Chapter 11Chapter 11

Trade DocumentationTrade Documentation

The Role of DocumentationThe Role of Documentation

Documentation requirements of Documentation requirements of international movements are a challenge.international movements are a challenge.

One way shippers comply with regulations.One way shippers comply with regulations.Some required by the government, some Some required by the government, some

by the organization’s national policy, some by the organization’s national policy, some other by banks, customers.other by banks, customers.

The basic principles are control and The basic principles are control and liability.liability.

The Role of DocumentationThe Role of Documentation

Main purposes of documentation:Main purposes of documentation:Fulfill regulationsFulfill regulationsManage riskManage riskCommon understandingCommon understandingRecord keepingRecord keeping

The Role of DocumentationThe Role of Documentation

Four types of documents:Four types of documents:TransportationTransportationBankingBankingCommercialCommercialGovernment Government

The Role of DocumentationThe Role of Documentation

Documentary sale refers to the sale of Documentary sale refers to the sale of goods in which ownership on the paper goods in which ownership on the paper documents.documents.

Documentation is a major cost item.Documentation is a major cost item.Today, computers are helping to reduce Today, computers are helping to reduce

facilitation costs.facilitation costs.Form of non-tariff trade barrier.Form of non-tariff trade barrier.

The legal status of documentsThe legal status of documents

Each country has multiple offices that have their Each country has multiple offices that have their own regulatory systems.own regulatory systems.

The U.N. Convention on the International Sale of The U.N. Convention on the International Sale of Goods ("CISG") is an international set of rules Goods ("CISG") is an international set of rules designed to provide clarity to most international designed to provide clarity to most international sales transactions involving the sale of goods. sales transactions involving the sale of goods.

The CISG went into effect on January 1, 1988, The CISG went into effect on January 1, 1988, with the United States as a party. with the United States as a party.

Applies when there is a commercial sale of Applies when there is a commercial sale of goods between two parties in different countries.goods between two parties in different countries.

The legal status of documentsThe legal status of documents

U.N. Commission on International Trade Law U.N. Commission on International Trade Law (UNCITRAL): A non-permanent U.N. body, (UNCITRAL): A non-permanent U.N. body, UNCITRAL was established by the U.N. General UNCITRAL was established by the U.N. General Assembly in 1966 to promote the progressive Assembly in 1966 to promote the progressive harmonization and unification of the law of harmonization and unification of the law of international trade. international trade.

The Convention's purpose is to simplify The Convention's purpose is to simplify contracts for the international sale of goods by contracts for the international sale of goods by subjecting them to a single uniform law, and to subjecting them to a single uniform law, and to eliminate wrangles over which particular national eliminate wrangles over which particular national law should apply to an international contract.law should apply to an international contract.

Contracts Contracts

The first step in an international transaction is The first step in an international transaction is the creation of a contract.the creation of a contract.

The four component parts of a contract are:The four component parts of a contract are: 1) Agreement, offer and acceptance,1) Agreement, offer and acceptance, 2) Mutuality and consideration,2) Mutuality and consideration, 3) Competent parties, and;3) Competent parties, and; 4) A legal objective.4) A legal objective. Jurisdiction requires all any contract for the sale Jurisdiction requires all any contract for the sale

of goods over US$500 to be in writing to be of goods over US$500 to be in writing to be enforceable. enforceable.

ContractsContracts

In the law of contracts, tIn the law of contracts, the terms as stated in the acceptance must exactly ‘mirror’ the terms as stated in the offer, known as the the mirror image mirror image rule.rule.

An attempt to accept the offer on different terms An attempt to accept the offer on different terms instead creates a counter-offer, and this instead creates a counter-offer, and this constitutes a rejection of the original offer.constitutes a rejection of the original offer.

CISG accepts different forms of the same CISG accepts different forms of the same agreement if it is “sufficiently definite and agreement if it is “sufficiently definite and indicates the intention of the offeror to be bound”indicates the intention of the offeror to be bound”

Contracts Contracts Breach of contract: Failing to perform any term of a contract, written or oral, Breach of contract: Failing to perform any term of a contract, written or oral,

without a legitimate legal excuse. without a legitimate legal excuse. This may include not completing a job, not paying in full or on time, failure to This may include not completing a job, not paying in full or on time, failure to

deliver all the goods, substituting inferior or significantly different goods, not deliver all the goods, substituting inferior or significantly different goods, not providing a bond when required, being late without excuse, or any act which providing a bond when required, being late without excuse, or any act which shows the party will not complete the work ("anticipatory breach"). shows the party will not complete the work ("anticipatory breach").

Breach of contract is one of the most common causes of law suits for Breach of contract is one of the most common causes of law suits for damages and/or court-ordered "specific performance" of the contract.damages and/or court-ordered "specific performance" of the contract.

Must be a Must be a fundamental breachfundamental breach which is a breach so fundamental that it which is a breach so fundamental that it permits the aggrieved party to terminate performance of the contract, in permits the aggrieved party to terminate performance of the contract, in addition to entitling that party to sue for damages.addition to entitling that party to sue for damages.

The seller has the right to remedy, which is to fix the problem, and the right The seller has the right to remedy, which is to fix the problem, and the right to additional time to perform.to additional time to perform.

The buyer cannot accept the shipment if there is a breach.The buyer cannot accept the shipment if there is a breach.

Contracts Contracts

Three ways a party may be excused from Three ways a party may be excused from fulfilling a contract:fulfilling a contract:

1. If it is physically or legally impossible to 1. If it is physically or legally impossible to fulfill,fulfill,

2. If the underlying purpose of the contract 2. If the underlying purpose of the contract no longer exists,no longer exists,

3. If a change makes it commercially or 3. If a change makes it commercially or financially impossible.financially impossible.

The documentation flowThe documentation flow

Order processing and shipmentOrder processing and shipmentExport clearanceExport clearanceShipmentShipment Import clearance Import clearance Delivery Delivery

The documentation flowThe documentation flow

Order processing and shipment: the first step in Order processing and shipment: the first step in logistics is when a The Purchase Order (PO) logistics is when a The Purchase Order (PO) was made.was made.

The Purchase Order is provided to the vendor as The Purchase Order is provided to the vendor as a record of the Purchase.a record of the Purchase.

Issued by a buyer to a seller, indicating the type, Issued by a buyer to a seller, indicating the type, quantities and agreed prices for products or quantities and agreed prices for products or services that the seller will provide to the buyer. services that the seller will provide to the buyer.

The selling terms should be determined at this The selling terms should be determined at this point. point.

The documentation flowThe documentation flow Export clearance: An international freight forwarder is an Export clearance: An international freight forwarder is an

agent for the exporter in moving cargo to an overseas agent for the exporter in moving cargo to an overseas destination.destination.

These agents are familiar with the import rules and These agents are familiar with the import rules and regulations of foreign countries, the export regulations of regulations of foreign countries, the export regulations of the U.S. government, the methods of shipping, and the the U.S. government, the methods of shipping, and the documents related to foreign trade. documents related to foreign trade.

The Shipper's Export Declaration (SED or Form 7525-V) The Shipper's Export Declaration (SED or Form 7525-V) is used by the U.S. Census Bureau to compile trade is used by the U.S. Census Bureau to compile trade statistics and to help prevent illegal exports.statistics and to help prevent illegal exports.

Shows what is being exported.Shows what is being exported. Forwarders often prepare SEDs on behalf of their Forwarders often prepare SEDs on behalf of their

exporter clients.exporter clients.

The documentation flowThe documentation flow

The The invoiceinvoice is an essential legal document given is an essential legal document given to the customer or client to serve as a record of to the customer or client to serve as a record of goods or services sold to the customer or client. goods or services sold to the customer or client.

Commercial invoice is the basic statement of the Commercial invoice is the basic statement of the seller to the buyer for payment of the goods seller to the buyer for payment of the goods shipped.shipped.

Consular invoice is prepared from the Consular invoice is prepared from the information on the Commercial Invoice by the information on the Commercial Invoice by the buyer’s consulate or embassy in the shipper’s buyer’s consulate or embassy in the shipper’s country.country.

The documentation flowThe documentation flow A Certificate of Origin is a document, required by foreign A Certificate of Origin is a document, required by foreign

governments, declaring that goods in a particular governments, declaring that goods in a particular international shipment are of a certain origin. international shipment are of a certain origin.

Even though the commercial invoice usually includes a Even though the commercial invoice usually includes a statement of origin, some countries require that a statement of origin, some countries require that a separate certificate be completed. separate certificate be completed.

Customs offices will use this document to determine Customs offices will use this document to determine whether or not a preferential duty rate applies on the whether or not a preferential duty rate applies on the products being imported and whether a shipment may be products being imported and whether a shipment may be legally imported during a specific quota period. legally imported during a specific quota period.

The certificate of origin must be signed by the exporter The certificate of origin must be signed by the exporter and be certified by a local chamber of commerce. and be certified by a local chamber of commerce.

The documentation flowThe documentation flow

Carnet is an international trading Carnet is an international trading document that is used for accompanying document that is used for accompanying sample goods. sample goods.

Functions like a passport/visa allows a Functions like a passport/visa allows a person to carry a sample into a nation duty person to carry a sample into a nation duty free, provided that it is carried out again, free, provided that it is carried out again, without alteration, usually within 12 without alteration, usually within 12 months.months.

The documentation flowThe documentation flow

Shipment: A bailment involves only a Shipment: A bailment involves only a transfer of possession or custody, not of transfer of possession or custody, not of ownership.ownership.

Carriers are responsible for delivering the Carriers are responsible for delivering the cargo in the same condition as was cargo in the same condition as was received and are liable for loss or damage.received and are liable for loss or damage.

The documentation flowThe documentation flow Import clearance: The documents should arrive Import clearance: The documents should arrive

before the cargo arrives.before the cargo arrives. The customs clearance process is where The customs clearance process is where

documentation is most important.documentation is most important. Inspections normally occur at the time cargo Inspections normally occur at the time cargo

arrives in a port.arrives in a port. Certificate of inspection may be required by the Certificate of inspection may be required by the

importer.importer. Cargo may have been lost or stolen in transit. Cargo may have been lost or stolen in transit. If the cargo is given to the wrong party by the If the cargo is given to the wrong party by the

carrier, it is called carrier’s misdelivery.carrier, it is called carrier’s misdelivery.

The documentation flowThe documentation flow

Delivery: when the importer is notified that Delivery: when the importer is notified that the cargo has arrived, he would send a the cargo has arrived, he would send a truck to pick up the cargo. truck to pick up the cargo.

After delivery, the importer in the US is still After delivery, the importer in the US is still required to keep all records according to required to keep all records according to the standard of informed compliance.the standard of informed compliance.

Bills of Lading and WaybillsBills of Lading and Waybills Bill of Lading (BL) is a receipt obtained by the Bill of Lading (BL) is a receipt obtained by the

shipper of goods from the carrier (trucking shipper of goods from the carrier (trucking company, railroad, ship or air freighter) for company, railroad, ship or air freighter) for shipment to a particular buyer. shipment to a particular buyer.

It is a contract protecting the shipper by It is a contract protecting the shipper by guaranteeing payment and satisfies the carrier guaranteeing payment and satisfies the carrier that the recipient has proof of the right to the that the recipient has proof of the right to the goods. goods.

It can be legally defined as 1) a contract of It can be legally defined as 1) a contract of carriage 2) documentary evidence of title 3) a carriage 2) documentary evidence of title 3) a receipt for goods.receipt for goods.

BL must state the true nature of the cargo.BL must state the true nature of the cargo.

The documentation flowThe documentation flow

Clean bill of lading:Clean bill of lading:

A clean bill of lading is a bill of lading that A clean bill of lading is a bill of lading that is issued by a carrier when a shipment is is issued by a carrier when a shipment is received in good order. received in good order.

Electronic Bills of LadingElectronic Bills of Lading UCP 500 are the ICC Uniform Customs and Practice that have been UCP 500 are the ICC Uniform Customs and Practice that have been

used for over 60 years to govern the operation of documentary used for over 60 years to govern the operation of documentary credits. credits.

Uniform Customs and Practice for Documentary Credits for Uniform Customs and Practice for Documentary Credits for Electronic Presentation or "eUCP” was prepared as a "supplement" Electronic Presentation or "eUCP” was prepared as a "supplement" to the UCP. to the UCP.

The 12 Articles of the eUCP cover a range of issues - including the The 12 Articles of the eUCP cover a range of issues - including the format of electronic records, presentation, examination and, most format of electronic records, presentation, examination and, most controversially, corruption of an electronic record. controversially, corruption of an electronic record.

The eUCP responds to the growing numbers of documents - The eUCP responds to the growing numbers of documents - including bills of lading, certificates of origin, insurance documents, including bills of lading, certificates of origin, insurance documents, etc. - that are being presented in electronic form.etc. - that are being presented in electronic form.

Electronic transmission may only be used if all parties approve.Electronic transmission may only be used if all parties approve.

Waybills Waybills

A waybill is a transport contract (contract A waybill is a transport contract (contract of carriage) - the same as a bill of lading.   of carriage) - the same as a bill of lading.  

A waybill, however, is not needed for A waybill, however, is not needed for cargo delivery but only issued as a cargo cargo delivery but only issued as a cargo receipt.  receipt. 

A waybill is not a document of title.A waybill is not a document of title.Waybill is usually for air cargo.Waybill is usually for air cargo.Air waybills are no negotiable.Air waybills are no negotiable.

Insurance and LiabilityInsurance and Liability

The primary purpose of insurance is to redistribute the loss and so to The primary purpose of insurance is to redistribute the loss and so to eliminate risk.eliminate risk.

Harter ActHarter Act -- An 1893 Federal Statute regarding ocean bills of lading and -- An 1893 Federal Statute regarding ocean bills of lading and limitation of some carrier liabilities.limitation of some carrier liabilities.

Hague Rules of 1924 Hague Rules of 1924 represented the first attempt by the international represented the first attempt by the international community to find a workable and uniform means of dealing with the community to find a workable and uniform means of dealing with the problem of shipowners regularly excluding themselves from all liability for problem of shipowners regularly excluding themselves from all liability for loss or damage of cargo. loss or damage of cargo.

The objective of the Hague Rules is to establish a minimum mandatory The objective of the Hague Rules is to establish a minimum mandatory liability of carriers which could be derogated from.liability of carriers which could be derogated from.

Under the Hague Rules the shipper bears the cost of lost/damaged goods if Under the Hague Rules the shipper bears the cost of lost/damaged goods if they cannot prove that the vessel was unseaworthy, improperly manned or they cannot prove that the vessel was unseaworthy, improperly manned or unable to safely transport and preserve the cargo.unable to safely transport and preserve the cargo.

CARRIAGE OF GOODS BY SEA ACTCARRIAGE OF GOODS BY SEA ACT (COGSA) incorporated Hague (COGSA) incorporated Hague Rules.Rules.

Insurance and LiabilityInsurance and Liability During the 1970s pressure mounted from developing During the 1970s pressure mounted from developing

countries and major shipper nations for a full re-countries and major shipper nations for a full re-examination of cargo liability regimes.examination of cargo liability regimes.

Many, especially developing countries, took the view that Many, especially developing countries, took the view that the Hague Rules had been developed by "colonial the Hague Rules had been developed by "colonial maritime nations" in 1924, largely for the benefit of their maritime nations" in 1924, largely for the benefit of their maritime interests, and that the imbalance between maritime interests, and that the imbalance between shipowners and shipper interests needed to be shipowners and shipper interests needed to be redressed. redressed.

This led to the negotiation in 1978 of the United Nations This led to the negotiation in 1978 of the United Nations Convention on the Carriage of Goods by Sea (Hamburg Convention on the Carriage of Goods by Sea (Hamburg Rules).Rules).

Insurance and LiabilityInsurance and Liability

The Visby Amendment added two main The Visby Amendment added two main elements to the Hague Rules: increased elements to the Hague Rules: increased limitation amounts and a specific provision limitation amounts and a specific provision of limitation relating to containers. of limitation relating to containers.