Transcript Chapter 4 Documents in International Settlements

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
Chapter 4 Documents in International
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In international settlements, all relevant parties
deal with documents, not goods.
1) Banks pay against documents;
2) Exporters receive payment by handling over
the required documents;
3) 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..
Chapter 4 Documents in International
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–
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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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.
–
Chapter 4 Documents in International
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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
 ⅠIt is evidence for the importer to check
goods and make payment.

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 ⅡThe commercial invoice is the basis for the
importer’s Customs' identification,
classification, duty/tax assessment, and final
approval of entry of the goods.
 Ⅲ 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.
 ⅣIn the absence of a separate bill, the
importers or the issuing bank will make
payments according to the invoice.
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 Ⅴ The commercial invoice is the basis for
exporters to collect and record.
 ⅥThe commercial invoice is the basis for the
exporter’s foreign Customs' identification,
classification, duty/tax assessment, and final
approval of delivery of the goods.
Chapter 4 Documents in International
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– 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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 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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 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.
Chapter 4 Documents in International
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 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 importer’s customs to
check particular packages.
Classification: packing list, weight memo (list),
and size memo (list).

–
Chapter 4 Documents in International
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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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 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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 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 seller’s own
premises.
Group F: main carriage unpaid, including:
Chapter 4 Documents in International
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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;
Chapter 4 Documents in International
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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 ship’s 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;
Chapter 4 Documents in International
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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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 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;
Chapter 4 Documents in International
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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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– 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.
Chapter 4 Documents in International
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 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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 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;
Chapter 4 Documents in International
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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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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.

Chapter 4 Documents in International
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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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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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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 ship’s owner and hirer.
long form B/L & short form B/L
short form B/L: a B/L that doesn’t contain the full
details of the contact of the carriage on the back.
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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 haven’t 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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– 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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 Road or inland waterway transport documents;
 Cargo receipt/railway bill;
 Courier receipt and post receipt.
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
–
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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 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.
Chapter 4 Documents in International
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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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 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.
Chapter 4 Documents in International
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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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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/L’s date
or conform to that stipulated in the letter of credit.
Chapter 4 Documents in International
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 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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 Beneficiary’s 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
Chapter 4 Documents in International
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– 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;
.
Chapter 4 Documents in International
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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 aren’t satisfied;
Corrections in documents haven’t 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.
Exercises
1. 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?
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?
Exercises
5. 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?
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?
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?