TRADE DOCUMENTS

In an international trade transaction, various documents need to be produced. Although the form and type of documentation differs from transaction to transaction, all the documents evidence various aspects of the trade transaction (e.g. description, quality, quantity and amount of goods, transportation, insurance, inspection and so on).

Importers and exporters need to ensure that the documentation supporting their international trade transactions is correct. Mistakes can be costly.

In the case of documentary credits, banks perform a crucial role in the transaction as they inspect the documents extremely carefully to ensure that they comply with the credit terms. The bank is not in a position to determine whether an irregularity in the documents is important or irrelevant. Neither is the bank in a position to decide on matters which only an expert in that field can correctly evaluate. In the case of documentary credits, the bank only has to examine the documents to ensure that they conform to the terms and conditions of the Credit.

Verification of the documents generally includes checking the following points:

Completeness
Conformity with all the terms and conditions of the Credit
Consistency of the documents with each other
Compliance with the International Chamber of Commerce (ICC) Uniform Customs and Practice for Documentary Credits, 1993 Revision, ICC Publication No. 500 (UCP 600) and subsequent revisions Trade documents:

*Air transport documents
*Bill of exchange
*Bill of lading
*Certified invoice
*Certificate of analysis
*Certificate of origin
*Commercial invoice
*Consular invoice
*Courier receipt
*Charter party bill of lading
*Insurance document
*Legalized invoice
*Multimodal transport document
*Non-negotiable sea waybill
*Post receipts
*Packing list
*Road / Rail transport documents
*Third party inspection certificate
*Weight certificate

Air transport documents
Air transport documents or air waybills are consignment notes issued for goods transported by air. These documents confirm that the goods have been received for shipment and give details of the contract terms. Air transport documents and air waybills do not give title to the goods. The goods are delivered to the named consignee once customs clearance has been obtained. They are normally issued in a set of 12. Three originals are produced:

For the issuing carrier
For the consignee
For the shipper of the goods
The remainder copies are for airline purposes.


Bill of Exchange
A bill of exchange, also commonly known as a draft, is an unconditional order in writing. The bill of exchange is signed by the person giving it, requiring the person to whom it is addressed to pay (on demand or on a fixed and determinable due date) a sum certain in money to a specified person or his order, or to bearer. The person drawing up the bill is called the "drawer", and the instrument is addressed to the "drawee" (the person who needs to pay the amount stipulated). It is important to remember that the drawee needs to accept the bill, and this acceptance constitutes acknowledgement of debt and makes the bill of exchange a legal instrument.

The following aspects must be checked :( Numbers correspond with specimen above)
Does the bill, if made to the order of the exporter, carry an endorsement?
Does the bill contain all the required clauses?
Is the bill drawn as stipulated, i.e. on the correct drawee? The "drawee" is the party who will be making the payment, usually the importer. The drawee needs to sign acceptance of the draft (bill) undertaking to pay it as stipulated.
Does the amount in words agree with the amount in figures?
Is the tenor of the bill payable as specified at sight or at a given term after sight or date, e.g. 30 days after bill of lading date?
The bill must be drawn by the drawer. The "drawer" is the party who makes out the bill, and is usually the exporter.
Does the amount of the bill of exchange correspond with that of the invoice?

Bill of Lading
Who is this intended for?
A bill of lading is a receipt from a shipping company for goods shipped for transport from one destination to another. It is signed by or on behalf of the master of the carrying vessel, or by the carrier or a named agent, for or on behalf of the master or carrier, and sets out the terms and conditions under which the goods are to be carried.

A bill of lading is negotiable to the extent that the title to the merchandise that it represents is transferred by endorsement and delivery of the bills of lading. It is issued in sets of two, three or more, and release of the goods at destination is usually subject to the production of one original, duly endorsed. The number in the set will be indicated on each bill of lading and all must be accounted for. This ensures that one of the set does not come into the hands of an unauthorised person who would be able to claim the goods at the destination.

The following aspects must be checked:
(Numbers correspond with specimen below)

1.The shipment must be consigned to the correct party. 2.
2.It must stipulate that the goods have been shipped on board an expressly named vessel.
3.The port of loading and port of discharge must be correct.
4.The shipping marks and numbers must agree with the marks and numbers on the other documents.
5.The description and quantity of goods must be consistent with that on the other documents.
6.It must indicate all reference and license numbers as called for.
7.The bill of lading must indicate that the goods have been loaded on board. The "On Board" notation may be indicated by pre-printed wording on the bill of lading. If not pre-printed, the "On Board" notation must also stipulate the date on which the goods have been loaded on board.
8.Payment of freight notations "Freight Prepaid" or "Freight Collect" must conform to the terms of delivery (Incoterms).
9.The date of the bill of lading or the "On Board" date must be within the specified "latest shipment date" if payment is via documentary credit.
10.If payment is via documentary credit, the full set of original must be presented if so stipulated in the Credit.
11.The bill of lading must be issued by a specifically named carrier, signed or authenticated by the carrier, the master or named agent for and on behalf of the carrier or the master.


Other points for consideration are:
The transport document must be "clean", that is without any qualifying remarks concerning the condition or packaging of the goods.
The transport document should not be subject to a charter party or stipulate loading on deck, unless otherwise authorised.
If payment is via documentary credit, and the bill of lading indicates a place of receipt different to the port of loading, then the "On Board" notation must include both the name of the vessel and port of loading mentioned in the Credit.
If the bill of lading is made out to order, it must be blank endorsed.
The contents of the bill of lading must be consistent with all other stipulated documents presented.


Certified Invoice
Certified invoices are issued by the exporter or his/her agent who is responsible for certifying any statement required by the importer from the exporter. All certified invoices must be signed. A third party is sometimes expected to witness the signature.


Certificate of Analysis
Certificates of analysis are used to give a statement of the chemical composition of goods. They are normally signed by a Public Analyst or Sworn Assayer.

Certificate of Origin
The certificate of origin, known as an official document, is a signed statement providing evidence of the origin of the goods. It is often required by the customs authority of the importing country for the purpose of assessing import duty. Generally the certificate has to be issued by a Chamber of Commerce and must contain details of the goods and the signature and seal of the chamber.

The following aspects must be checked:

(Numbers correspond with specimen below)

1.If payment is by documentary credit, has the Certificate been attested/authenticated and/or issued by the party specified in the Credit?
2.The consignee must not be inconsistent with the consignee stated in the transport document. If the transport document is issued "to order and blank endorsed", "to the order of" or "consigned to" the issuing bank, the certificate may show the importer as the consignee.
3.The consignor/exporter shown in the certificate must be either the shipper stated in the transport document or the beneficiary of the Credit, if applicable.
4.The origin of the goods as stated in the certificate of origin must agree with the contract terms.
5.Has the certificate been signed and dated?
6.The contents must be consistent with all other stipulated documents presented.


Consular Invoice
Consular invoices are required in certain countries before goods can be released from customs. These invoices are issued for this purpose only and are obtained from embassies and consulates of the importer's country by the exporter. The consulate or embassy will stamp the invoices after completion and they levy a charge for doing so.

Consular invoices provide the importing country with a means of:

*Checking prices of goods
*Determining the origin of goods
*Calculating import duties
*Checking over- and under invoicing

Courier Receipts
Courier receipts give proof that goods have been received and shipped whether by land or by air. They are also not negotiable documents and are made out to a specific consignee and cannot be made "to order". The consignee does not need to present the courier receipt in order to obtain his goods.

Charter Party Bills of Lading
Charter party is an arrangement between the owner of a vessel and a merchant (trader). The charterer (owner of the vessel) hires the vessel to the merchant who uses it to transport goods. The form of the agreement may differ depending on the type of goods being shipped. Charter party bills of lading are subject to the charter party's (ships owner's) terms and conditions and the goods are subject to the shipowner's lien for freight and all other charges.

Note: Lien for freight and all other charges is the shipowner's right to keep possession of the goods until payment for the charter is received.

These bills of lading may be subject to other restrictive conditions beside those already mentioned and for this reason one should take care when dealing with these. Charter party bills of lading are not acceptable in a drawing under a Credit, unless specifically authorised in the Credit.

Health, veterinary and sanitary certificates
These certificates are used where livestock, hide, foodstuffs, agricultural goods or some packing materials are exported. They are signed by the health authorities of the exporting country and certify that the goods are free of disease, e.g. mad cow disease.


Insurance document
The terms of the contract will dictate what insurance is required, and may be covered by an insurance policy or insurance certificate. An insurance policy may only be issued by the insurer and is usually in standard form covering the standard rules for any voyage.

Regular exporters normally arrange an open contract to cover all exports during a specific period - this provides insurance cover at all times within the agreed terms and conditions of the contract and avoids having to obtain separate cover and a new policy for each shipment. It contains similar details to that of a policy, the difference being a shorter version of the provisions of the policy under which it is issued.

The following aspects must be checked:
(Numbers correspond with specimen below)

1.The insurance document must be issued and signed by an insurance company or underwriters or their agents.
2.The insurance document must be of the right type, i.e. Insurance Policy, Insurance Certificate or Declaration of Insurance. In the case of documentary credits, brokers' cover notes are not acceptable unless expressly permitted in the Credit.
3.The document must not be dated later than the date of dispatch. If it is dated later than the date of dispatch, the document must expressly state that insurance cover is effective from the date of dispatch or the date of loading or taking in charge.
4.The description of goods, the marks, the transport route and the name of the vessel must agree with the details given in the transport document.
5.In the case of documentary credits, the document must be issued in the same currency as the Credit and for the specified amount, or at least for the CIF or CIP value of the goods plus 10%. If the CIF/CIP value cannot be determined, insurance must be taken out for a minimum of 110% of the amount for which payment, acceptance or negotiation is requested under the Credit or the gross amount of the invoice, whichever is the higher.
6.The specific risks must be covered.


Legalized invoices
These invoices are authorized by the consulate representing the importer's country or the local Chamber of Commerce in the exporter's country. The purpose of this invoice is to give the importing country an official record of the transaction.


Multimodal transport documents
Multimodal transport documents are issued by a multimodal transport operator, the carrier, the master or their agents. They are used for goods shipped in containers on one contract of carriage from a "place of taking in charge" to a "place of delivery".

The party who issues the document takes full responsibility for the whole transport being correctly completed and for loss or damage to the goods wherever occurring from the time he/she received the container until the container is delivered.


Non-negotiable sea waybills
Processing of bills of lading is quite time consuming and can result in the consignee receiving them only after the goods have arrived at the port of destination. The non-negotiable sea waybill prevents this delay as (similar to air waybills) the goods can be delivered to the consignee without handing over the waybill.


Post receipts
These receipts are simple evidence that the goods have been received by the post office in the exporter's country and do not give title to the goods, i.e. they are not negotiable. They may indicate that postage has been paid and the way in which the goods have been sent, i.e. by registered or ordinary post.


Packing list
The packing list provides details of how the goods have been packed for transportation. It gives a complete breakdown of quantity and description of goods packed in each container or package.

The following aspects must be checked:

(Numbers correspond with specimen below)

1.The packing list contains documentary credit reference number (if applicable).
2.The weight must be consistent with the weight indicated on the bill of lading and other documents.
3.The marks must be consistent with those on the bill of lading.
4.The number of packages must be consistent with those on the bill of lading.
5.The packing list must contain the necessary details, such as total number of units, number in each package, container breakdown, etc.
6.The document must cover the goods invoiced.
7.The document must be headed "packing list" and must be issued by the specified party.


Road / Rail transport documents
Road / Rail transport consignment notes are very similar to air waybills in that they are also non-negotiable documents confirming receipt of goods for shipment and detailing the terms of the contract. These documents are issued by the road or rail company providing the service.


Third Party Inspection Certificates
These certificates are issued by recognised independent third parties declaring the result of an examination of the goods exported. The importer may call for such an examination of the goods before shipment to protect him/her from paying for sub-standard goods.


Weight certificates
Weight certificates give details of the gross or nett weights of goods. These documents are used for goods which are not packed in boxes or containers, e.g. wheat, grain, corn, etc. These are important where loss of weight may occur through evaporation or some other factors. A weight certificate may be issued by the exporter or a public weigher, or an independent weigher for a fee.


Other points for consideration are:

1.If the goods have been loaded "on deck" the insurance must cover "on deck" risks.
2.If the insurance document is made out to order, ensure that it is blank endorsed.
3.If insurance document is made out to the beneficiary or the shipper, ensure that 4itis blank endorsed or endorsed to the applicant.
4.The contents of the insurance document must be consistent with all other documents presented.