Home ›› 09 Dec 2022 ›› Editorial

Shipping documents used in international trade

Towfique Hassan
09 Dec 2022 00:00:00 | Update: 09 Dec 2022 10:27:41
Shipping documents used in international trade

The exchange of goods and services across international boundaries has enabled us to achieve the principle of division of labour and extended it to international sphere. International trade originated on the basis of nations exchanging their products for others which they could not produce or could produce at an exorbitant cost. Therefore, International trade arises. However, to exchange goods certain documents are needed to make sure that the goods safely reach the importing country without any dispute from the exporting country. For this certain shipping documents are essential in overseas trade. They are-- (i) Invoice (ii) Insurance and (iii) Bill of Lading or other documents evidencing transport of goods. Depending on the type of goods and the country to which goods are shipped, other documents may also be required such as Specification, Weight Certificate, Certificate of Quality and Heath, Certificate of Consular Invoice, Country of Origin and other governmental documents as per regulations of the country concerned.

Where a documentary credit is established by a buyer in favour of an exporter, the credit should specify all the documents the buyer requires, in addition to shipping documents to meet custom or other governmental requirements in his country.

In Bangladesh, information verification can be done from concern Chamber of Commerce, or Export Promotion Bureau, or Customs authority or Commercial Wing of Bangladesh Embassy or High Commission in the country of importer, and Commercial wing of the Embassy of the importing country based in Bangladesh, as the case may be. Documents relating to drawings made under a documentary credit must conform exactly to the terms and conditions of the credit. Where the method of payment is not by documentary credit all documents should conform to the details of the transaction as set out in the commercial in voice.

Bills of Exchange (documentary) drawn by an exporter for payment of goods shipped should be domiciled and dated. For example, if a bill is drawn by an exporter in Bangladesh, it should be written, as Dhaka, 1st January, 2022. If the bill is drawn in terms of a documentary credit it must be drawn on the party specified in the credit. If the bill is not under a documentary credit, it should be drawn on the buyer and his address clearly stated. The Bills of Exchange should be drawn in duplicate, enabling a copy to accompany both original and duplicate documents. These are generally forwarded separately so that if one set is misplaced to reach the destination, the transaction could be completed using the other set.

Invoices: Invoice used in international trade is generally known as Commercial invoice in various forms necessity by import controls and customs regulations of the country of the importer. A commercial invoice is a statement of a transaction prepared by the exporter/ seller and addressed to exporter/buyer. In the export/import trade it should be by reading the invoice the exporter could ascertain complete information about a transaction. The Commercial invoice should ideally contain:

* Name and addresses of the exporter and importer;

* Order or contract numbers;

* Description and quantity of goods;

* Value of goods (per unit & total) and the price basis, e.g. CIF, C&F, FOB etc.

* Shipping marks on packages;

* Details of shipment including, (if by sea, name of the vessel, sailing date and ports of shipment & destination, or if by other modes of transport, equivalent details);

* Details of weight and/ or measurement of each package;

* Method by which payment is to be claimed, e.g. ‘by sight draft’ or, if the shipment is being drawn for under a documentary credit, brief details of the credit should be quoted;

* Whether freight pre-paid (For CIF and CFR shipment) or payable at destination (FOB shipment);

* Insurance—the amount insured for CIF shipment or the amount declared under buyer’s floating policy or open cover (for CFR and FOB shipment), if the buyer has required this to be done.

The contents of each package should be indicated in the commercial invoice if not covered by a separate sheet or packing slip.

All invoices must be correct and include all details required by the buyer. Although a buyer’s instructions may seem exacting to the supplier, they are frequently necessary to enable him to comply with regulations in the country applying to import licenses, customs duties and exchange controls.

Insurance Document: Marine insurance can be used to insure goods during transport by various means of conveyance across oceans and seas, on rivers, over land or in the air and may also be extended to cover the goods during periods in storage before and after transport.

Open cover is probably the best form of effecting insurance in modern commerce. Marine open cover operates on a time basis, providing cover for all the assured’s shipments during a specified period. The premium rates are usually fixed subject to annual review and an insurer cannot, in good faith, refuse to accept a shipment within the scope of the cover at the cover rates and conditions. The assured then, can secure in the knowledge that he has guaranteed cover at fixed rates. With open cover, shipments are automatically covered even if declared late or after loss has occurred.

The open cover incorporates a valuation formula to cover cases where a loss may occur before the importer or exporter has made his declaration of the particular shipment e.g.CIF+10%. The cover also incorporates a limit of the amount that the underwriter is willing to underwrite on any one vessel. Declarations under the cover are made after each shipment or periodically as agreed with the underwriter.

Insurance Policies can be obtained for individual shipments but any oversight means that the shipment goes uninsured. Insurance certificates for separate shipments are commonly issued in lieu of individual policies. If, however, a documentary credit specifies an insurance policy is required, a lesser document such as an insurance certificate or cover note is not good tender. Cover notes are notices from an insurance company to the party insuring goods that certain insurance has been arranged. These are provisional advices pending the issue of policies or insurance certificates.

When goods are sold on CIF basis the risks to be covered by insurance should be agreed upon between the buyer and seller in the contract of sale. If this is not done the insurance cover customary in the particular trade should be provided. If a documentary credit is established by the buyer, the risks to be covered and lusted therein must specifically be stated to be covered in the insurance document. Banks are governed by the fundamental precept of documentary credit business that documents must comply, on their face, with the terms of the credit.

The insurance amount in a valued policy should at least be equal to the invoice value, but is normally higher since the buyer will wish to add a percentage to the invoice value to cover anticipated profits and if he has to bear freight, insurance and other charges to cover those as well. If the value cannot be determined from the documents of their face, banks will accept as the minimum, the amount for which payment, acceptance or negotiation is requested under the credit or the amount shown on the relative commercial invoice, whichever is greater.

Bill of Lading: A Bill of Lading is a receipt issued by a shipping company, or its authorized agents, for goods shipped on board a named vessel or for the goods received for shipment. It is also a memorandum of the contract to transport goods, setting out the terms and conditions under which the shipping company agrees to carry the good. In addition it is a document of title to the goods. Correct completion of the B/L is of utmost importance. Any alteration in a bill of lading must be initialed by the shipping company or its authorized agents.

Bills of lading are issued in sets of one or more stamped and signed original negotiable copies, as required by the shipper. Each copy shows the number of signed original bills of lading in the set. Since a bill of lading is a document of title the complete set must be obtained by the shipper. Shippers may also obtain non-negotiable copies of the bills of lading for their records. These are unsigned and do not comprise part of the valid set of bills of lading.

The description of goods in the bill of lading must agree with the description stated in the relative invoice. The B/L need not be so detailed. No additional descriptive terms should appear in the B/L. It is essential that the marks, numbers, etc. on the bill should be same as those on the invoice. Whenever freight is payable by the shipper the B/L must be marked “freight prepaid’ or ‘freight paid’ or words of similar effect or a receipted freight account must be obtained from the shipping company for attachment to the B/L. A marine bill of lading indicates that his goods have been loaded on board or shipped on a named vessel. There are different types of B/L used for different types of shipments. They are (i) received for shipment B/L (ii) short form B/L (iii) clean and claused B/L (iv) state B/L (v) charter party B/L (vi) LASH (lighters abroad ship) B/L (vii) combined transport B/L (viii) house or forwarding agents B/L (ix) lost or missing B/L (x) air waybills (xi) parcel post receipt.

Exporters should be cognizant of the fact that where a transport document other than a document of title (B/L) is required under a credit, control of goods is lost once these leave exporters’ possession.

 

The writer is former Director General, EPB.

He can be contacted at [email protected]

×