Documents Used in International Trade

8/8/2019 Documents Used in International Trade

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PRESENTATION

Course: International Financial

Managementy (MSBA-2nd Semester)

Prepared by: Mian Shabir Hussain

Presented To: Prof. Muhammad Imran Sb

Presented by:

Mian Shabir Hussain

Muhammad Nadim

H. M. Iqbal

H. M. Imran


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ROLE OF BANKING

SECTOR

DOCUMENTS USED

INTERNATIONAL

TRADE


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International trade is the exchange ofgoods and services across internationalboundaries or territories. In most

countries, it represents a significant share

of GDP. While international trade has beenpresent throughout much of history its

economic, social, and political importance

has been on the rise in recent centuries.


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Industrialization, advancedtransportation, globalization,

multinational corporations outsourcing

and specially Financial Institutions(Banking sector) are all having a major

impact. Increasing international trade is

basic to Globalization.


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ROLE OF BANKING SECTOR

TO PROMOTINGINTERNATIONAL TRADE


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INTERNATIONAL TRADE IS

INEVITABLE?

It is impossible to be in international trade withoutinvolving your bank for all the services they provide

such as advice on financial issues and the potentialrisks involved.

A free trade or market economy can only function ifthose who supply goods and services are assuredpayment; and in return, those who pay receive goodsand services.

Contd


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This seemingly obvious statement gains considerable

complexity international trade, particularly when

geo-political borders representing separate economies

at varying stages of market systems development are

involved.

The non-convertibility of a multitude (large number)of currencies in today's world market still represents

a serious barrier to the free flow of goods in

international trade.

Contd


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A critical hurdle of SMEs is the lack of information on

international trade processes, documentation andbanking procedures necessary to carry on with

business abroad.

For result oriented and cost effective internationaltrade, these organizations need access to accurate and

timely information and a sound knowledge of banking.


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ROLE OF BANKS

Banks play a crucial role in helping to overcome

hurdles in international trade and perform the

following functions in promotion of trade:

International banking system Speed International Payment Transfers

Bankers Share Expertise

Facilities to Exporters and Importers


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TYPES OF FACILITIES FOR EXPORTERS

Rupee Export Credit (pre-shipment and

post-shipment)

Pre-shipment Credit in Foreign Currency

Negotiation of Bills under L/C

Export Bill Rediscounting

Bank Guarantees


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TYPES OF FACILITIES FOR IMPORTERS

Letter of Credit

Collection of Import Bills

Financing of import

Bank Guarantees

Remittances

Forex & Treasury Services

Resident Foreign Currency A/Cs

Correspondent Banking Services


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DOCUMENTS USED IN

INTERNATIONAL

TRADE


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CLASSIFICATION OF DOCUMENTS

a. Commercial documents

b. Official documents

c. Insurance documents

d. Transport documents

e. Financial and financing documents


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A. COMMERCIAL DOCUMENTS:

Invoice

Certificate of origin

Weight notes or certificates

Packing List

Quality or Inspection certificate


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INVOICE

An invoice is a commercial document issued by a seller

to a buyer, indicating the products, quantities and

agreed prices for products or services with which the

seller has already provided the Buyer. An invoice

indicates that, unless paid in advance, payment is due

by the buyer to the seller, according to the agreed

terms. Invoices are often called Bills.


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TYPES OF INVOICE

Proforma Invoice:It is a memorandum of the terms of a contract of sale wherein the

seller gives the quotation to the potential buyer. If the buyerapproves its terms, he sends a definite order for supply. Such aninvoice is marked with the word Proforma Invoice.

Commercial Invoice:A commercial invoice is a bill for the goods from the seller to thebuyer. Commercial invoice are utilized by customs officials todetermine the value of the goods in order to assess customs dutiesand taxes.

Certified Invoice:

An invoice bearing a signed statement by someone in theimporters country who has inspected the goods and found that thegoods are in accordance with the specific contract of the proformaand that the goods are of a specific country of origin.


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CERTIFICATE OF ORIGIN

It is a specified document certifying the country of

origin of the merchandise required by certain

foreign countries for tariff purposes. This certificate

is issued by Chamber of Commerce, Trade

Association or any other authorized body of the

exporting country and it sometimes requires the

signature of the consul of the country to which it is

designed.


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WEIGHT NOTES OR CERTIFICATES

This certificate indicates the weight of thegoods issued by a public agency. It can be

evidenced by means of a separate document, or

by a weight stamp/declaration of weight

superimposed on the transport document by

the carrier or his agent.


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PACKING LIST

The exporter must prepare a packing list

showing description of items, number of

containers/boxes with specification of net

weight & gross weight etc. to enable theimporter of the goods to check the shipment.


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QUALITY OR INSPECTION CERTIFICATE

This is a certificate declaring that the goods havebeen examined and found to be in accordance

with the contract of sale. It is signed by the

manufacturer or supplier or any recognized

independent inspection body as required by the

importer.


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B. OFFICIAL DOCUMENTS

y Consular Invoice: It is an invoice made out in a specially

printed form of the exporter and is shown before the consul

of importing country stationed in the exporters country as

being correct in all respect. The consular of the importing

country then certifies the invoice. A consular invoice enables

the importer country to have all accurate record of the

merchandise shipped.

y Legalized Invoice: Some Middle East countries require

that the commercial invoice should be countersigned andstamped by the authorized officer in their Embassy or the

consulate in the exporters country instead of consular

invoice.

Contd.


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y Black-listed Certificate: Under this certificate, theexporter has to provide a Black-listed certificate evidencing

that all parties involved including the bank and shipping lineare not black-listed. Due to strained political relation or any

other reasons some countries do not allow transactions with

some particular countries. These countries and the exporters

are treated as Black-listed.

y Health, Veterinary and Sanitary Certificate/Photo

Sanitary Certificate, Certificate of Analysis: Thiscertificate is generally needed in purchase of foodstuff, hides

and livestock and in the use of packing materials. It is issuedby the recognized health authorities in the exporting

countries. The certificate confirms that the shipment meets

the required health, veterinary and sanitary standards.


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C. INSURANCE DOCUMENTS

There are some risks of damage, loss or destruction ofgoods during the time of transit. Marine Insurance plays a

very vital role in this respect. The scope of Marine

Insurance extends to Sea, Land and Air conveyances only

in respect of good from one country to another country orone place to another place with short distance through the

vessel, craft which the goods are carried or conveyed.

Marine insurance comprises of the following:

y Marine Cargo Insurance

y Marine Hull Insurance

y Freight


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TYPES OF MARINE INSURANCE POLICIES

There are various types of marine insurance policies, whichdiffer in respect of the cover provided to the insured. The main

types are as follows:

y Floating policy:A floating policy is a contract of insurancemeans to cover a number of shipments, the details of which are not

finalized when the insurance contract is concluded. Under thefloating policy, insurance cover is given in general terms and

details of shipments are declared subsequently and endorsed in the

policy.

y Time policy: It covers the subject matter of insurance for aperiod of time.

y Voyage policy: It insures the subject matter from one

place to another irrespective of the length of time taken.


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y Mixed policy: It covers both a voyage and a period of timeexceeding 30 days.

y Open cover or Blank policy: This policy isautomatically covers all the shipments of the exporter up toan estimated amount during a given period.

y

Specific policy:A specific policy is a contract ofinsurance, which covers a specific shipment.

y Valued policy:A valued policy is one, which specifies theagreed value of merchandise insured.

y Unvalued policy: In this type of policy, the value of themerchandise insured is not specified. The insurable value ofthe goods is ascertained later on subject to the limit of thesum insured.


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D. TRANSPORT DOCUMENTS:

These documents indicates that the goods, which are

delivered to the named shippers, airlines or transporters,

must be carried to a named port, airport or place of delivery.

Following transport documents are being used at present in

the international trade:

Airway Bill/Air consignment Note

Mates Receipt

Bill of Lading

Railway consignment Note/Railway Receipt

Roadway Bill

Post Parcel Documents


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Airway Bill/Air consignment Note: This documentconfirms the delivery of goods to an airline or its agent for

transportation by air to a named consignee according to thedefined and agreed terms.

Mates Receipt: It is a prima facie evidence of the quantity

and condition of the goods received. When the goods aredelivered to the shipping company for transportation, at first a

temporary receipt is issued by the ships Chief Officer

acknowledging the delivery of the goods alongside the carrying

vessel which is known as Mates Receipt. On the basis of Mates

receipt, the shipper has to pay the port dues and other charges.


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Bill of Lading:A bill of lading is a document which is issuedy the transportation carrier to the shipper acknowledging that

they have received the shipment of goods and that they havebeen placed on board a particular vessel which is bound for a

particular destination and states the terms in which these

goods received are to be carried.

Normally a bill of lading contains the port of shipment and of

destination, the name of consignee, the number, contents and

identification marks of the goods shipped and the amount of

freight paid or to pay.

The bill of lading serves three main purposes,1. as a document of title of the goods

2. as a receipt from the shipping company and

3. as a contract for transportation of the goods.


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Railway consignment Note/Railway Receipt: Whenthe exporter or his agent delivers a consignment to the

railway authorities for its onward carriage to a named

destination, they issued a receipt, indicating the details of theconsignment and destination to which they would carry it.

This document is called the Rail Consignment Note or

Railway Receipt.

Roadway Bill: It is an internationally approved documentof transaction when goods are being sent by road through the

countries that had ratified the CMR (Convention

Merchandise Routers).

Post Parcel Documents: It is a receipt issued by PostOffice for the parcel. The post office has received for direct

delivery to the addressee. It is not a document of title of goods

and generally contains the post office stamp.


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E. FINANCIAL AND FINANCING

DOCUMENTS

There are some documents used for payment

in international trade transaction such as:

Letter of Credit

Bill of Exchange

Promissory Note

Trust Receipt


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Thank you