Documents Involved in International TradeMODULE III

What is Foreign Trade

Foreign trade is nothing but trade between the different countries of the world.

It is also Known as International trade, External trade or Inter-Regional trade.

It consists of imports, exports and entrepot. The inflow of goods in a country is called import trade Outflow of goods from a country is called export trade Goods imported for the purpose of re-export after some processing

operations is called entrepot trade

Importance of Foreign Trade

Specialization at the world level - Some countries have abundant natural resources

Optimum Allocation and Utilization of Resources - Rational allocation and utilization of resources at the international level

Equality of Prices - Prices can be stabilised by foreign trade Availability of Multiple Choices Ensures quality and standard goods Raises standard of living of the people

Importance of Foreign Trade

Generate employment opportunities Facilitate economic development Assistance during natural calamities Brings reputation and helps earn goodwill Promotes World Peace

Classification of Documents

The international Trade documents may be classified as under Commercial documents Official documents Insurance documents Transport documents Financial and financing documents

Commercial Documents

Invoice - Issued by the seller to a buyer, indicating the products, quantities and agreed prices Proforma Invoice Commercial Invoice Certified Invoice

Certificate of Origin Packing List Quality or Inspection Certificate

Official Documents

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 exporter’s country as being correct in all respect

Legalized Invoice: Some Middle East countries require that the commercial invoice should be countersigned and stamped by the authorized officer in their Embassy or the consulate in the exporter’s country instead of consular invoice.

Black-listed Certificate: Under this certificate, the exporter has to provide a Black-listed certificate evidencing that all parties involved including the bank and shipping line are not black-listed

Health, Veterinary and Sanitary Certificate/Photo Sanitary Certificate, Certificate of Analysis: This certificate is generally needed in purchase of foodstuff, hides and livestock and in the use of packing materials. It is issued by the recognized health authorities in the exporting countries. The certificate confirms that the shipment meets the required health, veterinary and sanitary standards.

Insurance Documents

There are some risks of damage, loss or destruction of goods during the time of transit. Thus Marine Insurance plays a very vital role in this respect There are various types of marine insurance policies

Floating Policy - Cover a number of shipments Time Policy – Covers for a period of time Voyage Policy - Covers from one place to another irrespective of the length of

time taken Open cover or Blank policy: This policy is automatically covers all the

shipments of the exporter up to an estimated amount during a given period.

Transport Documents

This document 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 Airway Bill/Air consignment Note Mate’s Receipt Bill of Lading Railway consignment Note/Railway Receipt Roadway Bill Post Parcel Documents

Financial and Financing Documents

Letter of Credit Bill of Exchange Promissory Note Trust Receipt Financing of Export/ Deemed Export: Pre ship (Packing Credit, etc.), and

Post Ship Finance (Export Credit) ECGC Uniform Custom Practices of Documentary Credits

ECGC

Export Credit Guarantee Corporation of India Ltd. ECGC is a Government of India Enterprise which provides export credit insurance

facilities to exporters and banks in India It functions under the administrative control of Ministry of Commerce & Industry,

and is managed by a Board of Directors comprising representatives of the Government, Reserve Bank of India, banking , insurance and exporting community.

ECGC is the seventh largest credit insurer of the world in terms of coverage of national exports.

ECGC is essentially an export promotion organization, seeking to improve the competitive capacity of Indian exporters by giving them credit insurance covers comparable to those available to their competitors from most other countries.

Uniform Custom Practices of Documentary Credits

Introduced by International Chamber of Commerce (ICC) UCP 600 are the latest revision of the Uniform Customs introduced in

2007 UCP is a set of rules on the issuance and use of letters of credit

INCOTERMS

International Commercial Terms (‘Incoterms’) are internationally recognized standard trade terms used in sales contracts. They’re used to make sure buyer and seller know: Who is responsible for the cost of transporting the goods, including insurance,

taxes and duties Where the goods should be picked up from and transported to Who is responsible for the goods at each step during transportation

Inco Terms are also defined by International Chamber of Commerce (ICC)

INCOTERMS

EXW (‘Ex Works’) FCA (‘Free Carrier’) CPT (‘Carriage Paid To’) CIP (‘Carriage and Insurance Paid’) DAT (‘Delivered at Terminal’) DAP (‘Delivered at Place’) DDP/DTP (‘Delivered Duty Paid’) FAS (‘Free Alongside Ship’)

INCOTERMS

FOB (‘Free on Board’) CFR (‘Cost and Freight’) CIF (‘Cost, Insurance and Freight’)