Welcome back friends. We are about to talk
about various kinds of documents used in international trade finance. We will discuss the purpose of each document and will also show you samples of those documents so that you can have a basic idea how each document looks like in real life.First lets quickly see what are
the categories of documents used in international trade finance.
First we have financial documents, the purpose of these documents is to obtain the finance
or the payment. The main instrument used is bill of exchange.
Next are commercial documents, i.e anything other than financial documents, documents
related to the nitty gritties of the trade like invoice, packing list, certificate of
origin etc Now commercial document has a huge variation,
a major part of it is the transport documents, i.e documents related to the movement of the
goods like bill of lading, airway bill etc And also another type of document is the risk
covering document like insurance certificate of the goods, any kind of export credit guarantee
coverage etc. Now lets see each category one by one.
First financial document, mainly the bill of exchange, its also called the draft or hundi. What are the charecteristics of B/E? It has three parties – Drawer,Drawee and
Payee Firstly it should be in writing It an unconditional order signed by the maker or drawer Directing a specific person called drawee To pay a fixed amount at a fixed date To a certain person or to his order called the payee So here ABC exporter is the drawer Standard Chartered bank NY is the drawee And ABC exporter himself is the payee, but if this draft is discounted by a bank then the name of that bank will come as payee here. It usually refers the invoice number or the LC under which it is drawn. I will talk in details about draft separately in another tutorial so for now just get familiarised with it. Next starts the commercial documents Before going to the main commercial document i.e the commercial invoice lets first see quickly what is a proforma invoice? Its basically a quotation for the goods provided by the seller to the buyer. It means if you buy things from me this will be the price. So this is used while forming a contract and in banking perspective its useful while issuing an LC. It will have almost all details and the type of goods and price. Next the commercial invoice This is prepared after the contract and thus is a definite demand for payment unlike the proforma invoice. This is how a typical invoice looks like. The main fields are the date and invoice number, names of exporter and importer, contract number or LC number, The terms of payment, the ports, the description, quantity and price of goods and other details deemed necessary for that trade. Now I will quickly touch upon a few variations of commercial invoice like consular invoice used mainly in Philippines and south America where the invoice is basically certified by the consulate of the importer’s country situated in the exporter’s country in a prescribed format. Mainly done for fixing of duties in the importer’s country. Another variation is the legalised invoice which is similar to the consular invoice except that it does not follow a prescribed format and used mainly in middle eastern countries. Another one is the custom’s invoice used in USA, Canada etc which facilitates entry of goods in importer’s country at preferential tariff rates Next packing list. As you can see it’s a document which shows the nature and number of packages with distinctive number or marks. This is how it looks like, it will show the details of packaging and gross weights and helps in easy identification of goods for the importer or the customs Next certificate of origin It indicates where the goods are manufactured or produced and issued by chamber of commerce, export promotion council or trade association or any other body authorised to issue such certificate by the government of the country. Now there are two types of certificates – preferential and non preferential. Preferential meaning certificates where developed countries extend tariff concessions to developing countries. Some examples are GSP or Generalised System of Preferences, FTA etc. Non preferential means just evidencing the country of origin, no tariff benefits to the importing nations. This is how a Indian certificate of origin looks like under FTA. It will have the country name, the details of the goods and the contract, and signature of the appropriate authority Next lets quickly see some miscellaneous certificates– health certificate –mainly for goods which will be consumed, will have a declaration from an appropriate authority that its safe to consume. Fumigation certificate- it states that any kind of goods that can be infected by termites is properly fumigated. Even if the container of the main goods is a wooden crate it may need to be fumigated sometimes. Its widely used in import of tea because its mainly packaged in wooden crates Certificate of Analysis – shows exact chemical composition of the goods shipped, these kind of certificates are used in import of metal alloys like steel, aluminium etc Next lets move on to transport documents First Bill of Lading- Bill of Lading is used when goods are transported via sea, there are various forms of bill of lading, we will talk in detail about B/L later in a tutorial, for now lets familiarise ourselves how a typical b/L looks like. It will have the details of the exporter and the importer, the invoice or LC number, the details of the ports, then the goods details, then the signatures. After the goods are shipped there will be a mark ‘Shipped on Board’ and a date. Next Airway Bill It will have similar fields to the bill of lading Next the risk covering document i.e the insurance certificate- It will have the invoice details, the goods, the exact amount of insurance, what coverage