions, if appropriate. Both
commercial stationers and freight forwarders carry
packing list forms. A packing list may serve as
conforming document. It is not a substitute for a
commercial invoice.

21.  Health Certificate
 For shipment of live animals and animal products
(processed foodstuffs, poultry, meat, fish, seafood,
dairy products, and eggs and egg products). Note:
some countries require that health certificates be
notarized or certified by a chamber and legalized by a
consulate.

23.  The transport document is issued by the “Carrier” whether a
shipping line, airline, trucking company or railroad. They come in
various forms and each serves several, but not necessarily all of
the following functions:
1) Receipt for the goods, evidencing loading, dispatch, or taking
in charge and indicating the general condition of the goods
received.
2) A contract for carriage between the shipper and the carrier
3) An invoice from the carrier for charges.
4) A negotiable document exchangeable for money, allowing
goods to be sold in transit.
5) A document of title representing ownership of the goods,
which will only be released by the shipping company against
presentation of a signed original document.

24.  Courier & Postal receipts are always addressed to a
specific consignee, are not negotiable, and should only
be used if getting paid is not a consideration. They
are basically delivery instructions for a specific
consignee at a specific address. Almost
all banks will refuse to accept a parcel consigned to
them.
Shipments by courier or post should only be consigned
to a bank if that bank’s L/C so instructs or if the bank
has specifically authorized delivery to them under a
documentary collection.

25. Bill Of lading
 The bill of lading (in ocean transport), waybill or
consignment note for rail, air, or road transportation and
receipt in postal or courier delivery are collectively known
as transport document
 Bill of lading is issued by shipping company or its agent
stating that goods are either being shipped or have been
shipped

26. Bill of lading

27. Bill of lading

28.  Air Way Bill (AWB): The Air Way Bill is a form of bill
of lading used for the air transport of goods. AWBs are
non-negotiable, mainly because of the short amount
of time that the goods are in transit. The original AWB
is rarely needed by the importer at the other end of the
shipment to prove ownership of goods. A “house
airway bill” is issued by a freight forwarder on behalf
of the actual carrier, which is the case when a freight
forwarder has a contract rate with an air cargo service
to expedite the documentation.

29. Marine Insurance Policy
 Marine insurance is contract between policy holder (exporter)
and insurance component. The insurance company will issue
marine insurance policy to the exporter. Marine insurance policy
in a basic document related to transport of exportable goods is
indemnified the risks to the goods when the goods are
transported by sea.
Contents for Marine Insurance Policy
i. Name and address of the insurance company
ii. Name and address of the insured (name of the exporter in whose
favour the insurance is effected)
iii. Marine insurance policy certificate number and date of issue.
iv. Name of vessel (ship)
v. Port of loading and poet of discharge
vi. Description of goods, number and kind of packages and marks
and number on packages

30. Insurance Certificate
 Insurance certificates are used to assure the consignee
that insurance will cover the loss of or damage to the
cargo during transit. These can be obtained from your
freight forwarder or publishing house. Note: an airway
bill can serve as an insurance certificate for a shipment
by air. Some countries may require certification or
notification.

31.  An air waybill (AWB) is a document that accompanies
goods shipped by an international air courier to
provide detailed information about the shipment and
allow it to be tracked. The bill has multiple copies so
that each party involved in the shipment can
document it.
 Multimodal transport (also known as
combined transport) is the transportation of goods
under a single contract, but performed with at least
two different modes of transport; the carrier is liable
(in a legal sense) for the entire carriage, even though
it is performed by several different modes
of transport

32.  An export declaration is a form that is submitted by
an exporter at the port of export. It provides
information about the goods being shipped, including
type, number, and value. This information is used
by customs to control exports, in addition to compiling
statistical information about a country's foreign trade.
 An Export Packing Declaration document is
a form used in International Trade. It is a document
created by the exporter (shipper) to state the types of
packaging materials used in export shipments.
 Export declarations provide Customs with details
about goods intended for export. The Integrated Cargo
System (ICS) processes the information provided and
issues an Export Declaration Number (EDN). An EDN
consists of nine alphanumeric characters. Each export
declaration has one header, but can have multiple lines.

33.  Guaranteed Remittance Form
 GR form is a declaration that exporter gives against
each shipment that he will realize the full export
proceeds. ... The bank sends the duplicate GR form to
RBI after realization of full payment against the
shipment.
 GR WAIVER certificate is issued by your Forex bank
for exporting goods under Non commercial invoice & for
which the consignment does not involve any transaction
in foreign exchange. In short for exporting such goods
you do not require to release BRC as per the norms.

34. Post Parcel (PP) Form
 If the export is made through post parcel, exporter should
declare the details of export in post parcel form. Exporter
should submit this form to the bank (authorized foreign
exchange dealer) for counter signature.
 The bank will counter sign and return the original copy of
the pp form to exporter. the counter signed pp form is
submitted to the post office with the parcel (export goods
for export. bank retains the duplicate copy of the pp
form., exporter will submit relevant export documents
within 21 days from the date post parcel to the bank for
negotiation and collection. the duplicate pp form will be
referred by the bank for documents negotiation and
collection of behalf of the exporter.

35. Value Payable. Cash-On –Deliver (VP/COD) Form
 Exporter should declare export details in VP/COD
form in the export is made through post parcel and
payment arrangement is made though postal channels
value payable on cash on delivery basis. This form is to
be submitted to the post parcel (export goods) for
export.

36. Certificate of origin
 A Certificate of Origin (CO) is an important
international trade document attesting that goods in
a particular export shipment are wholly obtained,
produced, manufactured or processed in a particular
country.

37. Different types of Bill of
Exchange
 1.Demand bills
 2.Term bills
 3.Trade Bills
 4.Accommodation Bills

38. Content of proforma Invoice
 An abridged or estimated invoice sent by a seller to
a buyer in advance of a shipment or delivery of goods.
It notes the kind and quantity of goods, their value,
and other important information such
as weight and transportation charges.
Proforma invoices are commonly used as preliminary
invoices with a quotation, or for customspurposes in
importation. They differ from a normal invoice in not
being a demand or request for payment.