NATIONAL INSTITUTE OF FASHION TECHNOLOGY

BENGALURU (2015 -2017)

FASHION EXPORT MERCH. & EXIM DOCUMENTATION

MFM SEMESTER- II

Assignment Four
Export Documentation For Garment House

Pranpratim Ron Bhuyan - MFM/15/40

Priya Rathore - MFM/15/55
Sharang Nimbekar - MFM/15/459
Shweta Chauhan - MFM/15/646
Shivangi Singh - MFM/15/54

Under the guidance of

Ms. Gulnaz Banu

Declaration

We hereby declare that the report entitled

Export Documentation submitted to NIFT Bengaluru is a record of original work done by
us under the guidance of Ms. Gulnaz Banu, Associate Professor, FMS, National Institute
of Fashion Technology, Bengaluru, and this project work is submitted in the partial
fulfilment of the requirements for the award of the degree of Masters of Fashion
Management. The results embodied in this report have not been submitted to any other
university or institute for the award of any degree or diploma

P. Ron
Bhuyan

Priya
Rathore

Sharang
Nimbekar
II of VIII

Shivangi
Singh

Shweta
Chauhan

Acknowledgement

We would like to express our sincere gratitude to Ms. Gulnaz Banu for her continuous
support, his patience, motivation, and immense knowledge.
Her guidance helped us in all the time of research and writing of this report.
We would also like to thank our fellow classmates for the stimulating discussions,
brainstorming sessions and the sleepless nights we were working together to meet the
deadlines.

P. Ron
Bhuyan

Priya
Rathore

Sharang
Nimbekar
III of VIII

Shivangi
Singh

Shweta
Chauhan

Executive Summary
This report elaborates the documentation procedure of a garment export house. The
process of documentation itself is divided into four major categories which are:

Commercial
Transportation
Government
Financial

There are two further categories which are:

Documents related to Excisable goods

Documents related to Foreign Exchange Regulations
For ease of reading, a summary of each document type has been provided at the end of
each category in a tabular form.
The report also mentions INCO terms and samples of all the kinds of documents have
been attached in the Annexure.
All sources have been duly acknowledged

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Table of Contents
Declaration .................................................................................................................... II
Acknowledgement ........................................................................................................ III
Chapter 01: Introduction ............................................................................................. 01
1.1 Introduction .............................................................................................................. 01
1.2 Industry Profile ......................................................................................................... 02
1.3 Indian Apparel Industry ............................................................................................ 02
1.3.1 Products .......................................................................................................... 03
1.3.2 Production Centres .......................................................................................... 03
1.3.3 Competitiveness .............................................................................................. 03
1.3.4 Competitors ..................................................................................................... 03
1.4 Foreign Trade Policy ................................................................................................ 04
Chapter 02: Introduction about Export Documentation .......................................... 05
2.1 Overview .................................................................................................................. 05
2.2 Role of Export Documentation ................................................................................. 06
2.3 Classification of Export Documents ......................................................................... 06
Chapter 03: Commercial Documents ......................................................................... 07
3.1 Commercial Documents ........................................................................................... 07
3.2 Principal Documentations ........................................................................................ 07
3.2.1 Category of Principal Documents include ........................................................ 07
3.3 Auxiliary Commercial Documents ............................................................................ 07
3.4 Formal Quote ........................................................................................................... 08
3.5 Performa Invoice ..................................................................................................... 09
3.5.1 Function of Performa Invoice ........................................................................... 09
3.5.2 Points to keep in mind when preparing performa invoice ................................ 10
3.6 Export Contract ........................................................................................................ 11
3.6.1 Essential elements of an export sales contract ............................................... 11
3.7 Commercial Invoice ................................................................................................. 14
3.7.1 Things that should appear in the commercial invoice ...................................... 14

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3.8 Packing List ............................................................................................................. 16

3.8.1 Contents of Packing List .................................................................................. 17
3.8.2 Purpose of Packing List ................................................................................... 17
3.9 Inspection Certificate ............................................................................................... 17
3.9.1 Pre Shipment Inspection Certificates .............................................................. 18
3.10 Insurance Policy/Certificate ................................................................................... 18
3.10.1 Requirements for completion of an insurance policy ..................................... 19
3.10 2 Categories of risk to cover ............................................................................. 20
3.10.3 Importance of Marine Insurance .................................................................... 21
3.10.4 Factors to consider in taking out marine cover .............................................. 21
3.12 Health Certificate ................................................................................................... 22
3.13 Fumigation Certificate............................................................................................. 23
3.14 ATA CARNET/Temporary Shipment Certificate ..................................................... 24
3.15 Consular Invoice .................................................................................................... 24
3.15.1 Significance of Consular Invoice ................................................................... 25
3.16 Summary of Commercial Documents .................................................................... 26
Chapter 04: Transport Documentation ...................................................................... 29
4.1 Shipping Bill.............................................................................................................. 29
4.1.1 Importance of Shipping Bill .............................................................................. 30
4.1.2 Types of Shipping Bills .................................................................................... 30
4.2 Mates Receipt ......................................................................................................... 30
4.2.1 Contents of Mates Receipt .............................................................................. 31
4.2.2 Types of Mates Receipts ................................................................................. 31
4.2.3 Significance of Mates Receipt ........................................................................ 32
4.3 Cart Ticket ............................................................................................................... 32
4.4 Certificate of Measurement ..................................................................................... 32
4.5 Bill of Lading ............................................................................................................ 33
4.5.1 Purpose of a Bill of Lading ............................................................................... 34
4.5.2 Types of Bill of Lading ..................................................................................... 34
4.5.3. Contents of B/L ............................................................................................... 36
4.5.4. Significance of Bill of Lading ........................................................................... 37
4.6 Air Waybill ................................................................................................................ 38
4.6.1 Types of air waybills ........................................................................................ 38
4.6.2 Importance of Airway Bill ................................................................................. 39
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4.7 Bill of Entry .............................................................................................................. 39

4.7.1 Classification on Bill Of Entry .......................................................................... 39
4.7.2 Contents of Bill of Entry ................................................................................... 39
4.8 Road Consignment Note ......................................................................................... 40
4.9 The Export Cargo Shipping Instruction (ECSI) ........................................................ 40
4.10 Sea Waybill ............................................................................................................ 41
4.11 Shipping Guarantee ............................................................................................... 41
4.12 Summary of Transport Documents ........................................................................ 41
Chapter 05: Financial Documents .............................................................................. 44
5.1 Letter of Credit ......................................................................................................... 44
5.1.1. Purpose of Letter of Credit ............................................................................. 44
5.1.2. Types of letter of credit ................................................................................... 45
5.1.3. Unconfirmed Letters of Credit ......................................................................... 46
5.1.4 Confirmed Letters of Credit ............................................................................. 46
5.1.5 Revocable Letters of Credit ............................................................................. 46
5.1.6 Irrevocable Letters of Credit ............................................................................ 46
5.1.7 Transferable letters of Credit ........................................................................... 47
5.1.8 Sight Credits .................................................................................................... 47
5.1.9 Usance Credits ................................................................................................ 47
5.1.10 Standby letters of Credit ................................................................................ 48
5.1.11 Revolving letters of Credit .............................................................................. 48
5.1.12 Back-to-back letters of Credit ........................................................................ 48
5.1.13 Irrevocable and revocable letters of Credit .................................................... 48
5.2 Bills of Exchange ..................................................................................................... 49
5.2.1. Parties to a Bill of Exchange ........................................................................... 49
5.2.2. Types of Bills of Exchange ............................................................................. 50
5.3. Trust Receipt .......................................................................................................... 51
5.4 Promissory Note ...................................................................................................... 51
5.4.1. The promissory note: Advantages .................................................................. 51
5.4.2. The promissory note: Drawbacks ................................................................... 52
5.5 Bank Certificate of Payment .................................................................................... 52
5.6 Summary of financial documents ............................................................................ 52

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Chapter 06: Government Details................................................................................. 54

6.1 Certificate of Origin .................................................................................................. 54
6.1.1. Types of COs .................................................................................................. 55
6.1.2. Significance of Certificate of Origin ................................................................ 55
6.2. Certificates of Value (and Origin) ............................................................................ 55
6.3. Import export license .............................................................................................. 56
6.4. International Import Certificate (IIC) ....................................................................... 56
6.5. Delivery Verification Certificate (DVC) .................................................................... 56
6.6. Landing Certificate .................................................................................................. 57
6.7. Customs Invoice ..................................................................................................... 57
6.8. Summary Of Government Documents ................................................................... 57
Chapter 07: Documents Related To Excisable Goods ............................................. 60
7.1 GP Forms ................................................................................................................ 60
7.2 Form C ..................................................................................................................... 60
7.3 Forms AR4/AR4A .................................................................................................... 60
Chapter 08: Documents Related To Foreign Exchange Regulations Legal
Regulated Documents ................................................................................................. 61
8.1 GR Form .................................................................................................................. 61
8.2 PP Form .................................................................................................................. 61
8.3 VP?COD Form ........................................................................................................ 62
8.4 SOFTEX Form ......................................................................................................... 62
Chapter 09: INCO Terms ............................................................................................. 63
Chapter 10: Export Process ....................................................................................... 65
References and Bibliography
Appendix

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Chapter 01
Introduction
1.1 Introduction
The term export is derived from the conceptual meaning as to ship the goods and
services out of the port of a country. The seller of such goods and services is referred to as
an "exporter" who is based in the country of export whereas the overseas based buyer is
referred to as an "importer". In International Trade, "exports" refers to selling goods and
services produced in home country to other markets.
Any good or commodity, transported from one country to another country in a
legitimate fashion, typically for use in trade. Export goods or services are provided to
foreign consumers by domestic producers.
Export of commercial quantities of goods normally requires involvement of the
customs authorities in both the country of export and the country of import. The advent of
small trades over the internet such as through Amazon and e-Bay has largely bypassed
the involvement of Customs in many countries because of the low individual values of
these trades. Nonetheless, these small exports are still subject to legal restrictions applied
by the country of export. An export's counterpart is an import.

Trade

S.No

Year

Exports

Growth %

Imports

Growth %

2004-2005

375340

27.94

501065

39.53

-125725

2005-2006

4,56,418

21.6

660409

31.8

-203991

2006-2007

5,71,779

25.28

840506

27.27

-268727

2007-2008

6,55,864

14.71

1012312

20.44

-356448

2008-2009

8,40,755

28.19

1374436

35.77

-533680

2009-2010

8,45,534

0.57

1363736

-0.78

-518202

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Balance

2010-2011

11,42,922

35.17

1683467

23.45

-540545

2011-2012

14,65,959

28.26

2345463

39.32

-879504

2012-2013

16,34,319

11.48

2669162

13.8

-1034843

10

2013-2014

18,94,182

15.9

2714182

1.69

-820000

(Table 1: Trade Data for period 2004-05 to 2013-14)

1.2. Industry Profile- World Apparel Industry

Global garment exports are valued at more than US$ 310 billion a year, of which the
world's top 15 clothing exporters account for more than 80%.
Developing countries in Asia continue expanding their Garment Industry due to their verylow-cost production.
India is the second most preferred country after China for textile and apparel
sourcing. Its Apparel industry is likely to achieve an export target of US$ 28billion by
2012-13. Factors effecting like vast sources of raw materials, low labor costs, and
entrepreneurship and design skills of Indian traders, changes in the policies to open up
Indian economy to the outside world etc.
Bangladesh has emerged as a key player in RMG sector (Ready Made Garment Industry).
1.3. Indian Apparel Industry

14% of total industrial Production and 30% of total exports (in India).

Current share in world clothing export 3.5-4 %

One of the largest foreign exchange earners.

2nd largest exporter and producer of Apparel Products

30,000 manufacturing units and 35 million employed.

Industry is dominated by sub-contractors and consists mainly of small units.

55% of investment in technology done for spinning.

Supply base is medium quality with small volume.

During 2008, exports of apparel and textile products to US declined by0.43% in value
terms though export volumes increased by 7.49% due value increase in Rupee.

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1.3.1. Products

Garments and Clothing

Leather- Clothing and other Products

Home Decor and Furnishings

Apparel Accessories- Industry and

Handlooms

Textiles, Fabrics and Yarns

Products

1.3.2. Production Centres

Ludhiana

Mumbai

Tirupur

Chennai

New Delhi

Jaipur

Bangalore

1.3.3. Competitiveness

Caters basic requirement of people.

Large skilled/ unskilled workforce with cheap rate.

Sound Export Potential

Comprises of effective Supply Chain (Diverse Fabrics to large market)

Heavy Production Capacity

India has a large fibre base

Have a large and organised mill area

Economic Upgraded Technology

1.3.4. Competitors

China

Hong Kong

Vietnam

Dominican Republic

Bangladesh

Korea

Indonesia

Thailand

Mexico

Philippines

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1.4. Foreign Trade Policy

Clothing and accessories are classified under HS code 61 and 62. All the products
listed under these codes are freely importable. Furthermore the manufacturers of these
products are exempt from obtaining a license to manufacture though they are required to
file an Industrial Entrepreneur Memoranda (IEM) in Part 'A' with the Secretariat of
Industrial Assistance (SIA), and obtain an acknowledgement and part B after the
commencement of commercial production. Certain items of clothing are reserved for small
scale industries.

Most of the articles falling under HS 61-62 carry an import duty of 56.83 per cent which
includes 30 per cent basic duty, 16 per cent additional duty and 4 per cent special
additional duty. India has reduced peak rate of customs duty to 20%, in view of the
WTO Agreement.

In the foreign trade policy, certain amendments and inclusions have been done
pertaining to specific sectors of textiles and garment specially the handlooms.

Specific funds would be earmarked under MAI/ MDA Scheme for promoting handloom
exports.

Duty free import entitlement of specified trimmings and embellishments shall be 5% of

FOB value of exports during the previous financial year.

Duty free import entitlement of hand knotted carpet samples shall be 1%of FOB value
of exports during the previous financial year.

Duty free import of old pieces of hand knotted carpets on consignment basis for reexport after repair shall be permitted.

New towns of export excellence with a threshold limit of Rs 250 crore shall are notified.

The textile and apparel industry is an important one to India, contributing 1.6% of
industrial production and 30 % of total exports.

Import duties on capital equipment are low (the majority of the capital equipment used
by the apparel industry, like sewing machines, can be imported at 5% basic customs
duty).

Fabrics can be imported duty-free if made up into garments and re-exported

Import duties on fabrics and other raw materials are duty free for export production.

The apparel industry can import duty free specified trimmings and embellishments like
Fasteners, Rivets, Garment Stay, textile, Badges, Sewing Thread, Sequin, Tape &
others for export production.
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Chapter 2
Introduction about Export Documentation
2.1. Overview
Export documentation is a tedious but necessary process that all exporters must
pay close attention to, as documentation requirements vary considerably by country,
commodity, and situation. Although exporters must fill out and submit many different forms
for each international shipment, most require similar data elements and can (and should!)
be duplicated precisely from one document to the next.
Export documentation is complex in nature as the number of documents to be filled-in is
very large, so also is the number of the concerned authorities to whom the relevant
documents to be submitted. It is, therefore, advisable to take the help of shipping and
forwarding agents who will obtain and fill out the documents correctly as well as arrange
for transportation.
There are buyers and exporters, buying agents, RBI, authorised dealers (where the
exporter has his bank Account), buyers bank (foreign bank), DGFT, Customs and Port
Authorities, VAT and Excise Authorities, EPCs, Insurance Companies, Inspection
Agencies, Clearing and Forwarding Agents, Shipping Companies/Airlines and Inland
Carriers etc.
Proper Documentation will ensure smooth sailing with the requirements of the
above agencies and the resulting transaction will be a successful one.
Inaccurate or incomplete documentation will result in serious financial and goodwill losses.
Such losses can be completely avoided by understanding clearly the documentation
requirements of all concerned parties and then meticulously planning to get the right
documents in the right numbers, at the right places and at the right time.

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2.2. Role of Export Documentation

The major role of export documentations are:
i.

Export documentation plays a vital role in international marketing as it facilitates the

smooth flow of goods and payments thereof across national frontiers.

ii.

Exporters are required to follow certain formalities and procedures, using a number
of documents.

iii.

Each of these documents serves a specific purpose and hence carries its own
significance.

iv.

A clear understanding of all documents and their purpose, how to prepare these,
number of copies required, when and where to file, is a must for all export
professionals.

2.3. Classification of Export Documents

Export Documents can be classified into following four categories:
1. Commercial documents,
2. Financial documents,
3. Transport documents,
4. Governmental document

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Chapter 03
Commercial Documents
3.1 Commercial Documents
These documents are used by exporters/importers to discharge their respective legal and
other incidental responsibilities
Commercial documents can be further sub-divided into:
i.

Principal Commercial Documents

ii.

Auxiliary Commercial Documents

3.2. Principal documentations

These documents serve the following purposes:
a. To effect physical transfer of goods and title of the goods from exporter to the buyer.
b. To realise export sales proceeds.
3.2.1. Category of Principal Documents include:

Formal Quote

Commercial Invoice (and the invoice prescribed by the importer)

Packing list

Certificate of Inspection

Certificate of Insurance/Insurance Policy

Bill of Lading/Airway bill/Combined Transport Documents

Certificate of Origin

Bill of Exchange

Shipment Advice

3.3. Auxiliary Commercial Documents- These Documents are required to prepare or

procure the principal commercial documents and include:

Performa Invoice

Mates Receipt

Shipping Instructions

Application for Certificate of Origin

Insurance Declaration

Letter to bank for negotiation /

Intimation for Inspection

Shipping Order

collection of documents

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3.4. Formal Quote

A quotation is normally the first step in the export transaction. It is a response to an
inquiry received from a potential buyer .e.g. (U.S. representative of the foreign entity) or a
proactive marketing step of a U.S. based company.
A quotation may include all the contents that appear in a typical pro forma invoice except:

Country of origin of product and

The title Performa invoice.

If a quotation is sent to a foreign company that is not familiar with the company or

products, the description should be very specific and detailed, more so than if the buyer
were domestic. Along with the description, there are other items that should be included,
such as:

Sellers name and address

Potential buyers name and address

Buyers reference inquiry number if noted

Prices of items: per unit and extended

Weights and dimensions of quoted products

Discounts, if applicable

Terms of sale or Inco terms used (include geographical delivery point)

Terms of payment

Validity of quotation

Estimated shipping date

Estimated date of arrival

When quoting a price, it is beneficial to give a potential buyer some options of trade

terms selection. INCO terms are very effective when presenting pricing options to the
potential buyer. For some very large foreign companies, it is more convenient and costeffective to negotiate their own freight rates and organise their own shipments, so they
may prefer EXW or F-terms. On the other hand, there may be other buyers that would
prefer the seller to organise the movement, thereby preferring the C-terms or even the Dterms.

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3.5. Performa Invoice

A performa invoice is a quote in an invoice format that may be required by the buyer
to apply for an import license, contract for pre-shipment inspection, open a letter of credit
or arrange for transfer of hard currency.
A performa may not be a required shipping document, but it can provide detailed
information that buyers need in order to legally import the product.
Performa invoices basically contain much of the same information as the formal
quotation, and in many cases can be used in place of one. It should give the buyer as
much information about the order as possible so arrangements can be made efficiently.
The invoices inform the buyer and the appropriate import government authorities details of
the future shipment; changes should not be made without the buyers consent.
3.5.1 Function of performa invoice

A price quotation prepared in the form of an invoice, a performa invoice, is different

from commercial invoices.

It is used to create a sale and is sent in advance of the commercial invoice. The
content of a performa invoice is almost identical to a commercial invoice and is
usually considered a binding agreement although the price might change in advance
of the final sale.

For establishment of LC or for advance payment by the importer through his bank,
usually banks prefer performa invoice to a quotation.

Considered as a binding agreement between exporter and importer. May be required

by some countries as part of their import licensing procedures.

Bankers and financial institutions use pro forma invoices to open letters of credit,
advance payments, etc., for importers.

Easily recognised due to their similarity to commercial invoices. Pro forma invoice
format encourages exporters to include all the information that shall appear in the
commercial invoice.

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3.5.2 Points to keep in mind when preparing performa invoice:

The title of the document should clearly say "Pro Forma Invoice".

Exporter's name, address, telephone number and e-mail address.

Sold to name, address, telephone number and e-mail address.

Pro forma invoice reference number.

Date issued. The date of the pro forma invoice is the date of the quotation.

Customers Inquiry reference number or purchase order number, if available.

Terms of payment (letter of credit, documentary collection, pre-payment, T/T, open

account etc.).

Exporters banking details for advising /negotiating LC or SWIFT code details for
Wire Transfer.

Estimated date of shipment.

If more than one product, number each product beginning with number 1.

Type of Delivery & shipment: Full in one lot or partial.

Indicate Transshipment if any,

Quantity shipped per lot.

Full product description, include the Harmonised Schedule (HS) code if available.

Indicate clearly currency used (USD, euro, yen etc.).

Unit pricing should be included.

Unit pricing should be extended by the quantities quoted to form the line item total.

Any additional supplies-provided services should be itemised and should be added

to reach a grand total.

Terms of sale using latest INCO TERMS (FOB, CIF, CFR, DDU etc.- named port or
destination).

Identify the number of unit measure, weight, case, pallets, box, etc.,

The country of origin of the product.

Cost of any additional documents, inspection, legalisation, etc., to be borne by the

importer or exporter.

Validity period, never make a open-ended commitments remember that the validity
date can be changed.

Must be signed and title to be included.

Column for Acceptance with Signature, title of the buyer to be incorporated in PI or

covering letter.

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3.6. Export contract

It is difficult to draw up a comprehensive contract that can be standardised for all
export transactions. However, the exporter and the importer should be aware of certain
minimum general requirements when drawing up an export sales contract.
3.6.1 Essential elements of an export sales contract
The clauses covering these requirements will make up the basic elements of the
contract and are outlined below:

Name and addresses of the parties. The parties to the contract should be clearly
stated.

Product, standards and specifications. The export contract should explicitly state
the product name, as well as technical names if there are any; sizes in which the
product is to be supplied (if this is required); the applicable national or international
standards and specifications;

specific buyer requirements; and sample

specifications.

Quantity. The quantity should be clearly stated in both figures and words; units of
measure should be specified.

Inspection. Although a number of goods are now subject to pre-shipment inspection

by designated agencies, foreign buyers may stipulate their own inspection agencies
and conditions for inspection. Therefore, the parties should clearly state the nature,
manner and focus of the inspection envisaged, as well as the inspection agency.

Total value of the contract. The total value of the contract should be put in both
words and figures, and the currency should be specified.

Terms of delivery. Terms of delivery (one of the Inco terms 2000 or .) should be
stated in the contract.

Taxes, duties and charges. The prices quoted by the seller may be inclusive of
taxes, duties and charges. Levies, if any, in the country of importation may be the
buyers responsibility. Responsibility for payment of all such taxes should be clearly
specified in the contract.

Period of delivery, shipment, etc. The place of dispatch and delivery should be
clearly specified, also whether the period of delivery will run from the date of the

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contract, from the date of notification of the issue of an irrevocable letter of credit, or
from the date of receipt of the notice of issuance of the import license by the seller.

Part-shipment, trans-shipment, consolidation of cargo. The contract should

explicitly state whether the parties to it have agreed on part-shipment or transshipment. The contract should also indicate the port of trans-shipment and the
number, if any, of partial shipments agreed. If the goods are likely to be shipped
under a consolidation of export cargoes scheme, this should be mentioned in the
contract.

Packaging, labelling and marking. Packaging, labelling and marking requirements

should be clearly stated in the contract.

Terms of payment, amount, mode and currency. When quoting different payment
terms, the exporter should specify whether the prices are based on the current rate
of exchange of the South African rand, or on the basis of another currency (e.g. the
US dollar). Fluctuations in the rate of exchange should also be addressed.

Discounts and commissions. The contract should specify the amount of discount
or commission to be paid and by whom (i.e. by the exporter or by the importer). If
required, the basis on which commission is calculated and the rate to be applied
should also be clearly stipulated. Discount or commission rates may, or may not, be
included in the export price agreed upon by the exporter and importer.

Licenses and permits. Import licenses may be difficult to obtain in the buyers
country. Parties to the contract should therefore clearly state whether the export
transaction will require any export or import licenses, whose responsibility it will be
to obtain them, and at whose expense.

Insurance.

A contract should provide for the insurance of goods against loss,

damage or destruction during transportation. The contract should specify the type of
risk covered and the extent of coverage.

Documentary requirements: Documents required by the buyer/importer, and which

the exporter agrees to provide, should be stated. Where the exporter is required to
take out marine insurance, it is important that he be asked to provide a certificate of
insurance, rather than the policy, to enable him to ship consignments under an open
policy.

Product guarantee. The length of the period of guarantee should be fixed.

Delay in delivery. The contract should define the damages due to the buyer from
the seller in the event of late delivery owing to reasons other than force majeure.

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Force majeure or excuse for non-performance of contract: Parties should

include certain provisions in the contract defining the unforeseeable circumstances
that would relieve them of their liability for non- performance of the contract. Such
provisions are intended to identify the relief which may be available to either party to
the contract should supervening circumstances occur during the period of validity of
the contract.

Remedial action: As defaults in contractual obligations by any of the parties can

occur, it is always advisable to include in the sale or purchase contract certain
specific remedial actions. These remedial actions should reflect the mandatory
provisions of the law applicable to the contract.

Applicable law. The contract should state the law of the country that is to govern
the contract.

Arbitration. The contract should include an arbitration clause to facilitate the

amicable and quick settlement of disputes or differences that may arise between the
parties.

Signature of the parties: The signing of the contract indicates the agreement of
both parties to the terms and conditions of the contract.

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3.7. Commercial Invoice

There is usually very little, if any, difference between the final performa invoices
accepted by the importer and the commercial invoice, except that the one is titled
"Performa Invoice", while the other is titled "Commercial Invoice". Although the performa
invoice comes before the commercial invoice, the performa invoice really only serves as a
means of negotiating the actual contract.
The commercial invoice should reflect the final (agreed-upon) performa invoice
exactly - any deviances will result in problems executing the transaction and/or receiving
payment (unless such changes have been requested by the importer and are agreed to by
the exporter).
Based on the terms specified in this commercial invoice, the importer will instruct
his/her bank (referred to as the issuing bank) to issue a letter of credit (L/C). This L/C (or
the documentation associated with any other form of payment) will also need to reflect the
terms specified in the commercial invoice exactly, while all subsequent documentation
must reflect the terms of the L/C; there can be no exceptions. From this explanation, it is
clear that the commercial invoice plays a central role in an export transaction.
Prepared after the sale takes place, the commercial invoice is the final bill from the
exporter to the buyer that conforms in all respects to the agreement. It could have the
exact terms of the pro forma invoice first offered, or it could differ in those terms that were
the result of final negotiations.
3.7.2 Things that should appear in the commercial invoice
The following details should appear in the commercial invoice:

The document title should clearly state "Commercial Invoice"

The name of the exporter (referred to as the shipper) and their contact details (tel,
fax, cell, e-mail), including physical (not postal) address

The name of the importer (referred to as the consignee, meaning the person or firm
to whom the goods are to be sent) and their contact details (tel, fax, cell, e-mail),
including physical (not postal) address (In the case of transshipment, there may be

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an intermediate consignee and their contact details and address should then also
be included on the invoice.)

If the person or firm buying the goods (the importer) is not the same as the person
or firm to whom the goods are being sent, then you should include both their
contact details and addresses in the commercial invoice

The name of the person and company to notify once shipment has taken place and
their contact details and physical address (here the contact details such as
telephone, fax and cell number and e-mail address are more important than the
physical address)

A commercial invoice reference number

A purchase order number or similar reference to correspondence between the

supplier and importer

The date of issue of the commercial invoice

A complete, detailed and clear description of the goods in question, incorporating

the appropriate HS codes and brand marks if applicable

The quantity of goods in question, including the number of units/items

The packing details unless provided in a separate packing list, including their
external dimensions, cubic capacity, weight, numbers and contents of each
package shipped, and kinds of packaging involved (pallets, boxes, bags, etc.) - if a
separate packing list is used, reference should be made in the commercial invoice
to the packing list

The grand total price of the goods for the whole consignment

Where applicable, the unit prices should be indicated - the unit price multiplied by
the number of units/items should be reflected in the line total. The various line totals
(in the case where different items are included in the same commercial invoice, or
where additional services are itemised in the invoice), should add up to the total
price for the whole consignment (also referred to as the 'Grand Total')

The currency in which the goods will be sold (e.g. US dollars or rands)

The type and amount of any discount given, where applicable

The likely delivery schedule and delivery terms

The payment methods (for example cash in advance, documentary collection, L/C,
etc.)

The payment terms (for example 30 days on sight)

The Inco term to be used (Inco terms 2000 - FAS, CIF, CFR, DDP, etc.)

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Who is responsible for the banking fees and other related costs (insurance and
freight costs are covered by the inco term in question)

What the freight and insurance charges are

The exporter's banking details

A declaration of the country of origin of the goods

The expected country of final destination

Any freight details such as the port of loading and discharge

Any additional exporter-provided services that should be added to the invoice to

come to the grand total

Any transshipment requirements

The validity of the commercial invoice - that is, when does the offer expire (leaving it
open-ended could be very risky)

Any other information relevant to the order

Make sure the commercial invoice is signed, together with the signature's name
written underneath, with initials, title and position

3.8. Packing List

Also known as packing specification, this document provides the details of number
of packages; quantity packed in each of them; the weight and measurement of each of the
package and the net and gross weight of the total consignment.
A packing list is prepared by the shipper and is a detailed break down of the items
within a shipment. It may also include any special marks for identification. For example,
the customer may want ABC XX in blue letters on the side of the packaging. For
insurance claims and tracking purposes, it helps to describe what is in each package.
The packing list should also reference the customers purchase order number and
destination. Often, a packing list is taped to palletised cargo or on the main carton/box of a
shipment so that the importers customs agency or any transportation handlers can have
easy access to it to know what the goods are and their destination. The quantity and items
listed on the commercial invoice must match with the packing.

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3.8.1 Contents of Packing list

Date of packing,

Number of packing note,

Number of case to which it relates to,

Contents of case in terms of quantity and weight,

Marking numbers,

Name of exporter,

Name of importer,

Importers order number,

Number and date of bill of lading and

Name of vessel/flight.

3.8.2 The purpose of the packing list

The list is used by the shipper or forwarding agent to determine:
i.
ii.

The total shipment weight and volume and

Whether the correct cargo is being shipped. In addition, customs officials (both
local and foreign) may use the list to check the cargo. Packing lists come in fairly
standard forms and can be obtained from your freight forwarder.

3.9. 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.
A report issued by an independent surveyor (Inspection Company) or the exporter on the
specifications of the shipment, including quality, quantity, and/or price, etc; required by
certain buyer and countries.
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.

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Pre-shipment inspection certificates

It is not uncommon for importers to want to confirm that the to-be-exported goods
meet their requirements. This is particularly so in instances where it is essential that the
goods meet certain standards. These same importers unfortunately cannot always fly to all
the countries from where they are buying their products and for this reason, they may:
i.

Require that the shipment be inspected just before loading by an independent thirdparty arranged and generally paid for by the importer. The exporter will need to
indicate an approximate time and place for this inspection to take place.

ii.

Ask the exporter to obtain the pre-shipment inspection certificate from an

independent third-party inspection firm which is then forwarded to the importer. In
this instance either the exporter or the importer may pay for the inspection,
depending what was negotiated in the contract.
The independent contractor - usually a recognised firm in this field - will undertake a

detailed inspection of equipment or materials after manufacture, but prior to shipment. The
scope of the inspection includes quantity and quality, packing and marking and supervision
of loading. A Certificate of Inspection can be provided against a Letter of Credit and may
be authorised by a Chamber of Commerce. Occasionally, the importer may ask a trusted
individual to undertake the inspection on their behalf.
Furthermore, some countries may require certification for selected products (this is
independently from the importer) and in these instances a pre-shipment inspection is a
necessary step to receive an import certificate for the shipment. Without this certificate the
shipment will not be able to clear customs in the country of destination.
3.10. Insurance policy/certificate
Because of the enormous risks involved in international trade, it has become a core
part of the international trading process for the parties involved to insure their respective
risks. One of the major risks that international traders (exporters and importers) face is the
risk of damage or loss during the transportation process. This is where marine insurance
comes into play. 'Marine insurance' is thus the term used to described the insurance taken
out to cover the risks involved in all forms of transportation, for example, sea, road, rail and
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air, from the point where the goods are loaded onto their first form of transport until they
arrive at their final destination.
An insurance policy is an insurance document evidencing insurance has been taken
out on the goods shipped, and it gives full details of the insurance coverage. An insurance
certificate certifies that the shipment has been insured under a given open policy and is to
cover loss of or damage to the cargo while in transit.
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.
3.10.1 Requirements for completion of an insurance policy:

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 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.

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3.10.2 Categories of risk to cover

There are several different categories of risk that you can consider covering. These are
i.

Catastrophe risk- These relate to events which can occur to the carrying ship,
aircraft or other conveyance in which the goods are loaded, or to the location in
which the goods are temporarily housed in the normal course of transportation.
These are:
Sinking, stranding, collision, or catching fire of the carrying ship
Overturning or collision of a carrying vehicle
Fire or flooding of a transit warehouse

ii.

Accidental or fortuitous risks- These are risks which are more commonly the
cause of claims and relate to events which affect the goods themselves rather than
the conveyance in which they move. These are the risks which account for the
greater part of the premium rate. These are:
Dropping

Contamination

Crushing

Scuffing, scratching, bruising,

Impacting

denting etc.

Twisting and bending

Breaking
Burning
Rusting
iii.

Other risks - There are risks which are not accidental or fortuitous but are outside
of the control of the cargo owner and include:
Theft and pilferage

Malicious damage

Non-delivery
Losses due to piracy
iv.

War and associated risks - These include war, strikes, civil commotion and
terrorism.

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3.10.3. Importance of Marine Insurance

As there are many risks involved in the transportation cargo internationally, traders
want to minimise these risks. A loss of goods to a buyer (or seller - depending who has
contractual ownership of the goods at the time of the damage/loss) could mean:

Loss of business

Expensive repairs

Loss of money

Penalties for late delivery

Loss of goodwill

Delays in utilisation of the goods

Any of these factors could put a small firm out of business and can even cause

larger firms serious financial difficulties. The sensible trader will make certain that he or
she has taken out suitable insurance cover, covering the correct value and risks thereby
ensuring that all aspects of marine insurance have been suitably addressed.
3.10.3. Factors to consider in taking out marine cover
In taking out marine insurance, there are several factors that the assured must take into
consideration. These include:

The principle of 'utmost good faith'

The categories of risk to be insured

The principles of insurable interest and insurable value

Insuring against the risks of war, strikes, riots and civil commotion

The duration of an insurance policy

The principle of general average

Types of marine insurance cover

The premium

There are three main contracts which are:

i.

The contract of sale; between the seller and the buyer

ii.

The contract of carriage; between the carrier and the shipper

iii.

The contract of marine insurance: between the insurer and the assured

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While each of the contracts is independent of each other they cannot be detached
because they complement each other and look after the interests of both the seller and the
buyer. When concluding these contracts the following aspects must be given attention,
these are:

The nature of the journey

The means of conveyance that will carry the goods to their final destination

The goods/cargo being sold

3.11. Product Testing Certificate

A certificate to certify the products are conformed to a certain international/national
technical standard, such as product quality, safety and specifications, etc.
3.12. Health Certificate
Document issued by the competent country when products are being exported, to
certify that they comply with the relevant legislation in the exporters country and was in
good condition at time of inspection, prior to shipment and fit for human consumption.
Certificates of health are normally required by the importing country to ensure that the
imported goods (plants, plant products, animals and animal products) are in good health
and carry no diseases, pests or any health-threatening organisms. Such certificates of
health confirm (a) the origin of the shipment and, (b) that local authorities have inspected
the consignment and ensure its good health. Certificates of Health can be divided into two
types:

Phytosanitary certificates which are required for the import of certain plants and
plant products such as seeds and flowers. Phytosanitary certificates are governed
by the International Plant Protection Convention and represent an internationally
accepted means of pest risk mitigation.

Veterinary certificates which are required for the import of live animals, as well as
fresh, chilled or frozen animal products.

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The exact import requirements are set by the importing country but are usually
communicated to the corresponding authorities in South Africa (usually the Department of
Agriculture).
3.13 Fumigation certificate
A pest control certificate issued to certify that the concerned products have been
undergone the quarantine and pre-shipment fumigation by the approved fumigation
service providers. Some countries, such as Australia, Canada, New Zealand, the US and
the UK, are very strict about letting in goods that might contain bacteria or insects that
could harm their agriculture. For this reason, they may require a fumigation certificate also referred to as a 'pest control certificate - as proof that the packing materials e.g.
wooden crates, wood, wool etc., have been fumigated or sterilised. Fumigation certificates
usually contain details such as purpose of treatment, the articles in question, temperature
range used, chemicals and concentration used, etc. Sometimes they may be required for
sea shipments, but not for air shipments. Your freight forwarder should be able to advise
you as to whether you require such as certificate.
3.14 ATA CARNET/Temporary shipment certificate
An international customs document used to obtain a duty-free temporary admission
for goods such as exhibits for international trade fairs, samples and professional
equipment, into the countries that are signatories to the ATA Convention.
An ATA Carnet, "Merchandise Passport," is a document that facilitates the
temporary importation of products into foreign countries by eliminating tariffs and valueadded taxes (VAT) or the posting of a security deposit normally required at the time of
importation.
3.15 Consular Invoice
Some countries, however, may require the commercial invoice to be completed on
their own specified forms - such commercial invoices are known as "Customs' invoices"
and may be provided in lieu of or in addition to the standard commercial invoices referred
to above. In addition, a "consular invoice" is required by certain countries. The consular
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invoice must be prepared in the language of the destination country and can be obtained
from the country's consulate, and often must be "consularised" (i.e. stamped by an
authorized Consul official in the exporting country).
The importer needs the commercial invoice since it is often used by Customs
authorities to assess duties. For this reason, it is common practice to prepare a
commercial invoice in English and in the language of the destination country. The freight
forwarder can advise you when a translated copy is necessary.
Some of the importing countries insist that the invoice is to be signed by the
importing countys consular located in the exporters country. Such invoices are known as
consular invoice. The exporter has to pay a certain fee to obtain the certificate/invoice.
Such charges/ fees vary from country to country. The main purpose to obtain consular
invoice is to secure authentication of information contained in the invoice. Once the invoice
is signed by the consular of the country, the importer gets comfort and confidence in
respect of accuracy of information in respect of quality, source of goods, volume and
grade.
Normally, on arrival of the goods, it is necessary to convince the customs authorities
of the importing country that the goods stated in the invoice and the actually imported
goods are one and the same. If the customs authorities get suspicious or not convinced,
they open the packages of the imported goods. If this happens, considerable delay takes
place. The importer is put to hardship by delayed receipt of goods. To avoid all these
problems, importer insists on the exporter to obtain the consular invoice from the consulate
stationed in the exporters country. The consulate invoice is, generally, prepared in three
copies. One copy is retained by the consulate office, the second copy is sent to the
customs of the importing country and the third copy is given to the exporter to forward the
same along with other documents through the banker for collection/negotiation.
This information also facilitates in assessing import duties and also would be useful
for statistical purposes.

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3.15.1. Significance of Consular Invoice:

Importance to the Exporter

Once the invoice is signed by the consulate of the importing country, the exporter is
reasonably assured that there are no import restrictions in the importers country for
the goods and that there would be no problem in realisation of export proceeds or
foreign exchange.

It enables prompt clearance from the customs of exporters country for shipping the
goods.

Importance to the Importer

In the importers country, the customs do not normally open the packages. It helps
the importer to get speedy delivery of goods.

Lot of unnecessary hardship which importer faces once the packages are opened is
avoided.

Importance to the Customs

The customs of the exporting country can easily clear the goods.

The customs of the importing country need not open the packages for checking and
can easily calculate the import duties.

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3.16. Summary of Commercial documents

Documents

Functions

Prepared by

An offer to sell goods and should state clearly the

Quotation

price, details of quality, quantity, trade terms, delivery

Exporter

terms, and payment terms.

An agreement between the buyer and the seller
Export Contract

stipulating every details of the transaction. It is a Exporter and

legally binding document. It is therefore advisable to

importer

seek legal advice before signing the contract.

An invoice provided by a supplier prior to the
shipment of merchandise, informing the buyer of the
kinds and quantities of goods to be sent, their value,
Pro Forma

and importation specifications (weight, size and

Invoice

similar characteristics). This is not issued for

Exporter

demanding payment but may be used when applying

for an import license/permit or arranging foreign
currency or other funding purposes.
It is a formal demand note for payment issued by the
exporter to the importer for goods sold under a sales
Commercial

contract. It should give details of the goods sold,

invoice

payment terms and trade terms. It is also used for

Exporter

the customs clearance of goods and sometimes for

foreign exchange purpose by the importer.
Packing list

A list with detailed packing information of the goods

shipped.

Exporter

A report issued by an independent surveyor

Inspection
Certificate

(inspection company) or the exporter on the

Inspection

specifications of the shipment, including quality, Company or

quantity, and/or price, etc; required by certain buyer
and countries.

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Exporter

An insurance policy is an insurance document

Insurance Policy/
Certificate

evidencing insurance has been taken out on the

Insurer or

goods shipped, and it gives full details of the

Insurance

insurance coverage. An insurance certificate certifies

Agent or

that the shipment has been insured under a given

Insurance

open policy and is to cover loss of or damage to the

Broker

cargo while in transit.

A certificate to certify the products are conformed to
Product Testing
Certificate

a certain international/national technical standard,

Accredited

such as product quality, safety and specifications, Laboratories

etc.
Document issued by the competent country when
agricultural or food products are being exported, to

Health Certificate

certify that they comply with the relevant legislation

in the exporter's country and were in good condition
at time of inspection, prior to shipment and fit for

Exporter /
Inspection
Authority

human consumption.
Frequently an international requirement that any
consignment of plants or planting materials importing
into a country shall be accompanied by a
Phytosanitary Certificate issued by the exporting
Phytosanitary

country stating that the consignment is found

Certificate

substantially free from diseases and pests and

Exporter

conforms with the current phytosanitary regulations

of the importing country. Application of the certificate
in Hong Kong should be made to the Agriculture and
Fisheries Department.
A pest control certificate issued to certify that the
concerned products have been undergone the
Fumigation
Certificate

quarantine and pre-shipment fumigation by the

Exporter /

approved fumigation service providers. It is mainly

Inspection

required by the US, Canada, Australia, New Zealand

Authority

and UK's customs on solid wood packing material

from Hong Kong and the Chinese Mainland.
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An international customs document used to obtain a

duty-free temporary admission for goods such as
ATA Carnet

exhibits for international trade fairs, samples and

Exporter

professional equipment, into the countries that are

signatories to the ATA Convention.
A document required by some foreign countries,
showing shipment information such as consignor,
consignee, and value description, etc. Certified by a
Consular Invoice consular official of the importing country stationed in
the foreign country, it is used by the country's
customs officials to verify the value, quantity and
nature of the shipment.

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Exporter

Chapter 04
Transport Documentation
4.1 Shipping Bill
The shipping bill is the main document on the basis of which the customs
permission is given. Under manual processing of export documents, the exporter is
required to file the appropriate type of shipping bill to seek the order for customs clearance
of the export shipment. Under computerised processing, the exporter does not prepare the
shipping bill; instead it is computer generated. The customs order is called LET EXPORT
Order. After the shipping bill is stamped by the customs, then only the goods are allowed
to be carted to the docks.
The shipping bill contains the following particulars:
i.

Nature of goods exported,

ii.

Name of vessel, master or agents,

iii.

Flag,

iv.

Country of destination, the port at which the goods are to be discharged,

v.

Exporters address,

vi. Importers address,

vii. Details of the packages, such as numbers and marks,
viii. Quantity details of each case, total number of cases and aggregate weight,
ix. F.O.B. prices and real value as defined in the Sea Customs Act and
x.

Whether the merchandise is Indian or foreign origin which is re-exported.

The shipping bill is prepared in five copies:

Customs copy

Port Trust copy and

Drawback copy

Exporters copy

Export Promotion copy

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4.1.1. Importance of Shipping Bill

It is an important document required by the customs authorities for clearance of

goods. The customs authorities endorse the duplicate copy of the shipping bill with
Let Export Order and Let Ship Order.

After the clearance of customs, exporter can load the goods on ship.

Shipping bill endorsed by the customs authorities facilitates the exporter to claim
incentives such as excise duty refund and duty drawback.

4.1.2. Types of Shipping Bills

i.

Free Shipping Bill: It is used in case of goods which neither attract any export duty
nor entitled for duty drawback. It is printed on simple white paper.

ii.

Dutiable Shipping Bill: It is used in case of goods, which attract export duty. It may
or may not be entitled to duty drawback. It is printed on yellow paper.

iii.

Drawback Shipping Bill: It is used in case when refund of duties is allowed on the
goods exported. Generally, it is printed on green paper, but when the drawback
claim is paid to a bank, then it is printed on yellow paper.

iv.

Shipping bill for Shipment Ex-Bond: It is used in case of imported goods for re
export and which are kept in bond. It is printed on yellow paper.

v.

Coastal Shipping Bill: It is used in case of shipment that is moved from one port to
another port, by sea, within India. It is not an export document.

When goods are sent by sea, it is called Shipping Bill and it is Airway bill when goods are
sent by Air.
4.2 Mates Receipt
A mates receipt is issued by the mate (assistant to the captain of the ship) after the
cargo is loaded into the ship. It is an acknowledgment that the goods have been received
on board the ship.

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4.2.1. Contents of Mates Receipt

Mate receipt contains the details about

Name of the vessel,

Date of shipment,

Berth,

Marks,

Numbers,

Description and condition of goods at the time they are shipped, port of loading,

Name and address of the shipper,

Name and address of the importer(consignee) and

Other required details.

4.2.2. Types of Mates Receipts

Mates receipt can be clean or qualified.
i.

Clean Mates Receipt: Mate of the ship issues a clean mates receipt if the
condition, quality of the goods and their packing are proper and free from defects.

ii.

Qualified Mates Receipt: If the mates receipt contains any adverse remarks as to
the quality or condition of the goods/packing, it is known as Qualified Mates
Receipt. If the goods are not packed properly and the mates receipt contains any
adverse remarks about the packing such as Poor Packing, the shipping company
does not assume any responsibility in respect of the goods during transit. It is
necessary for the exporter to secure the mates receipt without any adverse
remarks. On the basis of the mates receipt, the Bill of Lading is prepared by the
shipping agent. If there are adverse remarks in the mates receipt, the same will be
incorporated in the Bill of Lading, which may turn to become a closed Bill of Lading,
and this may not be acceptable for negotiation.
Mates receipt is first handed to the Port Trust Authorities who hands over to the

exporter soon after he clears their dues. This procedure is adopted to facilitate for
collection of port dues from the exporter.

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4.2.3. Significance of Mates Receipt

Mates receipt is an acknowledgment of goods. It is not a document of title.

It is issued to enable the exporter or his agent to secure bill of lading from the
shipping company.

Bill of Lading, which is the title to the goods, is prepared on the basis of Mates
receipt so it should be obtained without any adverse remarks.

Port Trust Authorities are enabled to collect their dues as it is routed through them.

4.3 Cart Ticket

A cart ticket is also known as cart chit. This is prepared by the exporter, which
contains the details of the vehicle number, description of goods, quantity, name of the
shipper, shipping bill number and port of destination. The driver of the vehicle carries the
cart ticket. At the time of entry into Port, the cart ticket is verified by the Port Authorities to
satisfy that the vehicle is carrying only those goods, which are mentioned in the cart ticket.
After being satisfied, the gatekeeper/warden/inspector issues the gate pass to the driver
and allows entry of the vehicle into the premises of the port.
4.4 Certificate of Measurement
Freight is charged either on the basis of weight or measurement. When weight is
the basis of measurement, the shipping company for the purpose of calculation of freight
may accept the weight declared by the exporter. However, when measurement is the basis
for calculation of freight, the shipping company may insist on a certificate issued by
Chamber of Commerce or other approved organisation in respect of goods. The certificate
of measurement contains the details in respect of description of goods, quantity, length,
breadth and depth of the packages, name of the vessel and port of destination of the cargo
etc.

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4.5 Bill of Lading

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.

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4.5.1 Purpose of a Bill of Lading

It serves three main purposes.
As a document of title to the goods
As a receipt from the shipping company and
As a contract of affreightment (transportation) of goods.

The main parties involve in a bill of lading are:

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

4.5.2. Types of Bill of Lading

i.

Received for Shipment B/L: A shipping company issues it when goods have been
given to the custody of the shipping company, but they have not been placed on
board.

ii.

On Board Shipped B/L: The shipping company certifies that the cargo has been
received on board the ship.

iii. Clean B/L: It indicates a clean receipt. In other words, it implies that there has been
no defect in the apparent order or condition of goods at the time of receipt or
shipment of goods by the shipping company.
iv. Claused or Dirty B/L: It shows that the B/L is qualified which expressly declares a
defective condition of goods. The clause may state bale number 5 hook-damaged
or package number 10 broken. By superimposing this type of clause, the shipping
company is limiting its responsibility at the time of delivery of goods, at the
destination. It is very important to note that bank accepts only a clean B/L at the
time of negotiation.
v.

Transshipment or Through B/L: When the journey covers several modes of

transport from the place of starting to the place of destination, this type of B/L is
taken. It indicates that transshipment would be en route. For example, part of the
journey is by ship and the rest of journey may be by road, rail and air.
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vi. Stale B/L: According to international commercial practice, B/L along with other
documents must be presented to the bank not later than twenty one days of the
date of shipment as given in the B/L. In some cases, the importer may indicate the
number of days within which the documents are to be presented from the date of
shipment. Exporter has to comply with the stipulation indicated. Otherwise, the B/L
becomes stale and is not accepted by the bank for payment. A stale bill is one
which is tendered to the presenting bank so late a date that it is impossible for the
bank to dispatch to the consignees place, in time, before the goods arrive at the
destination port. In other words, bank finds it impossible to see the documents
reach before the ship reaches the destination.
vii. To Order B/L: In this case, the B/L is issued to the order of a specified person.
viii. Charter Party B/L: It covers shipment on a chartered ship.
ix. Freight paid B/L: When the shipper pays the freight, then this type of B/L is issued
with the words Freight paid.
Freight Collect B/L: When the freight on the B/L is not paid and to be collected at

x.

the point of destination, it is marked Freight Collect and this B/L is known as
Freight Collect B/L.
Generally, the importer insists on the clean on-board shipped bill of lading with the
prohibition of transshipment of goods as goods can suffer damage during transshipment. If
transshipment is allowed, even period of journey may take longer.
B/L is a non-negotiable document: A bill of lading is not a negotiable document while it
is a transferable document. Transferability enables the exporter to claim payment from the
bank even before the goods reach the destination. Similarly, it enables the importer to sell
the goods even before they reach the destination.
Parties mentioned in B/L: There are three main columns in B/L. These are shipper
(consignor), consignee or order of and notifying party. Notifying party is party to whom
notice is to be sent on the arrival of goods at the place of destination. When the B/L is
made to the order of, the person, in whose name it is made to the order of, has the right to
endorse further. To illustrate:

Consignor: Cherry & Co, Bhopal

Consignee or to the order of: Dimpy & Co, New Jersey, U.S.A.

Notifying Bank: Bank of America, New Jersey

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In this case, Dimpy & co has the total right for the cargo as the consignee. So,
Cherry & Co cannot transfer title to the goods to the third party. If payment of the goods is
not received, consignor loses title to the goods and so B/L is not to be made in this way.
However, where advance payment has been received or goods are shipped under
irrevocable letter of credit, bill of lading can be made in the name of the consignee. In the
normal circumstances, exporter takes the bill of lading to his order and endorses to the
bank at the time of negotiation and in this way his interests are fully protected.
Who can lodge claim: B/L is the only evidence to file claim against the shipping company
in the event of non-delivery, defective delivery or short delivery. If the importer makes
payment, he can lodge the claim, as he will be in possession of negotiable copy of B/L.
Otherwise, exporter can lodge the claim and receive the value of goods.
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.

4.5.3. Contents of B/L

i.

Name and address of the shipper.

ii.

Name and address of the vessel.

iii.

Name of port of loading.

iv.

Date of loading of goods.

v.

Name of port of discharge and place of delivery.

vi. Quantity, quality, marks and other description.

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vii. Number of packages.

viii. Freight paid or payable.
ix. Number of originals issued.
x.

Name of the shipping company.

xi. Voyage number and date.

xii. Signature of the issuing authority.
4.5.4. Significance Of Bill Of Lading
Importance to the Exporter

It is an acknowledgment from the shipping company that the goods have been
received for the purpose of shipment.

After receipt of B/L, it helps him to send the shipping advice to the importer.

If any damage occurs to the cargo during transit, he can hold the shipping company
responsible, if he has received clean bill of lading.

A copy of bill of lading is required to be attached to the application form to claim the
incentives

It is a contract of carriage between the exporter (shipper) and the shipping

company.

Importance to the Importer

It is a document of title to the goods, which enables him to transfer the title by
endorsement and delivery.

The exporter can send a non-negotiable copy of B/L as advance intimation of

shipment to the importer.

It enables him to pay the freight amount as the B/L contains freight details.

Importance to the Shipping Company

It helps the shipping company to collect the freight amount from the exporter (CIF
contract) or importer (FOB contract).

Shipping company can protect itself from the wrongful claims of exporter/importer
by incorporating condition of goods/packaging, at the time of receipt. In case the
shipping company, inadvertently, omits to mention the adverse condition, at the time
of receipt, advantage can be claimed by exporter/importer, by submitting wrongful
claim.

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4.6 Air waybill

Air waybills (AWB) are a form of BOL and are used for both domestic and
international flights. An AWB (also referred to as air consignment note or airway bill of
lading) refers to a documentary receipt issued by a carrier (i.e. airline) in favour of a
shipper for goods received and is evidence of the contract of carriage to carry the goods to
a specified airport under specified conditions, but it is not a document of title to the goods.
Hence, the AWB is non-negotiable. It is usually the shipper - the exporter - (or their agent)
that completes the AWB. It serves as:

Proof of receipt of the goods for shipment

Evidence of the contract of carriage

An invoice for the freight, reflecting the shipper, the consignee and the goods being
shipped, as well as the full freight amount

A certificate of insurance (if carriers insurance is requested by the shipper)

A guide to airline staff for the handling, dispatch and delivery of the consignment

A means of clearing the goods through customs

Usually, the AWB consists of three originals and nine copies. The first original is

intended for the carrier (airline) and is signed by the exporter (or agent); the second
original the consignee's copy is also signed by the exporter (or agent) and
accompanies the goods; the third original is signed by the carrier and is handed to the
exporter (or agent) as a receipt for the goods after they have been accepted for carriage.
The AWB must be accompanied by the commercial invoice, packing list, certificate
of origin and any other document which may be necessary to clear the goods through
customs (such as any health certificates, etc.). AWBs have tracking numbers which can be
used to check the status of delivery and current position of the goods being transported.
4.6.1 Types of air waybills
There are two types of air waybills used for the international transportation of air cargo:

The "airline air waybill", with preprinted issuing carrier identification,

The "neutral air waybill" without preprinted identification of the issuing carrier in any
form and used by other bodies than air carriers (such as freight forwarder).
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4.6.2 Importance of Airway Bill

i.

It is a contract of carriage of goods between the consignor and airlines or his agent.

ii.

It acts as a customs declaration form.

iii.

It contains details of freight and so works as a freight bill.

4.7 Bill of Entry

Bill of Entry is a declaration form made by the importer or his clearing agent in the
prescribed form under Bill of Entry Regulations, 1971 on the strength of which clearance of
imported goods can be made.
When goods are imported into a country, customs duty has to be paid by the
importer. For this purpose, importer prepares the Bill of Entry declaring the value of goods,
quantity and description. This is prepared in triplicate. Customs authorities may ask the
importer to produce the invoice of the exporter, brokers note and insurance policy to
satisfy about the correctness of value of goods declared.
4.7.1 Classification on Bill Of Entry
i.

Free Goods: These goods are not subjected to any customs duty.

ii.

Goods for Home Consumption: These goods are imported for self-consumption.

iii.

Bonded Goods: Where goods are subject to customs duty, till duty is paid, goods
are kept in Bond.

4.7.2 Contents of Bill of Entry

Name and address of importer.

Name and address of exporter.

Import license number.

Name of port where goods are to be cleared.

Description of goods.

Value of goods.

Rate and value of import duty payable

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4.8 Road Consignment Note

A road consignment note (also referred to as a road transport document, a road
waybill or a road manifest) is a form of inland BOL used in South Africa, although, as road
consignment notes can cover cargo moving across borders, it is also a form of through
BOL. As road haulage is driven by a large number of private road haulers, you may come
across many different types of road consignment notes, although there is a tendency to
follow the typical BOL used in the case of ocean shipping (i.e. there is still a consignee, a
shipper, a description of the goods, etc.). The road consignment note is also:

Proof of receipt of the goods for transportation by road

Evidence of the contract of carriage

An invoice for the freight, reflecting the shipper, the consignee and the goods being
shipped, as well as the full freight amount

A guide to the road hauler for the handling, dispatch and delivery of the
consignment

A means of clearing the goods through customs

To clear the goods through customs, the road consignment note will need to be

accompanied by a commercial invoice, a packing list and any other documentation

relevant for clearing purposes (such as phytosanitary documents, etc.).
4.9 The Export Cargo Shipping Instruction (ECSI)
The Export Cargo Shipping Instruction (ECSI)* is the written instruction from the
exporter to the freight forwarder or carrier (shipping line, airline, road hauler, etc.) for them
to facilitate the movement goods to the desired destination. It contains information on the
goods and the route to their destination, any transport requirements, customs information,
which is to receive what documents and how costs are to be allocated. It is extremely
important that the information provided in the ECSI is accurate. Most freight forwarders
and transportation companies have standard documents that exporters can complete. The
document provided will capture all of the necessary information to enable the freight
forwarder or transport company to execute their obligations.

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It would be wise for you to provide the freight forwarder/transport company with a
copy of the L/C (where this is applicable) as well as any changes thereto, to enable them
to accurately generate any additional documents that they may be required to complete in
order to facilitate the movement of your cargo to your ultimate destination.
4.10 Sea Waybill
A receipt for cargo which incorporates the contract of carriage between the shipper
and the carrier but is non-negotiable and is therefore not a title document.
4.11 Shipping Guarantee
Usually a pre-printed form provided by a shipping company or the bank, given by an
importer's bank to the shipping company to replace the original transport document. The
consignee may then in advance take delivery of goods against a shipping guarantee
without producing the original bill of lading. The consignee and the importer bank will be
responsible for any loss or charges occurred to the shipping company if fault is found in
the collection. It is usually used with full margin or trust receipt to protect the bank's control
to the goods.
4.12 Summary of transport documents

Document

Function
A document to give details of the cargo and the

Shipping Order shipper's requirements. It is the basic document

S/O

for preparing other transport documents such as

bill of lading, air waybill, etc.

Prepared by
Shipper /
Transport
Companies

A receipt to confirm the receipt of cargo on quay/

Dock Receipt

warehouse pending shipment. The dock receipt is

D/R or Mate's

used as documentation to prepare a bill of lading.

Receipt

It has no legal role regarding processing financial

settlement.

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Shipping
Company

An evidence of contract between the shipper of

the goods and the carrier. The customer usually
needs the original as proof of ownership to take
Bills of Lading (
B/L)

possession of the goods. There are two types: a

STRAIGHT bill of lading is non-negotiable and a
negotiable or shipper's ORDER bill of lading (also

Shipping
Company

a title document) which can be bought sold or

traded while goods are in transit and is used for
many types of financing transactions.
A bill of lading issued by a forwarder and, in many
cases, not a title document. Shippers choosing to
use a house bill of lading should clarify with the
House Bill of

bank whether it is acceptable for letter of credit

Lading

purpose before the credit is opened. Advantages

(Groupage)

include less packing, lower insurance premiums,

Forwarder

quicker transit, less risk of damage and lower

rates than cargo as an individual parcel /
consignment.
A receipt for cargo which incorporates the contract
Sea Waybill

of carriage between the shipper and the carrier

Shipping

but is non-negotiable and is therefore not a title

Company

document.
A kind of waybill used for the carriage of goods by
Air Waybill
(AWB)

air. This serves as a receipt of goods for delivery

and states the condition of carriage but is not a

Airline

title document or transferable/negotiable

instrument.

House Air
Waybill (HAWB)

An air consignment note issued by an air freight

agent to provide the cargo description and Forwarding Agent
records. Again, it is not a title document.

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Usually a pre-printed form provided by a shipping

company or the bank, given by an importer's bank
to the shipping company to replace the original
transport document. The consignee may then in
advance take delivery of goods against a shipping Importer's Bank /
Shipping

guarantee without producing the original bill of

Shipping

Guarantee

lading. The consignee and the importer bank will

Company /

be responsible for any loss or charges occurred to

Consignee

the shipping company if fault is found in the

collection. It is usually used with full margin or
trust receipt to protect the bank's control to the
goods.
A list providing information needed for
transportation purpose, such as details of invoice,
Packing List
(sometimes as
packing note)

buyer, consignee, country of origin, vessel/flight

date, port/airport of loading, port/airport of
discharge, place of delivery, shipping marks /
c o n t a i n e r n u m b e r, w e i g h t / v o l u m e o f
merchandise and the fullest details of the goods,
including packing information.
(Table 3: Summary of Transport Documents)

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Shipper

Chapter 05
Financial Documents
5.1. Letter of credit (L/C)
Importing and exporting involves risks. Exporters run the risk of buyers failing to pay
for goods, while importers may risk paying but never receiving anything. Because of the
distances involved, it may be difficult to resolve any disputes.
One way of reducing the risks is to use a letter of credit - sometime known as
documentary credit. This can offer a guarantee to the seller that they will be paid, and the
buyer can be sure that no payment will be made until they receive the goods.
There are several different types of letters of credit available to use, depending on the
circumstances.
A letter of credit is basically a guarantee from a bank that a particular seller will
receive a payment due from a particular buyer. The bank guarantees that the seller will
receive a specified amount of money within a specified time. In return for guaranteeing the
payment, the bank will require that strict terms are met. It will want to receive certain
documents - for example shipping confirmation - as proof.
5.1.1. Purpose of Letter of Credit
Letters of credit are most commonly used when a buyer in one country purchases
goods from a seller in another country. The seller may ask the buyer to provide a letter of
credit to guarantee payment for the goods.
The main advantage of using a letter of credit is that it can give security to both the seller
and the buyer.
Advantages for sellers- By asking for an appropriate letter of credit a seller is reassured
that they will receive their money in full and on time. A letter of credit is one of the most
secure methods of payment for exporters as long as they meet all the terms and
conditions. The risk of non-payment is transferred from the seller to the bank (or banks).

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Advantages for buyers- When a buyer uses a letter of credit they get a guarantee that
the seller will honour their side of the deal and provide documentary proof of this.
Other things to consider- Its important to be aware of the additional costs involved in
using a letter of credit. Banks make charges for providing them, so its sensible to weigh
up the costs against the security benefits.
If youre an exporter you should be aware that youll only receive payment if you
keep to the strict terms of the letter of credit. Youll need to give documentary proof that
you have supplied exactly what you contracted to supply. Using a letter of credit can
sometimes cause delays and other administrative problems.
When to use a letter of credit- Although letters of credit can be useful, its often best to
avoid using one for a transaction. They can sometimes result in expensive delays,
bureaucracy and unexpected costs. As a general rule you should probably only consider
opening a letter of credit as an importer if:

your supplier insists on it

national exchange controls require it

5.1.2. Types of letter of credit

There are five commonly used types of letter of credit. Each has different features and
some are more secure than others. The most common types are:

Irrevocable

Confirmed

Revocable

Transferable

Unconfirmed

Other types include:

Standby

Sight

Revolving

Back-to-back

Sometimes a letter of credit may combine two types, such as confirmed and irrevocable.

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5.1.3. Unconfirmed Letters of Credit

Unconfirmed Letters of Credit can be described as a letter of credit, which has not
been guaranteed or confirmed by any bank other than the bank that opened it. In these
types of credits, the only bank that undertakes to honour a complying presentation is the
issuing bank.
5.1.4 Confirmed Letters of Credit
It would be easier to understand the confirmed letters of credit if we start from the
definition of the confirmation.
Confirmation means a definite undertaking of the confirming bank, in addition to that
of the issuing bank, to honour or negotiate a complying presentation.
If a letter of credit's payment undertaking is guaranteed by a second bank, in
addition to the bank originally issuing the credit this kind of credit is called confirmed letter
of credit. The confirming bank agrees to pay or accept drafts against the credit even if the
issuer refuses to do so. Only irrevocable credits can be confirmed
5.1.5 Revocable Letters of Credit
Revocable letters of credit give issuer the amendment or cancellation right of the
credit any time without prior notice to the beneficiary. Since revocable letters of credit do
not provide any protection to the beneficiary, they are not used frequently. In addition, UCP
600 has no reference to revocable letters of credit. All credits issued subject to UCP 600
are irrevocable unless otherwise agreed between the parties.
5.1.6 Irrevocable Letters of Credit
Irrevocable Letters of Credit cannot be amended or cancelled without the
agreement of the credit parties. Unconfirmed irrevocable letters of credit cannot be
modified without the written consent of both the issuing bank and the beneficiary.
Confirmed irrevocable letters of credit need also confirming bank's written consent in order
any modification or cancellation to be effective.
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5.1.7 Transferable letters of credit

A transferable letter of credit can be passed from one beneficiary (person receiving
payment) to others. Transferable Letters of Credit are suitable for triangle trade. Triangle
trade is a trade where a middleman exist between the buyer (importer) and the seller
(exporter). Transferable letter of credit issued in favour of the middleman. Then middle
man transfers part of the credit to the ultimate supplier of the goods.

Middlemans

commission is the difference of these two credit amounts (issued amount-transferred

amount=commission of the middleman) Transferable Letters of Credit can be issued
subject to UCP 600. Transferable credit can be transferred more than one beneficiary.
(partial transfer is allowed) Transferred credits cannot be transferred to another second
beneficiary once more.
5.1.8 Sight credits
This is an easy enough term to explain. A sight credit or L/C is one which paid upon
presentation of the required documentation (as stipulated in the original L/C) to the issuing
or confirming bank. As exporter, you need to be careful however, as some L/Cs state that
payment will only be made at a specified branch counter of the issuing or confirming bank
(and won't necessarily be paid or transferred directly into your account). The process of
having to go to a particular branch and receive payment and then to transfer this payment
into your account will slow down the payment process and may add further costs to the
overall process. Thus, when working with sight L/Cs (or any L/Cs for that matter) makes
sure where payment will be made.
5.1.9 Usance credits
An L/C can specify any credit period that you have negotiated with the importer. A
letter of credit that that incorporates a payment after a given term (e.g. 60 days) is known
as a usance credit (also referred to as a term or acceptance credit). The correct phrase is
that the L/C is at usance, meaning that it will come into effect at some future date (also
referred to as maturity).

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5.1.10 Standby letters of credit

A standby letter of credit is an assurance from a bank that a buyer is able to pay a
seller. The seller doesnt expect to have to draw on the letter of credit to get paid.
5.1.11 Revolving letters of credit
A single revolving letter of credit can cover several transactions between the same
buyer and seller.
5.1.12 Back-to-back letters of credit
Back-to-back letters of credit may be used when an intermediary is involved but a
transferable letter of credit is unsuitable.
Back-to-Back Letter of Credit although not recorded on a letter of credit, back-toback is a term used in transactions involving two irrevocable letters of credit. Such
transactions originate when a seller receives a letter of credit covering goods which must
be obtained from a third party who in turn requires a letter of credit. The second issuing
bank looks to the first issuing bank for reimbursement after paying under the second letter
of credit. The difference between back-to-back letters of credit and transferable letters of
credit, is such that in a transferable letter of credit, the rights under the existing letter of
credit are transferred. In a back-to-back transaction, different letters of credit are actually
issued. Because technical problems can arise in back-to-back transactions, banks tend to
discourage their use
5.1.13 Irrevocable and revocable letters of credit
A revocable letter of credit can be changed or cancelled by the bank that issued it at
any time and for any reason.
An irrevocable letter of credit cannot be changed or cancelled unless everyone
involved agrees. Irrevocable letters of credit provide more security than revocable ones.

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5.2. Bills of exchange

The legal definition (Bills of Exchange Act 1882, Section 3) of a bill of exchange is
an unconditional order in writing, addressed by one person (drawer) to another (drawee),
signed by the person giving it (drawer), requiring the person to whom it is addressed
(drawee) to pay on demand, or at a fixed or determinable future time, a certain sum in
money to, or to the order of, a specified person (payee), or to bearer. The words in
brackets do not appear in the Act, but have been inserted for clarity.
Bills of exchange are widely used in international trade, partly since they are
convenient vehicles for collecting payment from traders abroad. Finance may be arranged
in a number of ways using bills of exchange, both for the buyer (drawee) and for the seller
(drawer). Bills of exchange which have been dishonoured may be used in their own right
as the basis for legal action. After payment, the discharged bill of exchange is retained by
the drawee as evidence of payment, in other words it becomes a receipt for the money. It
is the practice in some European countries for banks to avail bills of exchange by adding
the bank's name to the bill; this raises the status of the document as the availing bank has
guaranteed payment at maturity.
5.2.1. Parties to a Bill of Exchange:
The Drawer - Is the party that issues a bill of exchange in an international trade
transaction; usually the seller.
The Drawee - Is the recipient of the Bill of Exchange for payment or acceptance in an
international trade transaction; usually the buyer.
The Payee - Is the party to whom the Bill is payable; usually the seller or their bankers.
The Endorser: The endorser is the person who has placed his signature on the back of
the bill signifying that he has obtained the title for the bill on his own account or on account
of the original payee.

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5.2.2. Types of Bills of Exchange

i.

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.

ii.

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.

iii.

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.

iv.

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.
The documents are given to the bank either for collection or negotiation. In case the

importer gets the documents on acceptance, it is called Documents against Acceptance. If

the importer gets the documents only on payment, it is called Documents against
Payment.
After shipment of goods, the exporter draws the bill on the importer or, more
frequently, on bank acting for the importer, as agreed between the exporter and importer.
The exporter usually draws the bill to his own order or that of his bank.
Later, he endorses the bill in favour of his bank. Exporter may request his bank to
collect or purchase the bill. In case of purchase of bill, exporter receives the export
proceeds immediately. In any case, the exporters bank sends the documents to its branch
or correspondents bank in importers place. The bank at that end sends the intimation of
receipt of documents to the importer either for acceptance or payment, dependant on the
nature of bill drawn. In case of Documents against acceptance, importer accepts the bill
and then only gets title to goods. In case of Documents against payment, importer has to
make the payment for securing delivery of documents.
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5.3. Trust Receipt

When a bank wishes to release documents of title, or the goods themselves, to a
customer of undoubted integrity, whilst still retaining its security rights in those goods and/
or the proceeds of their sale, it may obtain a completed trust receipt from its customer to
whom a loan has been made. This is an acknowledgement of the pledge of the goods to
the bank and an undertaking of the customer to take the documents as trustees for the
bank and to:

Arrange for goods to be warehoused in the bank's name, or

Arrange for processing of the goods and their return to the warehouse in the bank's
name, or

Arrange for sale of the goods and to pay all sale proceeds without deduction to the
bank immediately on receipt or within a short, stated period of time.

5.4. The promissory note

The promissory note is a payment tool that can be seen as a bill of exchange in that
it is also a commitment to pay by the due date. The difference between the two payment
tools is that the roles of the stakeholders, the issuer and the payee, are reversed.

Here, the importer, the issuer, agrees to make the payment. From this perspective,
the payee receives promissory note. In turn, the payee presents the promissory note by
the due date through a banking intermediary. The deadline date to present the promissory
note must not exceed three months after its issuance.
There is now an electronic promissory note (BOR); a computer document which can
be transmitted and stored electronically. As with other payment tools, the promissory note
has its advantages and drawbacks.
5.4.1. The promissory note: Advantages
An advantage for a promissory note versus a check is the fact that it can be not provided
with sufficient funds in the account on the issue date and, to the contrary, must have
sufficient fund on the due date. Other advantages:
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It is simple to use,

It is quickly implemented,

It can be endorsed, negotiated or backed.

5.4.2. The promissory note: Drawbacks

Drawbacks of the promissory note within the scope of international transactions:

It can be sometime issued late.

There is a risk of error,

It is not often used for international transactions.

5.5 Bank Certificate of Payment

It is a certificate issued by the negotiating bank to the exporter that the bill covering
the shipment has been negotiated through it and export proceeds have been received
from the importer. The certificate indicates the details of the merchandise exported.
Exporter submits this certificate of payment for establishing that the export transaction has
been completed totally by him. This certificate is required to comply with the requirements
for the discharge of export obligation.
5.6 Summary of financial documents

Document

Documentary
Credit D/C

Functions

Prepared by

A bank instrument began (issuing or opening bank),

The Issuing

at the request of the buyer, evidencing the bank's

Bank upon an

undertaking to the seller to pay a certain sum of

application

money provided that specific requirements set out in

made by the

the D/C are satisfied.

Importer

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An arrangement between customer and his bank by

which the customer may enjoy the convenience of
cashing cheques, up to a value. Or a credit set up
between the exporter and the importer guaranteeing
Standby Credit the exporter will pay the importer a certain amount
of money if the contract is not fulfilled. It is also

Exporter /
Issuing Bank

known as performance bond. This is usually found in

large transactions, such as crude oil, fertilizers,
fishmeal, sugar, urea, etc.
An instruction given by an exporter to its banker,
Collection

which empowers the bank to collect the payment

Instruction

subject to the contract terms on behalf of the

Exporter

exporter.
Bill of
Exchange (B/E)
or Draft

An unconditional written order, in which the importer

addressed to and required by the exporter to pay on
demand or at a future date a certain amount of

Exporter

money to the order of a person or bearer.

A document to release a merchandise by a bank to
a buyer (the bank still retains title to the

Trust Receipt

merchandise), the buyer, who obtains the goods for

(T/R)

processing is obligated to maintain the goods

Importer

distinct from the remainder of his/her assets and to

hold them ready for repossession by the bank.
Promissory
Note

A financial instrument that is negotiable evidencing

the obligations of the foreign buyer to pay to the
bearer.

(Table 4: Summary of Financial Documents)

53 of 71

Importer

Chapter 06
Government Documents
6.1. 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.
As the very name indicates, certificate of origin is a certificate that specifies the
name of the country where goods are produced. This is absolutely necessary where the
importing country has banned the entry of goods of certain countries to ensure that the
goods from those countries are not allowed to enter in. At the time of arrival of the goods in
the importers country, this certificate is necessary for the customs to permit preferential
tariff.
Certain countries offer preferential tariff to goods produced and imported from India.
In such a case, this is a must to the importer to claim preferential tariff and importer insists
on this document from the exporter. This enables the importers country to regulate the
concessional tariff only to select countries and deny to the rest of the countries.
A certificate of origin can be obtained from Chamber of Commerce, Export
Promotion Council and various trade associations which have been authorised by
Government of India to issue. The agency from which certificate of origin is obtained
should conform to the terms of letter of credit.
A Certificate of Origin (C/O) is required by some countries and is intended to certify
to the importing authorities as to which country the products being imported were
manufactured in - that is, the C/O certifies that the imported product meets the 'Country of
Origin' requirements set by the importing country and which are expected of their foreign
suppliers. It may be required that the C/O include information such as local material and
labor content. In many cases, a statement of origin printed on company letterhead will
suffice, although the document may need to be certified in some way. In other instances,
specific types of C/Os may be required, such as the Generalised System of Preferences
(GSP) Form A and the Chamber of Commerce C/O.
54 of 71

6.1.1. Types of COs

The main type issued by chambers are
i.

"Non-Preferential COs", i.e. ordinary COs which certify that the country of origin
of a particular product does not qualify for any preferential treatment.

ii.

"Preferential COs" refer to COs which enable products to enjoy tariff reduction or
exemption when they are exported to countries extending these privileges: e.g.
GSP, Commonwealth Preference Certificate. Certificates of Origin may be needed
to comply with Letters of Credit, foreign Customs requirements or a buyers request.
In most countries, chambers of commerce are the key agent in the delivery of

certificates of origin. However, in some countries, this privilege may also be extended
to other bodies such as ministries or customs authorities.
6.1.2. Significance of Certificate of Origin

Certificate of origin is required for availing concession under Commonwealth

Preferences (CWP) as well as Generalised System of Preferences (GSP).

It facilitates the importer to adhere to the rules and regulations of his country.

Customs in the importers country allow the concessional tariff only on production of
this certificate.

When goods from some countries are banned, importing country requires this
certificate to ensure that goods from banned countries are not entering into the
country.

Exporting country may insist on this certificate to ensure that the goods imported
are not reshipped again.

6.2. Certificates of Value (and Origin)

A Certificate of Value is intended to confirm the value of a cargo to assist in quick
clearing of the goods in the country of destination. Often the Certificate of value is
combined with a Certificate of Origin and is referred to as a Certificate of Value and Origin
(CVO). A CVO outlines details about the labor and packing costs, royalties or commissions
(if applicable), freight charges and any overseas insurance costs. The CVO also provides
55 of 71

an exporter's declaration and statement, in the form of clauses, about the value and origin
of the goods.
6.3. Import export license
A document issued by a relevant government department authorising the imports
and exports of certain controlled goods.
Most countries restrict the exports of specific products such as selected
pharmaceutical products, armaments, animals, etc. At the same time governments may
enter into international agreements that require the governments in question to exercise
some control over the export of certain specified products to the partner countries as per
the provisions of the agreement concerned (such as agricultural products to Europe or the
export nuclear products, for example). Export permits also help to control the outflow of
goods of strategic nature or of smuggled and stolen goods. To be able to export any of
these prohibited products, the exporter is required to obtain an export permit. Export
permits can be applied for from the International Trade Administration Commission (ITAC),
part of the Department of Trade and Industry family of organisations.
6.4. International Import Certificate (IIC)
A statement issued by the government of country of destination, certifying the
imported strategic goods will be disposed of in the designated country.
An International Import Certificate (IIC) is required for imports of controlled goods.
It is an undertaking by the importer to import goods without diversion or trans-shipment
elsewhere, and not to re-export the goods without an export license.
6.5. Delivery Verification Certificate (DVC)
A statement issued by the government of country of destination, certifying a specific
strategic commodity has been arrived in the designated country. An export license may be
issued with a requirement for delivery verification by Customs in the receiving country.
When delivery verification is required by a foreign government for goods imported into the

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U.S. the U.S. Customs Service will certify a delivery verification certificate. A U.S. export
license may require submission of a similar form from an importing country.
6.6. Landing Certificate
A document issued by the government of country of destination, certifying a specific
commodity has been arrived in the designated country. In Hong Kong, it is issued by the
Census and Statistics Department. Application requirements include letter stating the
reason for the application, import declaration & receipt; bill of lading, sea waybill & land
manifest; supplier's invoice; and packing list (if any).
6.7. Customs Invoice
A document specified by the customs authorities of the importing countries must
contain specific information about the shipment that it accompanies. Those requirements
include a descriptive statement of the contents, quantity, selling price, insurance, weight or
volume, cost of packaging and the terms of payment upon delivery. Complete information
is required to determine import fees when it reaches its destination port.

6.8. Summary Of Government Documents

Documents

Functions

Prepared by
Trade and
Industry

Certificate of
Origin (CO)

A certificate to certify the place of manufacture, the

nature/quantity/value of the goods.

Department
and five
Chambers of
Commerce

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A C.O. to support the claim for preferential tariff entry

(a reduced or zero rate) of the exporting country's
Certificate of
Origin
Generalized
Systems of
Preferences
GSP)
Form A

products into the GSP donors under the GSP they

operate. In general, a Form A is issued only when the

Trade and

goods concerned have met both the origin rules of the

Industry

preference receiving country as well as the origin

Department

criteria of the respective donor country's GSP. Hong

and five

Kong is now a beneficiary under the GSP schemes

Chambers of

operated by Canada and Norway, while China is

Commerce

beneficiary to countries like Australia, Canada, Czech

Republic, European Union, Japan, Poland, Russia,
and Slovakia.
A statement made to the Director of Customs at port of

Import /

entry/exit, declaring full particulars of the shipment, eg.

Export

The nature and the destination/exporting country of the

Declaration

ship's cargo. Its primary use is for compiling trade

Exporter/
Importer

statistics.
Trade and
Industry
Import /

A document issued by a relevant government

Department,

Export

department authorizing the imports and exports of

Customs &

License

certain controlled goods.

Excise
Department,
etc

International
Import
Certificate
(IIC)
Delivery
Verification
Certificate
(DVC)

A statement issued by the government of country of

destination, certifying the imported strategic goods will

Trade and

be disposed of in the designated country. In Hong

Industry

Kong, it is issued only to meet an exporting country's

Department

requirement.
A statement issued by the government of country of
destination, certifying a specific strategic commodity

Trade and

has been arrived in the designated country. In Hong

Industry

Kong, it is issued only to meet an exporting country's

Department

requirement.
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A document issued by the government of country of

destination, certifying a specific commodity has been
arrived in the designated country. In Hong Kong, it is
Landing

issued by the Census and Statistics Department.

Certificate

Application requirements include letter stating the

reason for the application, import declaration & receipt;

Census and
Statistics
Department

bill of lading, sea waybill & land manifest; supplier's

invoice; and packing list (if any).
A document specified by the customs authorities of the
Customs

importing countries stating the selling price, costs for

Invoice

freight, insurance, packing and payment terms, etc, for

the purpose of determining the customs value.
(Table 5: Summary Of Government Documents)

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Exporter

Chapter 07
Documents Related To Excisable Goods

7.1 GP Forms
GP stands for Gate Pass. A GP form, gate pass, is issued for the removal of
excisable goods from the factory or warehouse. Form GP1 is issued for the removal of
excisable goods on payment of duty. GP2 is issued for the removal of excisable goods
without payment of duty.
7.2 Form C
It is not to be confused with C form. Form C is used for applying for rebate of duty
on excisable goods (other than vegetable, non-essential oils and tea) exported by sea. It is
to be submitted, in triplicate, to the Collector of Central Excise.
7.3 Forms AR4/AR4A
These forms are meant for removal of excisable goods for export by sea/post. Now,
in their place, ARE-1 form is used.

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Chapter 8
Documents Related To Foreign Exchange Regulations Legal
Regulated Documents
8.1 GR Form
GR is an exchange control document required by Reserve Bank of India. It is
required to be filled, in duplicate, for all exports in physical form other than by post. An
exporter has to realise the export proceeds within a period of 180 days from the date of
shipment, in India. To ensure control on realisation, RBI has introduced this procedure.
GR form, in duplicate, is to be submitted by the exporter to the customs along with
the Shipping Bill. Customs will give their running serial number on both the copies. After
admitting the customs shipping bill, customs will certify the value of goods declared by the
exporter in the space earmarked and also record their assessment of value. Customs
retains the original copy and return the duplicate to the exporter. Customs sends the
original GR form to RBI, which will be an indication of the goods, which are to be exported.
Exporter has to submit the duplicate of GR form to the authorised dealer, named in GR
form, along with other shipping documents within a period of 21 days of shipment for the
purpose of negotiation. After the negotiation of bill, the authorised dealer will report the
transaction of negotiation to RBI. On receipt of the original, RBI is apprised of the
developments in respect of the export transaction.
Once the export proceeds are received from the importer, the authorised dealer has
to forward the duplicate copy of GR form together with the copy of invoice to RBI. RBI
recognises that the export transaction has been concluded and export proceeds have
been fully realised.
At certain customs offices, shipping bills are processed electronically. So, at those
offices, GR form has been replaced by SDF (Statutory Declaration Form).
8.2 PP Form
It is required to be filled in for all export transactions, in duplicate, for all countries to
be made by post parcel, except when made on value payable or cash on delivery basis.
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8.3 VP/COD Form

It is required to be filled for all export transactions to all countries by post where the
export proceeds are realised on value payable or cash on delivery basis.
8.4 SOFTEX Form
It is required to be prepared, in triplicate, for export of computer software in
nonphysical form. All the above documents serve the purpose of monitoring the realisation
of export proceeds in the stipulated manner.

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Chapter 09
INCO Terms

Usual
Method

Time of
Payment

Goods
Availabl
e To
Buyer

Risk
to
Seller

Risk to
Buyer

Complete.
Relies on
seller to ship
CASH IN
ADVANCE

Before

After

shipment payment

None

exactly the
goods
expected,
as quoted
and ordered

Comments

Seller's goods must

be special in one way
or another, or special
circumstances prevail
over normal trade
practices (e.g., goods
manufactured to
buyer-only
specification).

Commeric
al Invoice
must
match the
L/C
exactly.
LETTER OF

Dates

CREDIT (L/C)

must be

(See next two

carefully

items.)

headed.
"Stale"
document
s are
unaccepta
ble for
collection.

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Letters of Credit
require total accuracy
in conforming to
terms, conditions, and
documentaion.
Consult your
United Shipping
Associate member for
determining feasibility
of terms and
conditions.

Assures
shipment is
made but
Gives the
seller a

After

double

shipment
CONFIRED

assurance

is made,

IRREVOCABL documen
E

ts

CREDIT

presente

of

After
payment

payments.
Depends
on the

d to the

terms of

bank.

the letter
of credit.

relies on

The inclusion of a

exporter to

second assurance of

ship goods

payment

as described

(usually a U.S. Bank)

in

prevents surprises,

documents.

and adds assurance

Terms may

that issuing bank has

be

been deemed

negotiated

acceptable by

prior to L/C

confirming bank. Adds

agreement,

cost and an additional

alleviating

requirement to seller.

buyer's
degree of
risk.
Seller has
single
bank
UNCONFIRME
D
IRREVOCABL
E
CREDIT

Credit can be changed

assurance

only by mutual

of
Same as Same as
above

above

payment

Same as

and

above

seller
remains
dependen
t on
foreign
(Table 6: INCO Terms)

64 of 71

agreement, as
stipulated in a sales
agreement. Becomes
open account with
buyer's bank as

Chapter 10
Export Process
10.1 Receipt of Inquiry
It refers to the set of enquiries received by the exporter from the importer to serve
his own purpose. For an exporter it may not be possible to respond to all enquiries,
therefore an exporter checks the worthiness of importer by framing various questions like:
For how long they have been in that business?
Whether they intend to purchase goods on their own account or they intend to act as
commission agent?
The name and address of at least two firms which they already represent or have
represented in the past?
This process continues further only if the exporter is satisfied with the response.
10.2 Role of Merchandiser
The merchandiser is an important intermediate between the buyer and the exporter.
He works under the supervision of the directors. He often accompanies the CMD or the
head of department for getting the orders from the overseas buyer. The merchandiser
forwards different styles of samples to the buyer through local buying house as every
buyer or agent wants to assure that the goods manufactured at last should match up to
their description and illustration. This is called ad samples. If these samples are approved
by the buyer or some alterations has to be made say, in color or size, the merchandiser of
the buyer informs the merchandiser of the exporter about the alterations. Accordingly, a
new sample is prepared and forwarded.
To send samples to an enquirer is a costly business, specially as samples should
always be sent by air if possible, therefore the enquirer should be asked to pay for the
samples plus the cost of dispatch (or at least be asked to pay half of the cost) & if he is
really interested in that particular contract, he will do so.

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To serve this purpose, a Debit Note is prepared by the exporter. In this context, the
firm has maintained a program which has the records of various buyers and the follow up
of sample payments.

The exporter after having satisfied himself that the enquirer abroad is capable of
meeting his obligations provides him with the price list, details of terms of business and
payment which he is expected to adhere to.
Once the samples and the other details regarding the process are approved by the
buyer, the process of Documentation starts.

(Role of Merchandiser in the Export Process)

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10.3 Bulk Shipments

Washing Cutting Finishing Packing Inspection

15 20 Days prior to ex factory of goods.
Generate invoice (retail invoice)
Booking with nominated forwarder Booking confirmed in two three days time.
Ex factory vessel cargo cutoff date H/O

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10.4 Documentation
An exporter is required to deal with various documents both at the:
1. Pre shipment Documentation and
2. Post shipment Documentation
To complete the export transaction, these documents are important:

As an evidence of shipment and title of goods

For obtaining payments.

These documents are of vital interest to both the exporter and the importer. The importer
needs them to claim peaceful and legal possession and delivery of the goods in his
country. The exporter needs to hand them over to him to claim payment for the shipment.
10.5 Inco TermsInternational Shipping/Trade Terms
When buying or selling in international markets, it is critical that all parties to the
transaction know and understand the terms of sale. For example, a seller may think that
he has quoted a price to a buyer exclusive of the freight costs.
If the buyer thought that the price included the freight charges then a costly
misunderstanding has occurred. For this reason the ICC has developed a set of trade
terms that are used worldwide. They come under the general heading of Inco terms. Some
of the more frequently used terms are outlined below. The most recent Inco terms, Inco
terms 2010, was published on January 1, 2011.
There are 11 Inco terms subdivided into 2 categories: rules for any mode of
transport and rules for seas and inland waterway. The following is a summary of the
highlights of the Inco terms, which is not intended to furnish Inco terms in their entirety.

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10.6 Rules for any mode of Transport

EXW (ExWorks...named place)

Ex Works means that the seller fulfils his obligation to deliver when he has made the goods
available at his premises (that is, works, factory, warehouse, etc.) to the buyer. In particular, he is
not responsible for loading the goods on the vehicle provided by the buyer or for clearing the goods
for export, unless otherwise agreed. This term thus represents
the minimum obligation for the seller, and the buyer has to bear all costs and risks involved in
taking the goods from the sellers premises. If the parties wish the seller to be responsible for the
loading of the goods on departure and its risks and costs, this should be made clear by adding
explicit wording to this to the contract of sale. This term should not be used when the buyer cannot
carry out the export formalities directly or indirectly. In such circumstances, the FCA term should be
used, provided the seller agrees that he will load at his cost and risk.

FCA (Free Carrier . . . at the named point)

This term has been designed to meet the requirements of modern transport, particularly
such multimodal transport as container or roll on-roll o traffic trailers and ferries. It is based on the
same main principle as FOB except that sellers fulfils their obligations when they deliver the goods
into the custody of the carrier at the named point. If no precise point can be mentioned at the time
of the contract of sale, the parties should refer to the place or range where the carriers should take
the goods into their charge. The risk of loss or damage to the goods is transferred from seller to
buyer at that time and not at the ships rail. A Received for Shipment bill of lading is acceptable in
lieu of an On Board bill of lading. This allows exporters to receive shipping documents more
quickly and to get paid in a more timely manner. Carrier means any person by whom or in whose
name a contract of carriage by road, rail, air, sea or a combination of modes has been made.
When the seller has to furnish a bill of lading, waybill or carriers receipt, he/she duly fulfills this
obligation by presenting such a document issued by a person so de ned.

CPT (Carriage Paid To . . . named place of destination)

This term means that the seller delivers the goods to the carrier nominated by him, but the
seller must also pay the cost of carriage to bring the goods to the named destination. The buyer
bears all risks and any other costs occurring a er the goods have been so delivered. Carrier is de
ned as any person who, in a contract of carriage, undertakes to perform or to procure the
performance of transport by rail, road, air, sea, inland waterway or by a combination of methods. If
69 of 71

subsequent carriers are used for the carriage to the agreed destination, the risk passes when the
goods have been delivered to the first carrier. This CPT term requires the seller to clear the goods
for export.

CIP (Carriage and Insurance Paid To . . . named place of destination)

This term is the same as Carriage Paid To . . . but with the addition that the seller has to
procure transport insurance against the risk of loss or damage to the goods during the carriage.
The seller contracts with the insurer and pays the insurance premium. CIF is used for goods
carried by sea, while CIP is used irrespective of the mode of transport. This term allows the
exporter the greatest control over all aspects of shipment.

DAT (Delivered At Terminal. . . named terminal at port or place of destination)

This term is the same as CPT Carriage Paid To . . . but with the addition that the seller
must pay for the unload main carrier charges. The sellers obligation ends when the goods are
delivered to the disposal of the buyer, unloaded from the arriving carrier at the named destination
terminal, cleared for export, but not cleared for import. The buyer is responsible for the import
clearance of the goods. If the seller is also to be responsible for delivering the goods past the
terminal to another place, then DAP or DDP terms should be used.

DAP (Delivered At Place. . . named place of destination))

This term is the same as DAT Delivered at Terminal. . .. but with the addition that the seller
must pay for the destination terminal charges. The sellers obligation ends when the goods are
delivered to the disposal of the buyer at the named destination place, cleared for export, but not
cleared for import. The seller and buyer should agree which party will be responsible for unloading.
The buyer is responsible for the import clearance of the goods.

DDP (Delivered Duty Paid. . . named place of destination).

This term means that the seller delivers the goods to the buyer (cleared for import) but not
unloaded from any arriving means of transport at the named place of destination. The seller must
bear all costs and risks involved in bringing the goods thereto including, where applicable, any
duty (which includes the responsibility for and the risk of carrying out of customs formalities,
customs duties, taxes and other charges) for import in the country of destination. While the EXW
term signifies the sellers minimum obligation, the DDP term represents the maximum obligation.
70 of 71

10.7 Rules for Sea and Inland Waterway

FAS (Free Along Side . . . named port of shipment)

This means that the sellers fulfil their obligation to deliver when the goods have been
placed alongside the vessel on the dock or quay at the named port of shipment. The buyer has to
bear all costs and risks of loss or damage to the goods from that moment. The FAS term requires
the seller to clear the goods for export.

FOB (Free on Board . . . named port of shipment)

FOB means Free on Board. The goods are placed on board a ship by the seller at a port
of shipment named in the sales contract. The risk of loss of or damage to the goods is transferred
from the seller to the buyer when the goods pass the ships rail. All costs from that point forward,
including freight and insurance, are for the buyers account. This term can be used only for sea or
inland waterway transport. If the parties do not intend to deliver the goods across the ships rail, the
FCA term should be used.

CFR (Cost and Freight . . . named point of destination)

CFR means Cost and Freight. The seller must pay the costs and freight necessary to
bring the goods to the named destination, but the risk of loss or damage to the goods, as well as
any cost increases, is transferred from the seller to the buyer when the goods pass the ships rail in
the port of shipment. The CFR term requires the seller to clear the goods for export.

CIF (Cost, Insurance and Freight . . . named port of destination)

CIF means Cost, Insurance and Freight. This means that the seller delivers when the
goods pass the ships rail in the port of shipment. The seller must pay the costs and freight
necessary to bring the goods to the named port of destination, but the risk of loss or damage, as
well as additional costs due to events occurring a er the time of delivery, are transferred from the
seller to the buyer. In CIF the seller also has to procure marine insurance against the buyers risk
of loss or damage to the goods during the carriage. Consequently, the seller contracts for
insurance and pays the premium. The buyer should note that under the CIF term the seller is
required to obtain insurance only on minimum cover. If the parties do not intend to deliver the
merchandise across the ships rail, the CIP term should be used.

71 of 71

Conclusion
Export documentation plays a vital role in international marketing as it facilitates the
smooth flow of goods and payments thereof across national frontiers. A number of
documents accompany every shipment. These documents must be properly and correctly
filled. Export documentation is, however, complex as the number of documents to be filled
in is large, so also is the number of concerned authorities to whom the relevant documents
are to be submitted. Moreover documents required differ from country to country.

Incorrect documents may lead to non delivery of goods to the importer. You may get
the correct documents after some time but in the meantime storage charges may have to
be paid. More important, the importer will think twice before importing from the same
exporter.

It is therefore, advisable to take the help of shipping and forwarding agents who will
obtain fill out the documents correctly as well as arrange for transportation. But every
exporter should have an adequate knowledge about export documents and procedures.

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COMMERCIAL
DOCUMENTS

TRANSPORT
DOCUMENTS

FINANCIAL
DOCUMENTS

GOVERNMENT
DOCUMENTS

DOCS RELATED TO
EXCISABLE
GOODS

DOCS RELATED TO
FOREX
REGULATIONS