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Key of Trade Finance: Documents

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Provides for payment terms (at sight, usance etc. ... Text 'at sight/usance' of this first of .' is written. Transport Documents ... – PowerPoint PPT presentation

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Title: Key of Trade Finance: Documents


1
Key of Trade Finance Documents
The information flow in trade finance happens
through documents Bank deals only in documents
and not in goods
2
Financial Documents
3
Financial Documents Whats the Purpose?
  • Purpose
  • Seller should be able to demand money
  • Bank should be able to collect money
  • It should provide for credit extension
  • It should work as a receipt of payment
  • The title that passes is free from equities
    (unknown defect)
  • Types of Financial Documents
  • Bill of Exchange
  • Draft
  • Promissory Note

4
Types of Financial Documents
  • Bill of Exchange
  • Drafts
  • Promissory Notes

5
Bill of Exchange
  • Issued by Beneficiary
  • Addressed to issuing bank / nominated bank
  • Is a demand of money made by seller to buyer
  • Provides for payment terms (at sight, usance
    etc.)

6
Bill of Exchange Key Identification Features
  • Bill of Exchange is written at the top
  • Text at sight/usance of this first of is
    written

7
Transport Documents
8
Transport Documents Whats the Purpose?
  • Purpose
  • Should be a means for collecting goods at
    destination
  • Should ensure safe delivery of documents
  • Should match with contract terms and conditions
  • Should provide cover in case of damage / loss of
    goods
  • Should allow only authorised persons to collect
    goods
  • Types
  • Bill of Lading
  • Airway Bills
  • Road, Rail or Inland Waterway Transport
  • Courier and Post Receipts

9
Bill of Lading
  • Transport document representing movement of goods
    by water (ocean or sea)
  • Receipt of goods given by carrier or his agent
  • Contract of carriage
  • Important document as it is a title to goods
  • Generally it is issued in a set of 2 or 3
  • The exact number issued is indicated on each bill
    of lading

10
Bill of Lading Key Identification Features
  • Bill of Lading written at the top
  • Issuer is normally a shipping company
  • Receiver of goods is named as consignee
  • Port of loading discharge are given

11
Airway Bill
  • Transport document representing movement of goods
    by air
  • Receipt of goods given by carrier or his agent
  • Contract of carriage
  • Generally it is issued in a set of 3
  • The exact number issued is indicated on each
    Airway Bill

12
Airway Bill Key Identification Features
  • Airway Bill is written at the top
  • Flight details are given

13
Commercial Documents
14
Commercial Documents Whats the Purpose?
  • Purpose
  • Seller should be able to give merchansdise
    details
  • Seller should be able to specify payment terms
  • Document shows delivery terms
  • Clear description, quantity of goods, value

15
Types of Commercial Documents
  • Commercial Invoice Sellers bill of merchandise
  • Proforma Invoice A form of a quotation by the
    seller to a potential buyer.
  • Purchase Order Buyers request for purchase of
    specified goods
  • Certificate of Analysis Indicates the inner
    composition, quality and intricate nature of the
    goods broadly described in the invoice
  • Weight Certificate Certifying weight of goods
  • Inspection Certificate Document certifying
    inspection of the goods (prior to shipment)
    issued by agency specified by importer
  • Packing List Shows the nature and number of
    goods etc. put in each packet / container

16
Commercial Invoice
  • Contract of sales
  • Sellers description of merchandise

17
Commercial Invoice Key Identification Features
  • Invoice is written at the top
  • Description of goods is given
  • Total value of goods is given

18
Regulatory Documents
19
Regulatory Documents Whats the Purpose?
  • Purpose
  • Provide authorisation to trade to the party in
    the specified goods
  • Cover the said goods
  • Cover the shipment period
  • Cover full value

20
Types of Regulatory Documents
  • Certificate of Origin Shows the country of
    origin of the goods
  • Export/Import License Certification by export
    licensing authority allowing the export of goods
     
  • A1 Form Every payment made abroad for imports
    should be supported by Form A1 along with
    relevant invoices
  • A2 Form All the payments made out of the country
    for purpose other than imports should be
    supported by A2 Form

21
Types of Regulatory Documents
  • GR Form / Softex Form GR Form is a declaration
    by exporter ensuring that money earned through
    exports is coming into the country
  • EDI Form/SDF Electronic GR Form
  • Bill of Entry Proof of goods imported in India
    to ensure that if forex is remitted, the goods
    have come to India in lieu of that

22
Insurance Documents
23
Insurance Documents Whats the Purpose?
  • Purpose
  • To provide coverage for loss/damage of goods or
    other risks, as specified
  • To cover the bank
  • Cover the shipment period
  • Covers full value
  • Types of Insurance Documents
  • Policy
  • Cover Note
  • Certificate

24
Insurance Policy
  • A contract of insurance
  • Undertaking given by insurer to pay in case of
    loss / damage etc.
  • Policies are generally freely assignable to
    anyone who acquires insurable interest without
    notice to underwriters

25
Insurance Cover Note
  • A precursor to Insurance Policy
  • Replaced by actual policy

26
Insurance Documents Key Identification Features
  • Issued by insurance company
  • Beneficiary, validity period etc. are mentioned
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