Documents in International Trade

The sale of products in the international markets poses different chal­lenges to the marketers. Here, the customers and the selling companies are usually located in the various countries, and the supply of products is usually facilitated through third-party logistics partners. Hence, both the buyer and the seller need to perform their respective obligations as per the sales contract, the seller needs to deliver the products by the contract, and the buyer needs to arrange for the payment of the agreed price. Some of the documents used in the international trade are:

Commercial Invoice. Commercial invoices are the invoices by the exporter to demand payment from the imported. It includes names and addresses of the exporter and the importer, date, details of the products, unit price, quantity, types of packaging, information of pertinent import and export licenses, the total invoice value and the exporter’s stamp and signature

Bill of lading. Bill of lading (B/L) is issued by the shipment company. It is made out to the order of exporter and needs to be authorized to enable the importer to get the goods at the port. It works as a receipt for the original goods and contains the terms and conditions of the contract of carriage. It includes name of the exporter and the importer or their agents, the description of the goods, and freight charges. It also has the name of the vessel along with the details about the port of loading and discharge. The different bills of loading are marine bill of lading, short form bill of lading, combined transport bill of lading, liner bill of lading, transshipment bill of lading, and the container bill of lading.

Consular invoice. Consular invoice is issued by the consular office of the importing country, with the office being located in the exporter’s coun­try. It helps to calculate the correct amount of import duty to be calculated and also prevent goods imported to be sold at below market price.

Certificate of Origin. This is a certificate that certifies that the goods shipped are wholly manufactured or processed by the exporter, and the goods are the products of specified country.

Certificate of Quality. This is a certificate that certifies that the dis­patched products are of the quality specified in the contract.

Letter of Credit. Letter of Credit (L/C) is an instrument from a bank guar­anteeing that a buyer’s payment to a seller will be procured on time and for the accurate amount. If the buyer is inept to make the required payment, the bank will be obligated to cover the full or remaining amount of the purchase. It is an important document in the international trade due to the nature of international dealings, including factors like distance, different rules, and laws in the various countries.

Bills of Exchange. Bills of Exchange (BE) is an unconditional order addressed by the exporter to the buyer requiring the buyer to pay a certain sum of money to the exporter on demand, or after a fixed period. The BE is prepared by the exporter and submitted to the negotiating bank in the exporter’s country. It specifies that the exporter requests the reimbursing bank (usually the L/C issuing bank) in the importer’s country to reimburse the cost to the negotiating bank in the exporter’s country and charge the same amount to the importer’s bank account within a specified time limit. The exporter collects payment from the negotiating bank in exchange for B/L together with BE and other documents after the shipment to the importer.

Insurance Documents. It is important to have an insurance policy to cover the risk of loss or damage to goods during the shipment. This is usually taken by the exporter and the importer after negotiations regard­ing the insurance of the products for the different stages of the shipment. This contains the name of insurer, insured, types of risk covered, insurance amount, description of the insured products, and the place where claims are payable.

Source: Richard R. Still, Edward W. Cundliff, Normal A. P Govoni, Sandeep Puri (2017), Sales and Distribution Management: Decisions, Strategies, and Cases, Pearson; Sixth edition.

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