Chapter 4 Documents in International Settlements

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Chapter 4 Documents in International Settlements

• introduction of documents
• classifications
• financial documents bills of exchange,
  promissory notes and checks
• mercantile documents commercial invoice,
  transport documents, insurance policies and other
  documents.
• the importance of documents

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Chapter 4 Documents in International Settlements

• In international settlements, all relevant
  parties deal with documents, not goods.
• Banks pay against documents
• Exporters receive payment by handling over the
  required documents
• Importers pay by virtue of documents.
• The documents called for by a payment method
  differs according to the nature of the
  transaction, the goods and the countries of
  exporters and importers, etc..

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Chapter 4 Documents in International Settlements

• functions
• Evidence for the exporter to fulfill the sale
  contract
• representation of the goods
• financing means.
• Requirements accurate, complete, timely, tidy
• requirements for making documents (Article20b)
• requirements for signatures in documents
• requirements for the number of original documents
  and copies (article20c)
• Requirements for authentication (article20d)
• requirements for issuance date (article22).

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Chapter 4 Documents in International Settlements

• Classifications
• basic documents commercial invoice, bill of
  lading, insurance policy or certificate
• additional documents packing list, certificate
  of origin, inspection certificate, cable copy,
  and so on.

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Chapter 4 Documents in International Settlements

• Commercial invoice
• Definition
• A commercial invoice is the key accounting
  document describing the commercial transaction
  between the buyer and the seller, which gives
  details of the goods, service, price, quantity,
  settlement terms and shipment.
• functions
• ?It is evidence for the importer to check goods
  and make payment.

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Chapter 4 Documents in International Settlements

• ?The commercial invoice is the basis for the
  importers Customs' identification,
  classification, duty/tax assessment, and final
  approval of entry of the goods.
• ? In the absence of a separate contract of sale ,
  the invoice will take on added importance as the
  confirmation of the terms of the arrangements
  between the parties.
• ?In the absence of a separate bill, the importers
  or the issuing bank will make payments according
  to the invoice.

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Chapter 4 Documents in International Settlements

• ? The commercial invoice is the basis for
  exporters to collect and record.
• ?The commercial invoice is the basis for the
  exporters foreign Customs' identification,
  classification, duty/tax assessment, and final
  approval of delivery of the goods.

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Chapter 4 Documents in International Settlements

• items
• the word invoice or commercial invoice
• name and address of the exporter, importer, and
  consignee, if any
• place and date of issuance
• L/C (contract) No. and date
• terms of delivery and payment

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Chapter 4 Documents in International Settlements

• items relative to shipment departure date, the
  name of vessel/flight, the place of receipt and
  the place of destination
• shipping marks, goods description, quantity of
  goods, price and amounts (article 39)
• signature of the exporter
• other references.

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Chapter 4 Documents in International Settlements

• other types of invoice
• customs invoice prepared by exporter for
  the importing customs to ascertain the original
  price and avoid dumping.
• consular invoice an invoice covering a
  shipment of goods certified in the country of
  export by a local consul of the country for which
  the merchandise is destined.
• legalized invoice similar to consular
  invoice.
• pro forma invoice a predecessor of
  commercial invoice.
• sample invoice for the importer to apply
  for tax reduction or exemption when importing
  samples of goods.

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Chapter 4 Documents in International Settlements

• packing list
• Definition Packing list (P/L) is an extension of
  commercial invoice, which provides the complete
  packing details of goods.
• Functions
• the evidence for importers to check and accept
  the goods
• The evidence for the importers customs to check
  particular packages.
• Classification packing list, weight memo (list),
  and size memo (list).

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Chapter 4 Documents in International Settlements

• transport documents
• Commercial terms
• International Rules for the Interpretation
  of Commercial Terms, INCOTERMS,1936, 1967, 1976,
  1980, 1990, 2000.
• functions
• the division of transport cost
• the division of transport risks
• the handling liabilities furnishing of
  documents, export and import clearance, and
  notifications to the parities concerned.

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Chapter 4 Documents in International Settlements

• Incoterms do not deal with
• transfer of property/legal title
• breach of contract/deficiency in the
  merchandise
• terms of payment
• place of jurisdiction.

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Chapter 4 Documents in International Settlements

• elements
• the precise point of goods transference
• a clear definition of the expenses
• the time and the place for the actual
  delivery of goods
• Framework
• Group E
• EXW, or EX Works means that the seller
  makes the goods available to the buyer at the
  sellers own premises.
• Group F main carriage unpaid, including

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Chapter 4 Documents in International Settlements

• FCA, Free Carrier (named place), title and
  risk pass to the buyer including transportations
  and insurance costs when the seller delivers
  goods cleared for export to the carrier nominated
  by the buyer at the named place.
• FAS, Free Alongside Ship (named port of
  shipment), title and risk pass to the buyer
  including payment of all transportation and
  insurance cost when the goods are placed
  alongside the vessel at the named port of
  shipment by the seller

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Chapter 4 Documents in International Settlements

• FOB, Free on Board (named port of
  shipment), title and risk pass to buyer including
  payment of all transportation and insurance cost
  when the goods pass the ships rail at the named
  port of shipment.
• Group C, main carriage paid, including
• CFR, Cost and Freight (named port of
  destination), the seller pays the costs and
  freight necessary to bring the goods to the named
  port of destination but the risk of loss of or
  damage to the goods, as well as any additional
  costs due to events occurring after the time of
  delivery, are transferred from the seller to the
  buyer

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Chapter 4 Documents in International Settlements

• CIF, Cost, Insurance and Freight (named port of
  destination), the seller has to procure insurance
  and pay the insurance premium in the name of the
  buyer
• CPT, Carriage Paid To (named place of
  destination), title, risk and insurance cost pass
  to the buyer when the seller delivers the goods
  to the carrier nominated by him and pays
  transportation cost to the named destination
• CIP, Carriage and Insurance Paid To (named place
  of destination), the seller has to procure
  insurance during the carriage.

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Chapter 4 Documents in International Settlements

• Group D, arrival of the goods, including
• DAF, Delivered At Frontier (named place), title,
  risk and responsibility for import clearance pass
  to buyer when goods are placed at the disposal of
  the buyer at the named point and place at the
  frontier
• DES, Delivered Ex Ship (named port of
  destination), title, risk and responsibility for
  vessel discharge and import clearance pass to
  buyer when the goods are placed at the disposal
  of the buyer on board the ship at the named port
  of destination

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Chapter 4 Documents in International Settlements

• DEQ, Delivered Ex Quay (named port of
  destination), title and risk pass to buyer when
  goods are placed at the disposal of the buyer not
  cleared for import on the quay at the named port
  of destination
• DDU, Delivered Duty Unpaid (named place of
  destination), the seller delivers the goods to
  the buyer, not cleared for import, and not
  unloaded from any arriving means of transport at
  the named place of destination
• DDP, Delivered Duty Paid (named place of
  destination), the seller delivers goods to the
  buyer, cleared for import, and not unloaded from
  any arriving means of transport at the named
  place of destination.

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Chapter 4 Documents in International Settlements

• Definition of transport documents
• Transport documents are documents that
  represent the goods in transport or prove the
  goods have been received for transport.
• bill of lading (B/L)
• definition
• A bill of lading is a document issued by a
  carrier to a shipper, signed by the captain,
  agent, or owner of a vessel, providing written
  evidence regarding receipt of the goods, the
  conditions on which transportation is made, and
  the engagement to deliver goods at the prescribed
  port of destination to the lawful holder of the
  bill of lading.

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Chapter 4 Documents in International Settlements

• Characteristics
• Requisite in form
• Written document
• Transferable documents
• Documents to deal with goods
• Documents with value.
• Functions
• A receipt of goods from the shipping company
  to the exporter
• Evidence of the transport contract for
  carriage between the exporter and the carrier
• Document of title.

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Chapter 4 Documents in International Settlements

• items
• items on the obverse
• the carrier
• the shipper
• the consignee
• notify party
• vessel, port of loading, port of
  discharging and transshipment, if any
• marks and No.
• description of packages and goods
• freight

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Chapter 4 Documents in International Settlements

• place and date of issue
• shipment clause
• without information clause.
• Items on the reverse
• Definition clause
• Jurisdiction clause
• Duration of liability
• Package and marks
• Inaccuracy in particulars furnished by
  shipper
• Lien clause
• Transshipment clause
• on-deck cargo, live animals and plants.

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Chapter 4 Documents in International Settlements

• Classifications
• shipped on board B/L received for shipment B/L
• shipped on board B/L a B/L issued only after
  the goods have actually been shipped on board the
  vessel
• received for shipment B/L a B/L issued to
  acknowledge receipt of shipment before cargo
  loading or before official original bill of
  lading is issued.
• clean B/L unclean B/L
• Clean B/L a B/L in which there is no
  indication of damage to the goods and packaging
• Unclean B/L a B/L in which there is indication
  of damage to the goods or packaging.

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Chapter 4 Documents in International Settlements

• straight B/L, open B/L (blank B/L) order B/L
• Straight B/L a non-transferable B/L which
  indicates the carrier will deliver the goods to
  the consignee.
• open B/L a B/L which indicates no specific
  consignee and the goods will be delivered to
  anyone who holds the B/L
• order B/L a title document to the goods,
  issued "to the order of" a party, usually the
  shipper, whose endorsement is required to effect
  the negotiation.

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Chapter 4 Documents in International Settlements

• direct B/L, transshipment B/L, through B/L
• direct B/L issued when goods are shipped from
  the port of loading directly to the port of
  discharge without transshipment
• transshipment B/L issued when the goods are
  transferred from one ship to another at a named
  transshipment port (article 23 b, c)
• through B/L the carriage of goods from the
  port of loading to the place of destination are
  taken by two or more than two carriers, and the
  bill of lading to cover the entire carriage is
  issued by the first carrier.

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Chapter 4 Documents in International Settlements

• liner B/L charter party B/L
• Liner B/L a B/L which indicates that goods
  are being transported on a ship that travels on a
  scheduled route and has a reserved berth at
  destination
• charter party B/L a B/L issued by the hirer
  of a ship to the exporter, subject to the
  contract of hire between the ships owner and
  hirer.
• long form B/L short form B/L
• short form B/L a B/L that doesnt contain
  the full details of the contact of the carriage
  on the back.

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Chapter 4 Documents in International Settlements

• anti-dated B/L, advanced B/L stale B/L
• anti-dated B/L according to the request of
  shipper, the carrier signs a B/L in which the
  date of issuance is earlier than the actual date
  of shipment in order to comply with the
  requirements of L/C
• advanced B/L a shipped on board B/L issued by
  the carrier when the goods havent been shipped
  on board.
• stale B/L a B/L which arrives after the
  consignment arrives at the final destination.
  Because the B/L is not available, the goods
  cannot be handed over to the consignee.

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Chapter 4 Documents in International Settlements

• other transport documents
• sea waybill or ocean waybill issued by the
  shipping company covering port-to-port shipment,
  not a title document. Example8-8.
• multi-model transport document a B/L covering
  two or more models of transport, such as shipping
  by rail and by sea. Example8-13.
• air transport document air waybill house air
  waybill
• air waybill issued by the air carrier, a
  document evidencing shipment or dispatch or
  receipt of goods. Example8-9.

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Chapter 4 Documents in International Settlements

• Road or inland waterway transport documents
• Cargo receipt/railway bill
• Courier receipt and post receipt.

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Chapter 4 Documents in International Settlements

• insurance documents
• Definition An insurance document is a contract
  whereby the insuer undertakes to indemnify the
  assured in a manner and to the extent thereby
  agreed, against certain losses to cargo while in
  transmit.
• functions
• evidence of insurance contract
• evidence of compensation.

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Chapter 4 Documents in International Settlements

• types
• insurance policy a document issued by an
  insurance company, covering the goods being
  shipped against specified risks during the whole
  or part of the journey between the seller and the
  buyer.
• insurance certificate a document issued to the
  insured certifying that insurance has been
  effected and the version of the provisions of the
  policy is abbreviated.
• combined certificate or risk note a stamped
  invoice as an evidence of insurance.

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Chapter 4 Documents in International Settlements

• open policy an agreement between the insurer and
  the insured before the goods are shipped in case
  that the buyer covers the risks lest the
  insurance might be delayed or missed.
• insurance declaration after the goods are
  shipped, the buyer should report to the insurer
  the details of shipment in insurance declaration.
• cover note a document issued to give notice that
  insurance has been placed pending the production
  of a policy or a certificate. (article 34 c, d)

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Chapter 4 Documents in International Settlements

• items
• Insurer (article 34 a)
• the insured
• subject matter
• amount insured (article 34 f)
• items relative to shipment
• conditions
• basic risks free from particular
  average (F.P.A.), with average (W.A.) all
  risks.
• General additional risks theft
  pilferage and non-delivery, risk of fresh water
  rain damage, risk of shortage, risk of
  inter-mixture contamination, risk of leakage
  risk of crash breakage risk of taint of odor,
  risk of sweat and heating, risk of hook damage,
  risk of breakage of packing, risk of rust.

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Chapter 4 Documents in International Settlements

• Special additional risks failure to
  deliver risk, import duty risk, on deck risk,
  rejection risk, aflation risk, inspection risk,
  war risk.
• Claim payable at
• Surveyor
• Date and place of issue. (article 34 e)
• other documents
• inspection certificate a document issued by an
  authority, as stated in the documentary credit,
  indicating that goods have been inspected prior
  to shipment and the results of the inspection.

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Chapter 4 Documents in International Settlements

• Key points related to the Inspection Certificate
• The description and mark of the goods must be
  the same as those mentioned in the commercial
  invoice and other documents to ascertain that the
  goods inspected are exactly those exported
• The wording on the inspection certificate must
  be exactly the same as those mentioned in the
  invoice and must be in compliance with the terms
  and conditions of the credit
• The inspection date must be earlier than
  B/Ls date or conform to that stipulated in the
  letter of credit.

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Chapter 4 Documents in International Settlements

• origin certificate a document issued by an
  authority, as stated in the documentary credit
  stating the country of origin of goods.
• representative form Generalized System of
  Preference Certificate of Origin, a certificate
  used to obtain the treatment of preference
  customs duty imposed by the developed country in
  the developing countries.
• Export license a document prepared by a
  government authority of a nation granting the
  right to export a specific quantity of a
  commodity to a specified country.

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Chapter 4 Documents in International Settlements

• Beneficiarys statement a statement issued and
  signed by the beneficiary, certifying that he has
  done some work according to the stipulations in
  the credit.
• Cable copy

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Chapter 4 Documents in International Settlements

• key points in review
• Incorrect amounts or currency in bill of
  exchange
• Incorrect title in invoice or inconsistence
  of goods description with L/C
• Overloading or underloading
• Inconsistence of description of goods among
  documents
• Incomplete documents
• Omission of signature or stamp in documents
• Omission of endorsement
• Overdue loading or overdue presenting
  documents
• .

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Chapter 4 Documents in International Settlements

• Clause as to partial shipment or transshipment
  is violated
• Inconsistence of the freight in
  transportation documents with trade terms
• Overdraft
• Conditional requirements specified in the L/C
  arent satisfied
• Corrections in documents havent been signed
  or stamped
• Inconsistence of the type of transport
  documents with L/C
• Documents presented obeyed the original L/C
  after the L/C has been revised
• Inconsistence of issuing date in documents.

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Exercises

• A credit calls for an invoice in 3 copies. When
  presented, they are identical computerized copies
  not marked as "original". Is this acceptable?
• 2. A credit has a certain description of the
  goods at the end of which it specifies" FOB
  Shanghai". The invoice describes the goods but
  omits "FOB Shanghai". Is this acceptable?

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Exercises

• 3. Would you accept a B/L where the instructions
  to the agent at the port of discharge state "Do
  not deliver the goods without shipper's prior
  faxed agreement"?
• 4. A B/L shows that the goods were embarked in
  40' "open top" containers. Is this a defective
  packaging condition causing the bill to become
  dirty/clauzed/foul?

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Exercises

• A B/L carries the following clause" Packaging
  carried out using paper bags, the carrier accepts
  no responsibility in case of loss or damage
  caused to goods as a result of such type of
  packaging". Is this acceptable?
• 6. If a credit calls for a marine B/L without
  further specification, can you accept a received
  for shipment B/L?

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Exercises

• 7. A copy of a document is indicated as "copy",
  but is not signed. Can you accept it?
• 8. A B/L is issued in "Received for shipment"
  format and also carries the notation "Shipment on
  board" with a date other than and subsequent to
  the date of issue of the B/L. For the purpose of
  the credit the correct date is the shipped on
  board date or the date of issue?

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Exercises

• 9. If the B/L said short shipped one bale, is
  this an unclean B/L?
• 10. Is an insurance document dated later than the
  shipment date is acceptable?