Export documentation plays a vital role in international marketing as it facilitates the smooth flow of goods and payments thereof across national frontiers. It is widely considered as the heart and soul of international business as no form of international business can be done without the presence of proper documentation. 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 importantly, the importer will think twice before importing from the same exporter. Thus, the process of proper and relevant documentation is essential for facilitating smooth international trade. When the buyer and the seller are operating in two countries, the commercial practices and the legal systems are different.
Thus, for ensuring that the respective interests of the buyer and the seller are protected, certain documentary formalities become essential. Similarly, every country has its own laws governing imports and exports. Consequently, the exporter has to comply with laws in his country through documentary formalities. At the same time, he has to send some documents to the importer, which will enable him to take possession of the goods after getting permission from the concerned governed department (i. e. the customs authorities).
There is yet another reason for documentation in export trade. Such documentation is linked with the claim of export incentives given by almost all countries world over. Since most of these incentives are to be claimed after shipment, the exporter has to give documentary proof of the fact of shipment. While there are advantages to the documentary system some inherent risks are also attached to the system in a way that paper documents are most susceptible to forgery, alteration or simple misrepresentation.
These shortcomings can be minimized to a large extent if the trading community makes sure before entering into an international contract of sale that they possess adequate knowledge and skills in preparation of documents and thoroughly understand the documentary obligations required of them. We will now discuss the different aspects of international trade which are catered to by the export import documents. Commercial Aspect – Trade between two business firms located in different countries begins with the conclusion of an export contract.
Under the contract, the duty of the exporter is to ship the contracted goods in the agreed form (e. g. , packing) and by agreed mode of transport as well as according to agreed time schedule. On the other hand, it is the duty of the importer to remit sale value to the exporter according to agreed terms of payment. In this process of physical movement of goods from the exporter to the importer and remittance of sale value in the reverse order, neither the exporter nor importer is personally and physically involved.
Instead goods are handed over to a shipping company or an airline, which issues a receipt for these goods. Further, since goods in transit may be damaged or lost due to some accident, the exporter may be required to get an insurance policy. While these two documents will protect the interest of the importer, the exporter will ensure that these documents are not in the possession of the importer unless he has either paid for the goods or he has made a promise to make payment at a later date. For this purpose, physical possession of the good is linked with the acceptance of a payment document by the importer.
In actual practice, the exporter to the importer through the banking channel sends a set of documents giving proof of shipment and cargo insurance coverage along with a bill for payment. Legal Aspect – Besides commercial necessity, documents for exports have a legal perspective. All over the world, laws regulating export-import trade as well as movement of foreign exchange have been enacted. In some countries, the regulations are few, which are enforced through simple procedural and documentation formalities. In other countries, the regulations are many and the enforcement procedures are complex.
There is perhaps no country in the world where movement of goods and money is absolutely free. The minimum regulations that one can think of are the one to record the movement of goods from and into a country. For this purpose, the exporter has to declare on a document the details of goods being exported by him. Other than these basic minimum requirements, the governments all over the world regulate movement of goods to protect political, economic, cultural and other interests and for implementing trade agreements with other countries.
Some countries do not have political relations with the others. As a result, goods originating from such a country are not allowed to be imported. Documents are needed for protecting the economic and social interests of the trading countries. For example, under the Indian Foreign Trade Policy, the government has listed out products, which either cannot be exported or can be exported after obtaining permission from the designated agencies. Some of the products are subject to restrictions because of their short supply in the country.
Consequently, these products can be exported only after obtaining a quota, for which a documentary proof is to be submitted to the customs authority for shipment purposes. Similarly, there are a number of government regulations governing quality, standards, foreign exchange flows, valuation of goods for calculating customs duties etc. compliance with these regulations necessitates documentation. Incentives Aspect – Export assistance and incentive measures have become an integral part of policy in larger number of countries.
Since these incentives are to be given only to the export activity, documentary proof to this effect is required to be given by the claimant to the disbursing authorities. Such a documentary proof should state that the claimant is eligible to receive the incentive that the goods will be or have been exported according to the export contract and that the claim has been filed in the manner specified in the policy. In other words, holders of the claim have to be established for receiving incentives and assistance.
You may also note that for making a claim, the exporter has to file an application on the specified form that summarizes the shipment and other details. This application is to be accompanied by a number of supporting documents to enable the incentive disbursing authority to check the authenticity of details given in the application. Now we will discuss about the various documents that are commonly used in international trade worldwide. Commercial Documents – Commercial documents, also known as hipping documents, enable the exporter and the importer to discharge their obligations under an export contract. In specific terms, these documents ensure that the exporter makes shipment of the goods according to requirement of the contract and the importer makes payment for goods shipped in the manner as given in the contract.
When goods are shipped by the exporter, he has a set of documents, which entitles him or its legal holder (e. g. agent, importer, and bank) to the goods at the destination in the event of damage or loss to compensation by insurance. For a consignment under c. i. f. contracts, a set of commercial documents comprise Commercial Invoice, Bill of Lading/ Airway Bill/ Post Parcel Receipt/ Insurance Policy, Certificate and Bill of Exchange. In addition to these documents, a particular shipment may necessitate additional commercial documents such as packing list, certificate of inspection, certificate of quality etc. It must also be noted that for receiving payment from the importer, additional documents, satisfying the regulatory needs in the importing country, will have to be obtained by the exporter and sent to the importer. Let us discuss various commercial documents.
Commercial Invoice – Commercial invoice is perhaps the most important of all the international trade documents as it is the only complete document among all commercial documents. It is used as a customs declaration provided by the person or corporation that is exporting an item across international borders. Although there is no standard format, the document must include a few specific pieces of information such as the parties involved in the shipping transaction, the goods being transported, the country of manufacture, and the Harmonized System codes for those goods.
A commercial invoice must also include a statement certifying that the invoice is true, and a signature. In the first place, Commercial Invoice is a document of contents that describes details of goods sent by exporter. It is the statement of account, which must contain identification marks and numbers, description of goods and quantity of goods. Every shipment has identification marks, which identify the cargo with various documents. These are private marks, which are made on the packages. These marks could be either in the form of symbols or numerical.
Similarly, every package under a shipment is numbered, usually written serial numbers given in a particular consignment. Commercial invoice must describe the goods shipped by the exporter. The description of goods must correspond exactly with the description given in the contract of the letter of credit. Second function of the commercial invoice is that it is the seller’s bill given to the buyer. As a bill, it must contain the name and address of the buyer, unit price, and amount and authorized signatures with destination.
Unless required by the buyer, the total invoiced value should be net of any commission or discount; in other words, it should be the realizable amount of goods as per the trade terms. Sometimes a contract requires a detailed breakup of the amount to be recorded on the invoice for enabling the customs authority in the importing country to calculate import duty. The name and address given in the commercial invoice should be the same as given in the export contract or the letter of credit, as the case may be. The commercial invoice also sets forth the terms of sale, mode and date of shipment and terms of payment.
It can also serve as a packing list and a certificate of origin. A packing list shows details of goods contained in each pack of shipment. When the law in an importing country does not specifically require a separate certificate of origin issued by a third party, it can be self-certified by the exporter on the commercial invoice. 2. Bill Of Lading – A bill of lading, sometimes abbreviated as B/L or BOL is a document used in the transport of goods by sea. It serves several purposes in international trade. The bill of lading evolved with the growth of international trade in the medieval world.
Merchants needed a way of knowing what had been loaded onto ships, and began to issue signed receipts to certify the loading of goods on to vessels and to verify the condition of those goods at the time of loading. With the growth of mercantilism, these receipts began to be used as the title to the goods, and the bill of lading became established in much the same form as we know today. It is not the actual contract, which is inferred from the action of the shipper or ship owner in delivering or receiving the cargo, but forms excellent evidence of the terms of the contract.
It is a document of title to the goods which is the subject of the contract between the buyer (importer) and the seller (exporter). It is the most important commercial document in international trade, and is used to control delivery of goods transported by sea. A bill of lading is issued by the carrier and details a shipment of merchandise, gives title to the goods, and requires the carrier to deliver the merchandise to the appropriate party. Basically the bill of lading has four functions.
Broadly, it is a receipt for the goods shipped, a transferable document to the goods thereby enabling the holder to demand the cargo, evidence of the terms of the contract of affreightment but not the actual contract, and a quasi-negotiable instrument. Provided satisfactory arrangements have been concluded, the shipper forwards the cargo. At this stage, it is important to note that the shipper always makes the offer by forwarding the consignment, while the ship owner either accepts or refuses it. Furthermore, it is the shipper’s duty, or that of his or her agent, to supply details of the consignment.
Normally, this is done by completing the shipping company’s form of bill of lading and the shipping company then signs the number of copies requested. When the goods have been received on board the ship, the bill of lading is dated and signed by or on behalf of the carrier, usually by the Master of the ship or his or her agent, and stamped ‘freight paid’ or ‘freight payable at destination’ as appropriate. If the cargo is in good condition and everything is in order, no endorsement will be made on the document and it can be termed a ‘clean’ bill of lading.
Conversely, if the goods are damaged or a portion of the consignment is missing, the document will be suitably endorsed by the Master or his or her agent and the bill of lading will be considered ‘unclean’. Bills of lading are made out in sets and the number varies according to the trade. Generally, it two or three – one of which will probably be forwarded immediately, and another by a later mail in case the first is lost or delayed, together with a number of non-negotiable copies for office and filing use.
In recent years, the use of bills of lading has declined, as they have been replaced in the most part with the sea waybill. The main difference between these two documents is that the waybill does not confer title of the goods to the bearer, and as a result there is no need for the physical document to be presented for the goods to be released. The shipping line will automatically release the goods to the consignee once the import formalities have been completed.
This results in a much smoother flow of trade, and has allowed shipping lines to move towards Electronic data interchange which greatly eases the flow of global trade. However, for letter of credit and Documentary Collection transactions, it is important to retain title to the goods until the transaction is complete. This means that the bill of lading still remains a vital part of international trade. 3. Airway Bill – Airwaybill (AWB) or air consignment note refers to a receipt issued by an international airline for goods and an evidence of the contract of carriage, but it is not a document of title to the goods.
Hence, the air waybill is non-negotiable. This document, therefore, performs the triple functions as a forwarding note for the goods, receipt for the goods tendered and authority to obtain delivery of goods. The functions of AWB are similar to B/L in regard to its characteristics as an evidence of contract and as cargo receipt. The AWB may be given as receipt either for cargo given to the carrier pending shipment or for cargo loaded on board the aircraft. It may either be a clean receipt or an unclean receipt.
As regards the document of title characteristics, AWB is not a document of title, but this feature can be incorporated in it by making an Order AWB. General practices in the trade are to get the consignee-named AWB. Consequently, goods are delivered to the consignee named in the AWB. The consignee will have to identify himself as the party named in the AWB and goods may be delivered to him without any hindrance. But if the interests of the exporter have not been protected, the consignee may get hold of the goods and may also not pay for them.
Hence, exporters provide for a clause in the contract, which requires AWB to be made in the name of the paying bank, which will ensure exchange of goods for payment, by the importer. Airway bills have eleven digit numbers which can be used to make bookings, check the status of delivery, and current position of the shipment. The first three digits are the airline prefix. Each airline has been assigned a 3-digit number by IATA, so from the prefix we know which airline has issued the document. The next seven digits are the running numbers – one number for each consignment. The last digit is what is called the check digit. . Post Parcel Receipt – The parcel post receipt is an acknowledgement showing that a postal service delivered a shipment to a particular recipient. The parcel post receipt can help prove that a shipment was indeed carried out by the service.
The postmark date shows the day on which the item was dispatched. If an item is sent by airmail, the corresponding document is the airmail receipt. The parcel is consigned to the consignee named in the contract between exporter and importer. The consignee can identify himself with the postal authorities at the destination and obtain delivery of the goods. . Insurance Policy Certificate – It is termed as Cargo insurance Policy (also called marine insurance policy) provides protection to cargo owners in the event of loss or damage to cargo in transit. This loss or damage is caused by accidents, which cannot be known in advance and against which no protection is possible. These may be caused by natural calamities as well as by man-made accidents. It is, therefore, necessary that the risk of loss or damage to the cargo be minimized by obtaining a suitable insurance cover from an insurance company. 6.
Bill Of Exchange – Bill of exchange or draft is “an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to or to the order of a person or to the bearer of the instrument. Further, the person to whom it is addressed is to pay either on demand or at fixed or determinable future. Bill of exchange (B/E) is an important commercial document, which bridges the time gap between shipment of goods and receipt of sale amount. This document is prepared by the exporter and given to the bank along with other shipping documents for securing the sale amount.
In this sense, B/E is attached to other documents, which will be given to the importer only after he has honored the B/E either by actual payment or by undertaking to make payment at a future date. Simply stated, the maker of B/E is the exporter (drawer) and the person who is directed to pay is the importer (drawee), while the person who is entitled to receive payment is the exporter (payee) or anyone directed by him. The sum of money to be paid by the drawee is the amount billed in the commercial invoice and recorded in B/E.
B/E is to be honored either on demand or on presentation to the drawee or at a determinable future. Where B/E is to be honored on demand, a ‘Sight bill’ is drawn while in the second case ‘Usance bill is drawn. A bill of exchange may be endorsed by the payee in favor of a third party, who may in turn endorse it to a fourth, and so on indefinitely. The “holder in due course” may claim the amount of the bill against the drawee and all previous endorsers, regardless of any counterclaims that may have disabled the previous payee or endorser from doing so.
This is what is meant by saying that a bill is negotiable. 7. Certificate Of Origin – A Certificate of Origin (often abbreviated to C/O or COO) is a document used in international trade. It is a printed form, completed by the exporter or its agent and certified by an issuing body, attesting that the goods in a particular export shipment have been wholly produced, manufactured or processed in a particular country. The “origin” does not refer to the country where the goods were shipped from but to the country where they were made.
In the event the products were manufactured in two or more countries, origin is obtained in the country where the last substantial economically justified working or processing is carried out. An often used practice is that if more than 50% of the cost of producing the goods originates from one country, the “national content” is more than 50%, then, that country is acceptable as the country of origin. Documents required as per Indian laws & regulations Legal Documents for exports from India – Regulatory export documents are of two types.
Documents needed for different kinds of registrations of the firm and documents, which are specific to a shipment. In the first category are included applications and supporting documents for obtaining – I. Importer Exporter code number valid for a lifetime II. Registration cum membership certificate valid for a fixed period RCMC is strictly not a legal requirement for exporting from India, but is needed for claiming some of the important export incentives. The application of the Importer-Exporter Code Number (IEC) is to be made in the prescribed form to the Regional Licensing Authority.
RCMC is obtained from the concerned registering authority, which may either be an Export Promotion Council, or Commodity Board or a Development Authority. Application is to be made on the prescribed form available from the registering authority. In the second category are the documents, which an exporter or his agent has to prepare for shipment of goods. These documents are: a) GR Form/SDF Forms: GR Form is required to be filled in at places where operations are handled manually at the ports. At all other ports SDF forms are required to be filled-in.
It is required to be filled in duplicate for all exports in physical form other than by post. b) PP Form:It is required to be filled in duplicate for all exports to all countries by post parcel, except when made on “value payable” or “cash on delivery” basis. c) VP/COD Form:It is required to be filled in one copy for exports to all countries by post parcel under arrangement to realize proceeds through postal channels on “value payable” or “cash on delivery” basis.
d) SOFTEX Form:It is required to be prepared in triplicate for export of computer software in non-physical form. i) For goods that are subject to the Export Trade Control policy of the Government of India, documents in the form of application have been specified. On the basis of that the concerned authorities will grant documents either an export license or an export permit. License or permission is generally given on the customs document known as shipping bill. In many cases, specific permission may have to be obtained from particular government ministries/departments, in which case exporter has to apply on his letterhead.
For a number of products under the Export (Quality Control and Inspection) Act, 1962 and various other regulations, it is obligatory for an exporter to obtain Export Inspection Certificate from the notified agencies. For obtaining this certificate, the exporter has to apply in a document called intimation for inspection along with supporting documents (commercial invoice, technical specifications, etc. ) to an Export Inspection Agency. Thereafter, a certificate of inspection will be issued, which along with other documents will be submitted to the customs authorities before permission to ship goods is given.
Under the Indian Customs Act, goods cannot be loaded on board the carriers unless permission from the customs authorities has been obtained. This permission is accorded on a document prescribed by the customs authorities. When goods are sent by sea or by air, this document is known as Shipping Bill. When goods are exported by land or by rail it is called Application for Export. Post parcel consignment requires custom declaration form to be filled in. Application for Export is used for seeking customs permission of export goods to the neighboring countries like Bangladesh by road, river or rail.
This is of three types, namely, for export of free, dutiable and drawback cargos. Customs declaration form for goods sent by post parcel is a standard form for all types of cargo. However, for claiming duty drawback, the exporter has also to file another document known as “Form D”. Port authorities in India have specified documents for bringing the cargo into the shed for shipment as well as for payment of port charges. This document is called port-trust copy of shipping bill in Bombay, dock challan in Calcutta and Export application in Madras and Cochin.
Like the shipping bill, thus document is prepared by the clearing and forwarding agent of the exporter. In addition to these documents, there are certain other documents which are required for claiming certain incentives given by the government. For instance for the priority allotment of wagons, the exporter has to file forwarding note, wagon registration fee receipt and shipping order. For rebate in central excise ARE1/ ARE2 forms are to be filled. For claiming duty drawback we need to file drawback payment order, a copy of commercial invoice and a copy of bill of lading.