Module 2-2: Commercial Transaction Documents Participant

Commercial Transaction Documents

Overview

This part covers the following topics:

Commercial documents
Banking documents
Transportation and insurance documents

Objectives

By the end of this part, you will be able to:

Identify documents used in internatonal trade

Distinguish between the similar documents with different names and
functions
Analize the application of these documents in different transactions of
international trade

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Scenario: Quality of Shipping Documents

An African Company wants to sell lightweight working boots into European

Union. The boot has been developed by the local manufacturer.
At present it is supplying the local army and all agricultural cooperatives.
Agents take care of the sales in neighbouring countries and the national
salesmanager has been made responsible for export. A quality certificate is asked by
the buyer in Europe and the supplier just prepared a quality statement on their own
letterheaded paper.
During delivery it was realised that the necessery shipping documents requested by
the European customer, were missing and some were ill- prepared.
Do you see the weak points in this approach?
Think about the product, their present export experience, the responsible manager,
their market experience.

Introduction

Foreign trade documents are important for the exporter or importer

establishments, in terms of preparing according to the preferred qualities aware
of customs, exportation and importation regulations and prevention of all the
sides, led by exporters/importers, being wronged.

The documents incomplete, faulty or not given to the authorities on time

may give rise to some risks in the products delivery or during collection of the
product costs.

In this part, the necessary bank, delivery and commercial documents will
be studied and preparation of these documents will be described with
examples.

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Documents Used in International Trade

It is a fact of modern life that people and cargo generally dont cross
national borders without extensive documentation. In the worst case, cargo is
stranded, partway to its destination, unable to move for lack of the right
documents. As the cargo sits, it incurs storage charges, deterioration and
spoilage as its owners frustration mounts. Such a scenario must be avoided if
profitable trade is to be conducted. It can be avoided if the trader has a good
working knowledge of trade documentation.

Are the documents currently used in international trade necessary or only a

formality?

Most international trade documents can be placed into the following

categories:

Commercial documents The Purposes of

Documents
Banking documents
The general purpose of all categories
Transportation and insurance
of international trade documents is to
documents facilitate, control, and keep track of
international cargo movements.

Below, the different categories of international trade documents will be

discussed in detail.

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Commercial Documents

Commercial documents are those that move between the buyer and the
seller. The ones to be discussed here are the following:

Request for quotation

Quotation
Pro forma invoice
Terms and conditions of sale
Purchase order
Order acceptance and confirmation
Sales contract
Commercial invoice

Request for Quotation

Buyers and sellers can exchange any

What is Request for
number of letters, telephone calls, and fax and Quotation?

E-mail messages as the initial steps of an A request for a quotation is simply a

letter, telephone call, fax, or e-mail
international transaction. This will normally lead
message between buyers and sellers
to a Request for Quotation. This can be a used as the initial step in a trade
transaction.
simple fax or other form of message.

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A Request for a Quotation

FAX

E-MAIL

Buyer Seller

Figure 1: A Request for a Quotation

An example of a request for a quotation letter can be found below.

Dear Sirs:

Please send me your quotation for 50 Farm Best lawn tractors, Model number 307H.
Please quote C&F, Athens. Payment will be by 90 day letter of credit.

Sincerely,
Istanbul, MCN Trading Company

Figure 2: An example of a Request for Quotation Letter

Quotation

The exporter would logically follow with a

Important Points
Quotation, which is basically the price for Regarding Quotation

which he/she can supply the goods with the The quotation should be as specific as
possible, to avoid misunderstandings.
specified shipping and payment terms (although
It is normally signed, and of course it
you are free to propose alternate terms). All the is now possible to send E-mail
messages with signature on them.
costs, and his/her profit or commission, must be
included. The quotation should reference the number on the request, if there
was one, and include a date until which it is valid.

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Quotation

FCA
DDU
L/C
SIGHT
DRAFT

Seller Shipping and Payment Buyer

Terms

Figure 3: Quotation

What is the difference between a request for a quotation and a quotation?

You can see an example of Quotation.

A TRADE INTERNATIONAL
Caml Cad. 260/2 Istanbul

QUOTATION No. 21

This quotation is valid for 30 days from the date hereon: March 8, 2001.

Shipper: A Trade International, Caml Cad. No:260/2 Istanbul

Consignee: EximCo., Street 5, 724 Tirane Albania

50 tractors, Farm Model 3 US$42,100

as shown in their catalogue dated January 2, 2001,
packed for export by the manufacturer
Inland freight Ankara to the Port of Istanbul l ,000
Forwarding and freight to Albania 5,125
Total CFR Albania US$48,225

Marine insurance to be arranged by the Consignee.

Payment by 90-day irrevocable letter of credit from a first-class International bank.

Shipment to be made within 60 days after receipt of the letter of credit

Figure 4: A Quotation Document

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Pro Forma Invoice

Sometimes an importer will want a more A Pro Forma Invoice

formal document that will help him/her get an
import permit or foreign exchange authorization It is more formal document. The
difference from commercial invoice, is
and/or to open a letter of credit; she may go one
only the statement Pro Forma at the
step farther and ask for a Pro Forma Invoice. top side.

This looks like a regular commercial invoice,

except that it says "PRO FORMA" at the top. These words mean that the docu-
ment in hand isn'
t the actual commercial invoice but is almost exactly what the
real invoice will look like.

Pro Forma Invoice

Pro Forma
Invoice
Pro Forma
Invoice

Seller (When buyer wants Buyer

more formal
document)

Figure 5: Pro Forma Invoice

Why do you think an importer would want more formal document? What are
the advantages for him/her?

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Terms and Conditions of Sale

Sometimes quotations and pro forma

Terms and Conditions of
invoices are accompanied by other documents Sale

known as Standard Terms and Conditions of Terms and Conditions of Sale include
information that is not on a quotation
Sale. These give important information - such as or pro forma invoice and it is similar to

"All shipments are made F.O.B. stanbul Turkey" the fine print used on the documents
necessary when opening a bank
- that is not shown on quotations or pro forma account or receiving a credit card.

invoices. This information is somewhat similar to

the fine print you read when you open a bank account or receive a credit card.

Terms and Conditions of Sales

Quotations

+
Terms and
Pro Forma Conditions
Invoice of Sales

Buyer
Seller

Figure 6: Terms and Conditions of Sale

What kind of benefits does the extra information on the Terms and
Conditions of Sale give the buyer and seller?

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Purchase Order

If the importer is satisfied with the An Important Point

About Purchase Order
quotation and/or pro forma invoice, he/she may
place an order. This can be a simple oral or Note that it shows how to mark the
boxes and specifies payment by sight
written statement such as "We hereby order as draft, documentary against payment,
per your pro forma invoice number 627." More and is signed.

often there are additional details - for example,

"We hereby order 100 dozen Model R bicycle pumps, C.I.F. Romania, to be
shipped by ocean no later than January l, 2001, with payment by irrevocable
letter of credit." An order can include other conditions such as documents that
should be provided and even what should be said on the documents.

Purchase Order

Purchase
Order
I
1234

Buyer Seller
After accepting
Quotation and/or Pro
Forma Invoice

Figure 7: A Purchase Order

Order Acceptance and Confirmation

The exporter should reply with a simple statement such as, "We accept
your Purchase Order No. 291/91, dated May 2, 2001". In international trade, an
order and an unconditional acceptance make a contract that theoretically can
be enforced by either the contracting parties.

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Order Acceptance And Confirmation

Order Acceptance
and Confirmation
I 1234
1234
I 1234
1234

Buyer
Seller

Reply for Purchase

Order

Figure 8: Order Acceptance and Confirmation

Sales Contract

In some cases, importers order informally, by telephone, although this

system has been partly replaced by fax and E-mail. The exporter then sends an
order confirmation, which the importer signs and returns. This procedure
creates a Contract of Sale.

Sales Contract

ORDER

1 1

Order
Confirmation
2 I
I
1234
1234

2 Seller
Buyer
I 1234
I 1234

3 3
SIGNED

Figure 9: The Sales Contract

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Commercial Invoice

An Invoice is a document that provides Be Carefull!

information about the terms and conditions of
a sales transaction. A number of different The invoice should be in English or
accompanied by an accurate
types of invoices are used in international translation.

trade. A Commercial Invoice is used for

most purposes. It is simply a document prepared by the seller on its own form
that sets forth the names of the parties, the type of merchandise sold, the
price, and other information the seller deems relevant.

Typically this includes the port of entry for the goods, the time and place
of the sale, and a description of the goods including the name of the goods,
the grade or quality level of the goods, and the quantity by weight or measure. It
may include incidental charges such as sales commissions, insurance, freight,
and packaging. If the sale involves rebates or drawbacks, these might be listed
on the commercial invoice. Most, but not all, nations'customs services accept a
commercial invoice as evidence of the nature and value of the cargo for
customs purposes.

Commercial Invoice

Commercial
Invoice
1234 I 23
1234 I 342

1234 I 349
1234 I 452
1234 I
3429

Buyer
Seller
(How much money will be
paid for what)

Figure 10: Commercial Invoice

What does a commercial invoice give evidence of? If this document is not used what
type of problems could be encountered?

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Table 1: The Contents of Invoice

The invoice must provide the following information;

Final destination of the merchandise

If merchandise is sold or agreed to be sold, the time, place, and names of buyer
and seller; if consigned, the time and origin of shipment, and names of shipper
and receiver
A detailed description of the merchandise, including the name and quality of
each item, marks used in domestic trade in the country of origin, and marks and
numbers on the export packing
The quantities in weights and measures
The kind of currency
The country of origin

Banking Documents

The processes of paying and getting paid require relatively

Banking few documents. Cash in advance may be as simple as the
Documents
importer sending the exporter a check or depositing it in
his/her bank account. It is rarely more complicated than
filling out a simple form to buy a bank draft or to order an
airmail or cable transfer. Consignment, open-account, and credit card
transactions are equally uncomplicated.

With payment by Bill of Exchange (sight or time draft), the exporter must
complete a form to instruct his/her bank to prepare the draft and send it to the
importer'
s bank. A Letter of Credit sale is somewhat more complex than other
forms of international payment; the application for a Letter of Credit must be
completed by the importer and given to the opening bank. There are at least
four documents involved; these are as follows:

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Application for letter of credit

Letter of credit
Advice of letter of credit
Drafts (drawn on a bank for payment)

More details regarding the above documents can be found in the

Payment unit of this book.

What are the reasons for and advantages of using banking documents in
international trade?

Transportation and Insurance Documents

The transportation documents that will be mentioned in this section

include:

Packing List
Bill of Lading
Shipper'
s Letter of Instructions
Delivery Order and Freight Release
Airwaybill
Certificate of Origin
Customs Invoice
Consular Invoice
Rebilling Invoice
Inspection Certificate

The purpose of most of these documents is to keep track of merchandise

as it passes from one hand to another and to make sure it isn'
t delivered to
someone who is not supposed to receive it.

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Packing List

The Packing List provides information Packing List

about what is supposed to be included in the
particular shipment and may specify which Packing list gives information about
what is supposed to be included in a
package or container contains each item to particular shipment and simplify

simplify the unpacking and warehousing of the unpacking and warehousing.

cargo. If a box is missing, one can determine

from the packing list which one it is and what it contains. Or, if one should need
to find something specific in a shipment, the packing list should indicate which
box it is in.

Bill of Lading

The Bill of Lading is a document that a What is Bill of Lading?

transport company possesses acknowledging

A Bill of Lading is a contract between
that it has received the goods, and serves as a
a carrier and shipper for the
title for the purpose of transportation. It is transportation of goods, it is a receipt
issued by a carrier to a shipper for the
primarily a receipt for goods delivered to a
goods received for transportation, and
carrier. evidence of the title to the goods in
case of dispute.

What advantages does the Bill of Lading provide for the buyer and the
seller?

A Bill of Lading is foremost a contract among three parties to provide the

transportation of cargo. It is important to use the correct terms in the Bill of
Lading in order to avoid misunderstandings that could lead to litigation.

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Parties to Bill of Lading

Consignor Carrier Consignee

(sellers, agents, (transportation (buyer, seller,
brokers or company itself or bank,agent or anyone
forwarders) another company) entitled to delivery on
arrival)

Figure 11: Parties to Bill of Lading

The party delivering the goods to the carrier is called the consignor. The
consignor is usually the seller but can also be any one of a variety of agents,
brokers, forwarders or others.

The party accepting legal responsibility to provide transportation is the

carrier. The carrier may be the transportation company itself but it also may be
an entity assuming the legal responsibility of a carrier but arranging actual
transportation by another company.

The third party to a Bill of Lading is the party entitled to receive the cargo,
called the consignee. This may be the buyer, the seller, a bank, an agent or
anyone entitled to delivery on arrival. The consignee may or may not be
changed after the B/L is issued.

What type of relationship is there among the consignor, carrier and

consignee in the Bill of Lading process?

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Table 2: The Contents Bill of Lading Source (1997, Consumers Union)

The Bill of Lading must tell;

The points of origin and destination
The name, address, and telephone number of the carrier that should be
contacted in relation to the transportation of the shipment
The agreed date or period of time for pickup of the shipment and the agreed
date or period of time for the delivery of the shipment
The maximum amount required to be paid at the time of delivery to obtain
delivery of the shipment when the transportation is to be performed on a COD
basis and
Evidence of any insurance coverage sold to or procured for the shipper
including the amount of the premium for such insurance

Three Functions of Bill of Lading

As a receipt: shipped on board in apparent good order and condition

As contract of carriage: contract itself made before bill of lading is

issued

As evidence of title: gives the right to possession the key to

warehouse

There are several kinds of bill of lading. They are straight bill of lading,
order bill of lading and through bill of lading, etc.

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Straight Bill of Lading

The Bill of Lading, which names one

specific consignee to whom delivery must be What is Straight Bill of
Lading?
made, is the Straight Bill of Lading. The
In a straight bill of lading, the title to
carrier is responsible for making certain that it the goods is conferred directly to a
party named in the letter of credit
delivers the goods to the right consignee named
(usually the importer), as such the title
on the Straight Bill of Lading and should obtain to the goods is not transferable to
another party by endorsement. In
proof in the form of a delivery receipt signed
other words, the bill of lading is not
by the consignee or its agent. A Straight Bill of negotiable.

Lading is also called a direct consignment

because the shipment must be delivered
directly to the named consignee.

Straight Bill of Lading

Non-Negotiable Bill of Lading

Straight B/L
Straight B/L
Vksjdfhoshgfpou h
Ferutom uvp tyb p
Vksjdfhoshgfpou
Occtyhv cnn h
Ferutom uvp tyb p
Wnmtvr
Occtyhv Vksjdfhoshgfpou
cnn h
Ferutom uvp tyb p
Ituyvcomt987y0e
Wnmtvr
Occtyhv cnn
ruoytcn
Ituyvcomt987y0e
Wnmtvr
ruoytcn
Ituyvcomt987y0e

ruoytcn

Carrier
(responsible of Consignee
delivering to the (named in
right consignee) straight B/L)

Figure 12: A Straight Bill of Lading

In which situations is the Straight Bill of Lading preferred?

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Straight bill of lading" shall contain the following requirements:

The bill shall be printed on white paper eight and one-half (8 1/2)
inches wide by eleven (11) inches long;

The bill shall have prominently stamped upon its face the words, "not
negotiable";

Nothing herein shall be construed to prohibit the insertion in a straight

bill of lading of other terms or conditions not inconsistent with the
provisions of this act; but it shall be unlawful to insert in such bill any
term or conditions contrary to or inconsistent with such provisions.

There is no need for the consignee to present the bill of lading in order to
obtain delivery under a straight bill of lading shipment. Below, there is a sample
drayage bill of lading and information how to fill it in.

SHIPPERS NUMBER
33591
STRAIGHT BILL OF LADING SHORT FORM ORIGINAL Not Negotiable
DRIVER CHECK IN TIME

CONSIGNED TO (SHIPPING TO)

CO. NAME
STREET
1 BOOTH NO

CITY/STATE/ZIP CODE NAME

OF SHOW
SPECIAL INSTRUCTIONS NAME
OF COMPANY
CARRIER (IF KNOWN)

NUMBER
2 MOTOR FRT.
AIR FRT.
VAN
OTHER
KIND OF PACKAGE, DESCRIPTION OF ARTICLES,
DATE
CLASS CHECK
WEIGHT
PIECES SPECIAL MARKS AND EXCEPTIONS or RATE COLUMN
Crates

Cartons

3 Skids

Misc
4 FREIGHT CHARGES
(MARK ONE)

5
PREPAID

TOTAL WT. COLLECT

CHARGES BILLED TO TRAILER NUMBER

Company
Name
Street

City, State, Zip

6 DATE __________

7
Shipper Center or
Permanent address of shipper Agent Per TOTAL
PIECES

Figure 13: A Document of Straight Bill of Lading ([Link]

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1. Fill in the name of the company, the shipment it is consigned to and its
address along with any special instructions for the carrier.

2. Very Important: Fill in the carrier name and mark the appropriate blank
for the type of carrier. If no name is specified the drayage contractor will
give the shipment to a carrier of their choice, and since the exporting
company has not made any prior arrangements with that carrier
regarding billing, special instructions and discount amount, the shipment
might not be done as wished. Therefore, costs may be higher than with
the carrier intended.

3. List the number of pieces by type and total the column. Give a
description of each piece where relevant, such as writing "large" after the
word "cartons".

4. Fill in the estimated weight for each description and total the column.
Remember, your drayage billing will be based on the inbound weight, so
this can be a reasonable estimate. Your carrier might use this weight for
billing freight, unless your shipment is moving by dimensional weight.

5. Indicate how freight charges are to be paid by marking the appropriate

space. Mark "prepaid" if there is an established account with the carrier
and expect to be billed.

6. Give the name, address and contact person of the company to be billed
for the freight charges.

7. Sign the form and fill in a permanent address.

( http:// [Link]/[Link])

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Order Bill of Lading

A second type of Bill of Lading is the Order Bill of Lading

Order Bill of Lading. The Order Bill of Lading is
negotiable; it enables a shipper to collect for a Shippers frequently consign shipments
to themselves, on order bills of lading
shipment before it reaches its destination (this is so that delivery is made only upon the

done by sending the original Bill of Lading, with a shipper'

s order; the person or firm to
be notified upon arrival or the
draft drawn on the consignee through a bank). shipment at destination must be

When the consignee receives the lading designated.

indicating that payment has been made, the

lading will be surrendered to the carrier'
s agent, and the carrier will then ship
the goods to the consignee, and the Bill of Lading will be surrendered to the
carrier.

Order Bill of Lading

Negotiable Bill of Lading

Order B/L
Order B/L
Vksjdfhoshgfpou
h Order B/L
Ferutom uvp tyb
Vksjdfhoshgfpou
p h
Ferutom uvp tyb
Vksjdfhoshgfpou
p h
Ferutom uvp tyb
p

Consignees Consignee
Consignor 1 Bank

Order B/L
Order B/L
Vksjdfhoshgfpou
h Order B/L
Ferutom uvp tyb
Vksjdfhoshgfpou
p h
Ferutom uvp tyb
Vksjdfhoshgfpou
p h
Ferutom uvp tyb
p

Consignees Consignee
Carriers 2 Bank
Carrier
Agent

Order B/L
Order B/L
Vksjdfhoshgfpou
h Order B/L
Ferutom uvp tyb
Vksjdfhoshgfpou
p h
Ferutom uvp tyb
Vksjdfhoshgfpou
p h
Ferutom uvp tyb
p

Carrier Consignee
(Ships the 3
goods)

Figure 14: Order Bill of Lading

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Bearer Bill of Lading

If the original consignee endorses the B/L over to a third party and gives
the original to that third party, the third party and no other may claim the cargo
upon presentation of the endorsed order bill of lading to the carrier. If the
original consignee merely endorses the Order Bill of Lading without naming a
new consignee, the Bill of Lading becomes a Bearer Bill of Lading and anyone
who presents the original to the carrier may claim the cargo.

Why would the seller prefer to use a Bearer Bill of Lading? From what risks
does this method protect the seller?

An Order Bill of Lading can be used to help protect the shipper from the
nonpayment of goods. The shipper can ship the cargo to him/herself as
consignee and only endorse the shipment over to the buyer when the payment
is made. If the payment is never made, the shipper retains possession and title
to the goods. In this case the shipper is originally both the consignor and the
consignee.

Through Bill of Lading

Often a number of carriers are involved, Through Bill of Lading

each providing transport for one leg of a journey.
These carriers may have an agreement between Carriers may wish to offer a through
bill of lading to areas they dont serve.
themselves or there may be an agreement made This may be accomplished by hauling

by a freight forwarder, for a single B/L to contract the cargo partway, and then
transferring the cargo to a carrier that
for all transportation. Such a B/L will cover the serves the final destination.

journey from the port of origin to each

intermediate carrier in turn, all the way to the destination. This B/L is called a
Through Bill of Lading. A Through Bill of Lading can be either a Straight or
Order Bill of Lading.

This is done by means of an ongoing contract with another carrier to

complete the journey. Such a contract, between carriers, to combine their lines

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in order to offer service to destinations that one or the other doesnt serve, is
called an Interline Agreement.

Taking Exception

The process of noting damage or discrepancies on the B/L is called

Taking Exception. Before a B/L is issued, a representative of the carrier will
inspect the shipment for damage to make certain that the contents of the
shipment are represented correctly. If no apparent damage can be noted and
the contents of the shipment match the Bill of Lading, a Clean Bill of Lading
will be issued. If any damage can be seen or if the contents are not what were
represented, a notation will be made and the document is then called a Foul
Bill of Lading. If no exceptions are noted on the B/L, it is assumed to be a
clean B/L.

Taking Exception

Clean B/L Foul B/L

It means there is no It means there is

damage damage

Figure 15: Taking Exception

Received, On Board and Shipped Bill of Lading

A B/L will note the location of the cargo as of its issuance. If the B/L is
marked received, the cargo has been delivered to the carrier but not yet loaded
on the conveyance. If it is marked on board, the cargo has been loaded on the
conveyance but the conveyance has not yet begun its journey. An On Board Bill
of Lading is the most common type. If the B/L is marked shipped, the
conveyance has left the point of origin with the cargo on board. If a Letter of
Credit is to be paid conditionally on the issuance of a B/L, a shipped B/L is the
safest for the purchaser.

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Why is the Bill of Lading marked received, on board or shipped? In a trade

process why is this the easiness way to mark it?

Shippers Letter of Instruction

As stated previously, the seller'

s first opportunity to convey their
understanding of the agreement is through a commercial invoice. A second
chance occurs with a Letter of Instruction. A Shipper'
s Letter of Instruction may
be presented in a variety of forms. The freight forwarder may provide his/her
own forms. If they dont, a standard Shipper'
s Letter of Instruction form may be
purchased from one of the many stationers who publish such forms. If a routine
procedure has been established, an in-house printed form or letter designed
according to the normal terms and conditions of sale of the products would be
used.

A shipper can and should make its

A Note About Shippers
instructions to the freight forwarder as specific as Letter of Instruction

possible. The more details specified by the To avoid misunderstandings you

should give the instructions as specific
shipper, the less room for misunderstanding and
as possible.
unexpected expenses. A shipper gives
instructions to the freight forwarder in the form of a document known as a
shippers letter of instructions. This document may also be called a shipping
instruction blank or shippers instructions.

Shippers Letter of Instruction

SHIPPERS LETTER
OF INSTRUCTION

Freight
Shipper Forwarder

Figure 16: A Shippers Letter of Instruction

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If a shipper deals directly with an inland carrier, it provides a document

known as Delivery Instructions that indicates where and when the shipment is
to be picked up and where, when and to whom it is to be delivered.

What are the advantages and risks of a Shippers Letter of Instruction for the
buyer and seller?

Delivery Order and Freight Release

A written order by the shipper that names the party to whom delivery is to
be made is called a Delivery Order if for an inland carrier, and a Pier Release
if for an ocean carrier.

When all freight charges are paid, the carrier will issue a Freight release
or Freight Bill Receipt that is evidence that the carrier has no further lien on
the cargo for transportation costs. If freight is to be paid by the shipper, a freight
release might be one of the requirements for payment under a letter of credit.

What are the general functions of the documents that are used in a trade
process?

Delivery Order and Freight Release

Delivery Freight Release

Order

If it is a Delivery Order it It is evidence that the

is for an inland carrier, if it carrier has no further
is for an ocean carrier it is lien on the cargo for
a Pier Release transportation costs

Figure 17: Delivery Order and Freight Release

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Airwaybill

Air cargo operations use a document similar to the B/L called an

Airwaybill.

Certificate of Origin

Why do we need Certificate of Origin? Please give us examples from your

experiences.

The customs services of various countries require certain types of

imported cargo to have documentation certifying either that the cargo is from a
particulary country or that it meets the rules of origin for imports into that
country. A document that satisfies these requirements is a Certificate of
Origin. A certificate of origin might also certify that a certain amount of the
value of the product was added in a particular country for customs purposes.

Customs Invoice

What is the difference between customs, consular and the commercial

invoice?

Most , but not all, nations customs services accept a commercial invoice
as evidence of the nature and value of tha cargo for customs purposes.

Some countrys customs services ask that invoice be prepared on their

standardized form. This form is called a Customs Invoice.

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Consular Invoice

Other countries will not accept an invoice prepared by the shipper and
require that their consulate abroad issue an invoice for customs purposes. The
theory here is that the consulate is in a better position to know the value of
products originating in the country where the shipment originated and they can
not trust the [Link] reality, this is often a way for the consulate to collect a
fee for a useless bit of work. Such an invoice is called a Consular Invoice.

Rebilling Invoice

Why do we use rebilling invoice? Please indicate the points for usage.

Another type of invoice is a Rebilling Invoice. This is prepared to

substitute for the original invoice if the shipment is to be divided, the consignee
is to be changed or any other change is made since the original invoice was
issued.

Inspection Certificate

What kind of problems you think we could have at the destination point if we
do not have an Inspection Certificate?

In the sales contract the parties may agree that the goods are to be of a
certain grade or quality. It would be a problem if the goods arrived and a dispute
arose as to whether or not they met the agreed standard, so, often, the parties
agree to have an independent party or government employee inspect the
goods and give written assurance that they meet the standards.

The document prepared by this inspector is called an Inspection

Certificate. If an inspection certificate is issued by agreement of the parties, it is
determinative as to the quality of the goods.

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Case Study: The Malayan Fishing Company

A Malayan Fishing Company, specialized in frozen

shrimps has understood that there are marketing
opportunities for their type of shrimps in Europe. Limited
buying power in the homemarket has let to cut-throat
margins, so the company needs immediate export business
and profits.

There was no specific consignee named in the market but they ssued a
straight Bill of Lading and conveyed the cargo to the carrier. The cargo was loaded on
the first available vessel to leave for Europe. A representative of the carrier had an
inspection on the cargo and found out that there was a damage on few cartons and
after the inspection a clean bill of lading was issued.

The commercial invoice, the packing list and the certificate of origin
accompanied the goods. Later on, rebilling invoice was prepared as the shipment was
to be divided and sent to different countries in Europe.

Upon arrival of goods to one of the buyers, he asked for a quality inspection
certificate or he said he would do it himself and buy the goods in open- account
[Link] Malayan Company had no other choice but accept this payment terms as
they had no inspection certificate which is a must in European countries.

Other buyers got their goods as well and paid at open- account terms
[Link] has been a good trial business for the Malayan Company but not a
profitable one.

Questions

1. Do you see anything wrong with the preparation of the B/L?

2. What do you think about the issuance of clean Bill of Lading?
3. Why did the buyer ask for an inspection certificate?
4. What do you think about the banking documents in this case?
5. What are your comments about the overall performance of the Malayan
Company?

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Summary

There is an old expression: Trade moves on paper. Some day this may change to,
Trade moves electronically, but this is only beginning to happen internationally. What we are
seeing is electronic transfer of documents, through fax and the internet, but they still must be
created and studied pretty much like in the old days.

Fortunately, many of the prerequisite documents, like those between airlines and the
airports they fly into and out of, are never seen by the importer or the exporter. Also, most
shipments are reasonably uncomplicated. If you send rubber bands from United States to
England, by airfreight on open-account terms, documents wont be much of a problem. On
the other hand, if you want to ship repeating rifles to Singapure, by seafreight on a letter of
credit, you would better be prepared for reams of paper.

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Key Terms

Airwaybill Inspection Certificate

Banking Documents Order Acceptance and Confirmation
Bill of Lading Order Bill of Lading
Carrier Packing List
Certificate of Origin Pier Release
Clean Bill of Lading Pro Forma Invoice
Commercial Documents Purchase Order
Commercial Invoice Quotation
Consignee Rebilling Invoice
Consignor Request for Quotation
Consular Invoice Sales Contract
Customs Invoice Shippers Letter of Instruction
Delivery Instruction Straight Bill of Lading
Delivery Order and Freight Release Terms and Conditions of Sale
Freight Bill Receipt Through Bill of Lading
Foul Bill of Lading Transport and Insurance Documents

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Progress Check

1. A Bill of Lading is basically a contract among three parties to provide the

transportation of cargo. Name the 3 parties involved:

a. Consignor agent carrier

b. Consignor carrier consignee
c. Carrier consignee agent
d. Consignee distributor consignor
e. Consignor agent - carrier

2. Before a Bill of Lading is issued, a representative of the carrier will

inspect the shipment for damage to make certain that the contents of the
shipment are as requested. If no damage can be noted and the contents
of the shipment match the B/L, what kind of B/L will be issued?

a. Straight B/L
b. Order B/L
c. Clean B/L
d. Normal B/L
e. Through B/L

3. The party to a B/L who is entitled to receive the cargo may be a buyer,
the seller, a bank, an agent, etc. What do we call this party?
a. Consignee
b. Consignor
c. Carrier
d. Agent
e. Distributor

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4. If there are a number of carriers each providing transport for one leg of a
journey and they have agreed for a single B/L to contract for all
transportation then what kind of B/L will be issued?

a. Clean B/L
b. Through B/L
c. Order B/L
d. Straight B/L
e. Normal B/L

5. If the cargo has been loaded on the conveyance but the conveyance has
not yet begun its journey, how is the B/L marked?

a. Shipped
b. Taking exception
c. Received
d. On board
e. Air waybill

6. If any damage can be seen or if the contents are not what was
represented, a notation will be made and the document is then called:

a. Taking exception
b. Interline agreement
c. Clean B/L
d. Foul B/L
e. Order B/L

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7. The document, similar to the B/L, used in air cargo operations is called a:

a. Air B/L
b. Packing list
c. Airwaybill
d. Manifest
e. Order list

8. Some countrys customs services ask that an invoice be prepared on

their standardized form. This form is called a:

a. Commercial invoice
b. Special customs invoice
c. Consular invoice
d. Pro forma invoice
e. Rebilling invoice

9. If an invoice is prepared to substitute for the original invoice due to

shipment being divided or the consignee is to be changed or any other
change is made since the original invoice was issued, this type of invoice
is called a:

a. Rebilling invoice
b. Pro forma invoice
c. Consular invoice
d. Special customs invoice
e. Commercial invoice

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10. A written order by the shipper that names the party to whom delivery is
to be made for an inland carrier, is called:

a. Delivery instructions
b. Inspection certificate
c. Packing list
d. Pier release
e. Delivery order

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