Definition of IEC Code IEC Code is unique 10 digit code issued by DGFT Director General of Foreign Trade , Ministry

y of Commerce, Government of India to Indian Companies.

Export Finance and Documentation. Introduction International market involves various types of trade documents that need to be produced while making transactions. Each trade document is differ from other and present the various aspects of the trade like description, quality, number, transportation medium, indemnity, inspection and so on. So, it becomes important for the importers and exporters to make sure that their documents 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 standards. So, depending on these necessary documents, a seller can assure a buyer that he has fulfilled his responsibility whilst the buyer is assured of his request being carried out by the seller. The 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

Air Waybills Air Waybills make sure that goods have been received for shipment by air. A typical 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 consignee's 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 goods. Air 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. The principal requirement for an air waybill are :

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.

Bill of Lading (B/L) Bill of Lading is a document given by the shipping agency for the goods shipped for transportation form one destination to another and is signed by the representatives of the carrying vessel. Bill of landing is issued in the set of two, three or more. The number in the set will be indicated on each bill of lading and all must be accounted for. This is done due to the safety reasons which ensure that the document never comes into the hands of an unauthorised person. Only one original is sufficient to take possession of goods at port of discharge so, a bank which finances a trade transaction will need to control the complete set. The bill of lading must be signed by the shipping company or its agent, and must show how many signed originals were issued. It will indicate whether cost of freight/ carriage has been paid or not : "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. To be acceptable to the buyer, the B/L should :

Carry an "On Board" notation to 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.

The main parties involve in a bill of lading are:

Shipper The person who send the goods. Consignee

o

The person who take delivery of the goods. Notify Party o The person, usually the importer, to whom the shipping company or its agent gives notice of arrival of the goods. Carrier o The person or company who has concluded a contract with the shipper for conveyance of goods
o

The bill of lading must meet all the requirements of the credit as well as complying with UCP 500. These are as follows :

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.

Certificate of Origin The Certificate of Origin is required by the custom authority of the importing country for the purpose of imposing import duty. It is usually issued by the Chamber of Commerce and contains information like seal of the chamber, details of the good to be transported and so on. The certificate must provide that the information required by the credit and be consistent 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.

Combined Transport Document Combined Transport Document is also known as Multimodal Transport Document, and is used when goods are transported using more than one mode of transportation. In the case of multimodal transport document, the contract of carriage is meant for a combined transport from the place of shipping to the place of delivery. It also evidence receipt of goods but it does not evidence on board shipment, if it complies with ICC 500, Art. 26(a). The liability of the combined transport

operator starts from the place of shipment and ends at the place of delivery. This documents need to be signed with appropriate number of originals in the full set and proper evidence which indicates that transport charges have been paid or will be paid at destination port. Multimodal 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.

Commercial Invoice Commercial Invoice document is provided by the seller to the buyer. Also known as export invoice or import invoice, commercial invoice is finally used by the custom authorities of the importer's country to evaluate the good for the purpose of taxation. The invoice must :

Be issued by the beneficiary named in the credit (the seller). Be address 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.

Bill of Exchange A Bill of Exchange is a special type of written document under which an exporter ask importer a certain amount of money in future and the importer also agrees to pay the importer that amount of money on or before the future date. This document has special importance in wholesale trade where large amount of money involved. Following 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.

On the basis of the due date there are two types of bill of exchange:

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.

Insurance Certificate Also known as Insurance Policy, it certifies that goods transported have been insured under an open policy and is not actionable with little details about the risk covered. It is necessary that the date on which the insurance becomes effective is same or earlier than the date of issuance of the transport documents. Also, if submitted under a LC, the insured amount must be in the same currency as the credit and usually for the bill amount plus 10 per cent. The requirements for completion of an insurance policy are as follow :

The name of the party in the favor 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 buyer's 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 and 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.

Packing List Also known as packing specification, it contain details about the packing materials used in the shipping of goods. It also include details 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

Inspection Certificate Certificate of Inspection is a document prepared on the request of seller when he wants the consignment to be checked by a third party at the port of shipment before the goods are sealed for final transportation. In this process seller submit a valid Inspection Certificate along with the other trade documents like invoice, packing list, shipping bill, bill of lading etc to the bank for negotiation. On demand, inspection can be done by various world renowned inspection agencies on nominal charges. Rules for Any Mode(s) of Transport The seven rules defined by Incoterms 2010 for any mode(s) of transportation are: EXW Ex Works (named place of delivery) The seller makes the goods available at its premises. This term places the maximum obligation on the buyer and minimum obligations on the seller. The Ex Works term is often used when making an initial quotation for the sale of goods without any costs included. EXW means that a seller has the goods ready for collection at his premises (works, factory, warehouse, plant) on the date agreed upon. The buyer pays all transportation costs and also bears the risks for bringing the goods to their final destination. The seller doesn't load the goods on collecting vehicles and doesn't clear them for export. If the seller does load the good, he does so at buyer's risk and cost. If parties wish seller to be responsible for the loading of the goods on departure and to bear the risk and all costs of such loading, this must be made clear by adding explicit wording to this effect in the contract of sale. FCA Free Carrier (named place of delivery) The seller hands over the goods, cleared for export, into the disposal of the first carrier (named by the buyer) at the named place. The seller pays for carriage to the named point of delivery, and risk passes when the goods are handed over to the first carrier. CPT - Carriage Paid To (named place of destination) The seller pays for carriage. Risk transfers to buyer upon handing goods over to the first carrier. CIP Carriage and Insurance Paid to (named place of destination) The containerized transport/multimodal equivalent of CIF. Seller pays for carriage and insurance to the named destination point, but risk passes when the goods are handed over to the first carrier. DAT Delivered at Terminal (named terminal at port or place of destination) Seller pays for carriage to the terminal, except for costs related to import clearance, and assumes all risks up to the point that the goods are unloaded at the terminal. DAP Delivered at Place (named place of destination)

Seller pays for carriage to the named place, except for costs related to import clearance, and assumes all risks prior to the point that the goods are ready for unloading by the buyer. DDP Delivered Duty Paid (named place of destination) Seller is responsible for delivering the goods to the named place in the country of the buyer, and pays all costs in bringing the goods to the destination including import duties and taxes. This term places the maximum obligations on the seller and minimum obligations on the buyer. Rules for Sea and Inland Waterway Transport The four rules defined by Incoterms 2010 for international trade where transportation is entirely conducted by water are: FAS Free Alongside Ship (named port of shipment) The seller must place the goods alongside the ship at the named port. The seller must clear the goods for export. Suitable only for maritime transport but NOT for multimodal sea transport in containers (see Incoterms 2010, ICC publication 715). This term is typically used for heavy-lift or bulk cargo. FOB Free on Board (named port of shipment) The seller must load themselves the goods on board the vessel nominated by the buyer. Cost and risk are divided when the goods are actually on board of the vessel (this rule is new!). The seller must clear the goods for export. The term is applicable for maritime and inland waterway transport only but NOT for multimodal sea transport in containers (see Incoterms 2010, ICC publication 715). The buyer must instruct the seller the details of the vessel and the port where the goods are to be loaded, and there is no reference to, or provision for, the use of a carrier or forwarder. This term has been greatly misused over the last three decades ever since Incoterms 1980 explained that FCA should be used for container shipments. CFR Cost and Freight (named port of destination) Seller must pay the costs and freight to bring the goods to the port of destination. However, risk is transferred to the buyer once the goods are loaded on the vessel (this rule is new!). Maritime transport only and Insurance for the goods is NOT included. This term is formerly known as CNF (C&F). CIF Cost, Insurance and Freight (named port of destination) Exactly the same as CFR except that the seller must in addition procure and pay for the insurance. Maritime transport only

Previous terms eliminated from Inco terms 2000

DAF Delivered At Frontier (named place of delivery) This term can be used when the goods are transported by rail and road. The seller pays for transportation to the named place of delivery at the frontier. The buyer arranges for customs clearance and pays for transportation from the frontier to his factory. The passing of risk occurs at the frontier. DES Delivered Ex Ship (named port of delivery) Where goods are delivered ex ship, the passing of risk does not occur until the ship has arrived at the named port of destination and the goods made available for unloading to the buyer. The seller pays the same freight and insurance costs as he would under a CIF arrangement. Unlike CFR and CIF terms, the seller has agreed to bear not just cost, but also Risk and Title up to the arrival of the vessel at the named port. Costs for unloading the goods and any duties, taxes, etc are for the Buyer. A commonly used term in shipping bulk commodities, such as coal, grain, dry chemicals - - and where the seller either owns or has chartered, their own vessel. DEQ Delivered Ex Quay (named port of delivery) This is similar to DES, but the passing of risk does not occur until the goods have been unloaded at the port of destination. DDU Delivered Duty Unpaid (named place of destination) This term means that the seller delivers the goods to the buyer to the named place of destination in the contract of sale. The goods are not cleared for import or unloaded from any form of transport at the place of destination. The buyer is responsible for the costs and risks for the unloading, duty and any subsequent delivery beyond the place of destination. However, if the buyer wishes the seller to bear cost and risks associated with the import clearance, duty, unloading and subsequent delivery beyond the place of destination, then this all needs to be explicitly agreed upon in the contract of sale. Ex-Works: 'Ex-works' means that your responsibility is to make goods available to the buyer at works or factory. The full cost and risk involved in bringing the goods from this place to the desired destination will be borne by the buyer. This term thus represents the minimum obligation for you. It is mostly used for sale of plantation commodities such as tea, coffee and cocoa. Free on Rail(FOR): Free on Truck(FOT):These terms are used when the goods are to be carried by rail, but they are also used for road transport. Your obligations are fulfilled when the goods are delivered to the carrier. Free Alongside Ship (FAS): Once the goods have been placed alongside the ship, your obligations are fulfilled and the buyer notified. The buyer has to contract with the sea carrier for the

carriage of the goods to the destination and pay the freight. The buyer has to bear all costs and risks of loss or damage to the goods hereafter. Free on Board (FOB): Your responsibility ends the moment the contracted goods are placed on board the ship, free of cost to the buyer at a port of shipment named in the sales contract. 'On board' means that a 'Received for Shipment' B/L (Bill of Lading) is not sufficient. Such B/L if issued must be converted into 'Shipped on Board B/L' by using the stamp 'Shipped on Board' and must bear signature of the carrier or his authorised representative together with date on which the goods were 'boarded'. Cost and Freight (C&F): You must on your own risk and not as an agent of the buyer, contract for the carriage of the goods to the port of destination named in the sale contract and pay the freight. This being a shipment contract, the point of delivery is fixed to the ship's rail and the risk of loss or of damage to the goods is transferred from the seller to the buyer at that very point. As will be seen though you bear the cost of carriage to the named destination, the risk is already transferred to the buyer at the port of shipment itself. Cost Insurance Freight (CIF): The term is basically the same as C&F, but with the addition that you have to obtain insurance at your cost against the risks of loss or damage to the goods during the carriage. Freight or Carriage Paid (DCP): While C&F is used for goods which are to be carried by sea, the term "DCP" is used for land transport only, including national and international transport by road, rail and inland waterways. You have to contract for the carriage of the goods to the agreed destination named in the contract of the sale and pay freight. Your obligations are fulfilled when the goods are delivered to the first carrier and not beyond. In case the buyer desires you to insure the goods till the destination, he would add 'including insurance' before the word 'Paid in Freight' or 'Carriage Paid to'. EXS/EX-Ship: This is an arrival contract and means that you make the goods available to the buyer in the ship at the named port of destination as per sales contract. You have to bear the full cost and risk involved in bringing the goods there. Your obligation is fulfilled before the customs border of the foreign country and it is for the buyer to obtain necessary import license at his own risk and expense. EXQ/Ex-Quay: Ex-Quay means that you make the goods available to the buyer at a named quay. As in the term 'Ex-Ship' the points of division of costs and risks coincide, but they have now been moved one step further -- from the ship into the quay or wharf i.e. after crossing the customs border at destination. Therefore, in addition to arranging for carriage and paying freight and insurance you have to bear the cost of unloading the goods from the ship. Delivered at Frontier (DAF): The term is primarily intended to be used when the goods are to be carried by rail or road. Your obligations are fulfilled when the goods have arrived at the frontier, but before the 'Customs border' of the country named in the sales contract.

Delivery Duty Paid (DDP): This term may be used irrespective of the type of transport involved and denotes your maximum obligation as opposed to 'Ex-Works'. You have not fulfilled his obligation till such time that the goods are made available at his risk and cost to the buyer at his premises or any other named destination. In the latter case necessary documents (e.g. transport document or Warehouse Warrant) will have to be made available to the buyer to enable him to take delivery of goods. The term 'duty' includes taxes, fees and charges.Therefore, the obligation to pay VAT (Value Added Tax) levied upon importation will fall upon you. It is, therefore, advisable to use 'exclusive of VAT' after the words 'duty paid'. FAO/FOB Airport: 'FOB Airport' is based on the same main principle as the ordinary FOB term. You fulfill your obligation by delivering the goods to the air carrier at the airport of departure. Without the buyer's approval delivery at a town terminal outside the airport is not sufficient, your obligations with respect to costs and risks do not extend to the arrival of the goods at the destination. Free Carrier (Named Point) FRC: The term has been designed particularly to meet the requirements of modern transport like 'multi-modal' transport as container or 'roll-on-roll-off' traffic by trailers and ferries. The principles on which the term is based is same as applicable to FOB except that the seller or the exporter fulfills his obligations when he delivers the goods into the custody of the carrier at the named point. Freight Carriage and Insurance Paid (CIP): The term is similar to 'Freight or Carriage Paid to'. However, in case of CIP you have additionally to procure transport insurance against the risk of loss or damage to the goods during the carriage. You contract with the insurer and pay the insurance premium.