Export and Import Documentation and Incoterms


Export Documentation

Introduction
International market involves various types of trade documents that need to be produced while making transactions. Each trade document is differ from other and present the various aspects of the trade like description, quality, number, transportation medium, indemnity, inspection and so on. So, it becomes important for the importers and exporters to make sure that their documents support the guidelines as per international trade transactions. A small mistake could prove costly for any of the parties.

For example, a trade document about the bill of lading is a proof that goods have been shipped on board, while Inspection Certificate, certifies that the goods have been inspected and meet quality standards. So, depending on these necessary documents, a seller can assure a buyer that he has fulfilled his responsibility whilst the buyer is assured of his request being carried out by the seller.

The following is a list of documents often used in international trade:
  • Air Waybill
  • Bill of Lading
  • Certificate of Origin
  • Combined Transport Document
  • Draft (or Bill of Exchange)
  • Insurance Policy (or Certificate)
  • Packing List/Specification
  • Inspection Certificate
Air Waybills make sure that goods have been received for shipment by air. A typical air waybill sample consists of of three originals and nine copies. The first original is for the carrier and is signed by a export agent; the second original, the consignee's copy, is signed by an export agent; the third original is signed by the carrier and is handed to the export agent as a receipt for the goods.

Air Waybills serves as:

      •  Proof of receipt of the goods for shipment.
      •  An invoice for the freight.
      •  A certificate of insurance.
      •  A guide to airline staff for the handling, dispatch and delivery of the consignment.

The principal requirement for an air waybill are :
  • The proper shipper and consignee must be mention.
  • The airport of departure and destination must be mention.
  • The goods description must be consistent with that shown on other documents.
  • Any weight, measure or shipping marks must agree with those shown on other documents.
  • It must be signed and dated by the actual carrier or by the named agent of a named carrier.
  • It must mention whether freight has been paid or will be paid at the destination point.
Bill of Lading is a document given by the shipping agency for the goods shipped for transportation form one destination to another and is signed by the representatives of the carrying vessel.

Bill of landing is issued in the set of two, three or more. The number in the set will be indicated on each bill of lading and all must be accounted for. This is done due to the safety reasons which ensure that the document never comes into the hands of an unauthorised person.  Only one original is sufficient to take possession of goods at port of discharge so, a bank which finances a trade transaction will need to control the complete set. The bill of lading must be signed by the shipping company or its agent, and must show how many signed originals were issued.

It will indicate whether cost of freight/ carriage has been paid or not :

"Freight Prepaid" : Paid by shipper
"Freight collect" : To be paid by the buyer at the port of discharge

The bill of lading also forms the contract of carriage.

To be acceptable to the buyer, the B/L should :
  • Carry an "On Board" notation to showing the actual date of shipment, (Sometimes however, the "on board" wording is in small print at the bottom of the B/L, in which cases there is no need for a dated "on board" notation to be shown separately with date and signature.)
  • Be "clean" have no notation by the shipping company to the effect that goods/ packaging are damaged.
The main parties involve in a bill of lading are:
  • Shipper
    • The person who send the goods.
  • Consignee
    • The person who take delivery of the goods.
  • Notify Party
    • The person, usually the importer, to whom the shipping company or its agent gives notice of arrival of the goods.
  • Carrier
    • The person or company who has concluded a contract with the shipper for conveyance of goods
The bill of lading must meet all the requirements of the credit as well as complying with UCP 500. These are as follows :
  • The correct shipper, consignee and notifying party must be shown.
  • The carrying vessel and ports of the loading and discharge must be stated.
  • The place of receipt and place of delivery must be stated, if different from port of loading or port of discharge.
  • The goods description must be consistent with that shown on other documents.
  • Any weight or measures must agree with those shown on other documents.
  • Shipping marks and numbers and /or container number must agree with those shown on other documents.
  • It must state whether freight has been paid or is payable at destination.
  • It must be dated on or before the latest date for shipment specified in the credit.
  • It must state the actual name of the carrier or be signed as agent for a named carrier.
The Certificate of Origin is required by the custom authority of the importing country for the purpose of imposing import duty. It is usually issued by the Chamber of Commerce and contains information like seal of the chamber, details of the good to be transported and so on.

The certificate must provide that the information required by the credit and be consistent with all other document, It would normally include :
  • The name of the company and address as exporter.
  • The name of the importer.
  • Package numbers, shipping marks and description of goods to agree with that on other documents.
  • Any weight or measurements must agree with those shown on other documents.
  • It should be signed and stamped by the Chamber of Commerce.
Combined Transport Document is also known as Multimodal Transport Document, and is used when goods are transported using more than one mode of transportation. In the case of multimodal transport document, the contract of carriage is meant for a combined transport from the place of shipping to the place of delivery. It also evidence receipt of goods but it does not evidence on board shipment, if it complies with ICC 500, Art. 26(a). The liability of the combined transport operator starts from the place of shipment and ends at the place of delivery. This documents need to be signed with appropriate number of originals in the full set and proper evidence which indicates that transport charges have been paid or will be paid at destination port.
Multimodal transport document would normally show :
  • That the consignee and notify parties are as the credit.
  • The place goods are received, or taken in charges, and place of final destination.
  • Whether freight is prepaid or to be collected.
  • The date of dispatch or taking in charge, and the "On Board" notation, if any must be dated and signed.
  • Total number of originals.
  • Signature of the carrier, multimodal transport operator or their agents.
Commercial Invoice document is provided by the seller to the buyer. Also known as export invoice or import invoice, commercial invoice is finally used by the custom authorities of the importer's country to evaluate the good for the purpose of taxation.
The invoice must :
  • Be issued by the beneficiary named in the credit (the seller).
  • Be address to the applicant of the credit (the buyer).
  • Be signed by the beneficiary (if required).
  • Include the description of the goods exactly as detailed in the credit.
  • Be issued in the stated number of originals (which must be marked "Original) and copies.
  • Include the price and unit prices if appropriate.
  • State the price amount payable which must not exceed that stated in the credit
  • include the shipping terms.
A Bill of Exchange is a special type of written document under which an exporter ask importer a certain amount of money in future and the importer also agrees to pay the importer that amount of money on or before the future date. This document has special importance in wholesale trade where large amount of money involved.

Following persons are involved in a bill of exchange:
      Drawer: The person who writes or prepares the bill.
      Drawee: The person who pays the bill.
      Payee: The person to whom the payment is to be made.
      Holder of the Bill: The person who is in possession of the bill.

On the basis of the due date there are two types of bill of exchange:
  • Bill of Exchange after Date: In this case the due date is counted from the date of drawing and is also called bill after date.
  • Bill of Exchange after Sight: In this case the due date is counted from the date of acceptance of the bill and is also called bill of exchange after sight.
Also known as Insurance Policy, it certifies that goods transported have been insured under an open policy and is not actionable with little details about the risk covered.
It is necessary that the date on which the insurance becomes effective is same or earlier than the date of issuance of the transport documents.

Also, if submitted under a LC, the insured amount must be in the same currency as the credit and usually for the bill amount plus 10 per cent.
The requirements for completion of an insurance policy are as follow :
  • The name of the party in the favor which the documents has been issued.
  • The name of the vessel or flight details.
  • The place from where insurance is to commerce typically the sellers warehouse or the port of loading and the place where insurance cases usually the buyer's warehouse or the port of destination.
  • Insurance value that specified in the credit.
  • Marks and numbers to agree with those on other documents.
  • The description of the goods, which must be consistent with that in the credit and on the invoice.
  • The name and address of the claims settling agent together with the place where claims are payable.
  • Countersigned where necessary.
  • Date of issue to be no later than the date of transport documents unless cover is shown to be effective prior to that date.
Also known as packing specification, it contain details about the packing materials used in the shipping of goods. It also include details like measurement and weight of goods.
The packing List must :
  • Have a description of the goods ("A") consistent with the other documents.
  • Have details of shipping marks ("B") and numbers consistent with other documents


Certificate of Inspection is a document prepared on the request of seller when he wants the consignment to be checked by a third party at the port of shipment before the goods are sealed for final transportation.

In this process seller submit a valid Inspection Certificate along with the other trade documents like invoice, packing list, shipping bill, bill of lading etc to the bank for negotiation.

On demand,  inspection can be done by various world renowned  inspection agencies on nominal charges.


Import Clearance
Bill of Entry must be filed in the prescribed form by the Import or his authorised agent giving the prescribed details such as name and address of the importer, importer code, name address and licence number of the Custom House Agent, name of vessel, Rotation Number and date, Line Number, port of shipment, country of origin, country of consignment, number of Bill of Lading, description of packages, number of packages, quantity of goods, description of goods, Customs Tariff Heading, details of exemption from customs duty claimed, invoice number, and value, etc. A declaration that the details are true and there is no other document showing contrary information must also be given. The Bill of Entry may be signed by the importer himself or his Custom House Agent.
Bill of Entry are of three types :-
A. Bill of Entry for home consumption: is to be submitted when the imported goods are to be cleared on payment of full duty for consumption of the goods in India. It is white colored.
B. Bill of Entry for Warehouses : is to be submitted when the imported goods are not required immediately the importer but here they are to be stored in a warehouse without payment of duty under a bond and cleared later when required on payment of duty. This enables the importer to defer payment of Customs Duty until the goods are actually required by him. It is yellow colored. It is also known as "Bond Bill of Entry" since bond is executed for transfer of goods in a warehouse without payment of duty.
C. Bill of Entry for Ex-Bond Clearance : is used for clearing goods from the warehouse on payment of duty. The goods are classified and valued at the time of clearance from the Customs Port. Value and classification are not determined on such Bill of Entry. It is green coloured. The rate of duty payable is that rate which is applicable on the date of removal of goods from the warehouse. If the rate of duty has changed after goods are cleared from custom port, duty assessed in the yellow Bill of Entry and paid on green Bill of Entry will not be the same.
Assessment and Clearance : The document details filed by the importer or his authorized agent are checked and assessed by custom authority and then the goods are cleared. The following are the procedures in this connection: -
A. The Bill of Entry submitted by importer is tallied with the Import Manifest submitted by shipper. If any variance is found between the two, further clarifications for the difference are called for by the Customs authorities. The rate of duty payable will be that rate which is prevalent on the date of presentation of Bill of Entry. The importer or his agent may present Bill of Entry upto one week before expected date of arrival of the vessel. In such a case duty is payable at the rate of applicable on the date of which Inward Entry is granted and not the date of presentation of shipping bill. However the rate of foreign exchange will be that rate which was prevalent on the date of submission of Bill of Entry. This enables the importer to clear the goods quickly.
B. On presenting of the Bill of Entry, date of presentment is noted. The Bill of Entry is then send to the appraising department for examination. The examiners carry out physical examination of the goods. Packages are opened and examined on a test check sample basis on the basis of which examination report is prepared. The appraiser classifies the goods, determines the customs value, rate of duty applicable and verifies that the imports do not violate any provision of law. The duty payable is typed by a pin point typewriter. The Importer must pay the amount of duty so determined in cash or by bank draft for clearance of goods. However, regular importers may pay the duty out of the current account balance which they keep deposited with the Customs authorities. Once the duty is assessed, the Bill of Entry is returned to the importer for payment of duty. Duty must be paid within 7 days after Bill of Entry is returned ; otherwise interest at the rate of 20% p.a. is payable.
Sometimes, if all documents are in order and the authorities are convinced that there is no violation of any law, the assessment may be done without physically examining the goods.
Provisional Assessment may be done in the following circumstances: -
·         When the Customs Officer is satisfied that importer or exporter is unable to produce the required document or information.
·         It is necessary to carry out chemical or other test of goods.
·         When the importer or exporter has produced all documents but the Customs Officer still feels that further enquiry is required.
In such circumstances, assessment is done on a provisional basis i.e. on a tentative basis. The importer has to pay the duty assessed and may clear the goods. However, he has to execute a bond or furnish warranty or security as required by the custom officer for payment of difference, if any. The surplus amount paid, if any, on final assessment is refunded to him and the shortfall, if any, is to be paid by him. If the imported goods are warehoused after provisional assessment, the Customs Officer may require the importer to execute bond for twice the difference in duty, if the duty finally assessed is higher.
Sometimes goods are imported in completely knock down condition i.e. CKD ( eg. all the components an parts of a car are imported and they are then assembled in India ). Such packages comprise of several goods, each of which are liable at different rate of duty. In such a case, if the importer is liable to produce satisfactory evidence regarding break-up value of different parts, duty will be charged at different rates applicable on the basis of such break-up. If break-up is not available, the rate of duty for the entire package will the highest rate applicable among the parts in the package.
C. Import Control : After assessment, the Bill of Entry is sent to the "License Section" where it is checked whether the import complies with the export and import policy of the Government. I any license is required for the import, it is verified whether the goods have been imported against a proper import license. Such import license is given in duplicate, one copy for customs purpose and another exchange control copy for clearance of foreign exchange by bank.
Out of Customs Charged Order : After all the above formalities are completed, the Customs Officer will issue Out-of Customs Order. Goods can be removed only on receipt of such order.
Delay due to Customs formalities: Heavy charges known as "demurrage" are payable if goods are not cleared from the Customs Port within 3 days of unloading. If due to Customs formalities, such goods cannot be removed, the Customs authorities issue a certificate stating that delay was due to bonafide Customs formalities or due to bonafide Import Control formalities. In such a case, the demurrage may be refunded by the Port authorities.
Self Assessment of Bill of Entry (Green Channel of Import) This is a special scheme allowed in certain cases for speedy clearance of imports. As the name suggests, the duty is assessed by the importer himself and voluntarily paid by him. Some of the situations where this scheme has been made applicable are Public Sector Undertakings, Government Departments, 100 % export oriented units approved by the Collector and other importers which a proven identity and clean track record. The following are the main conditions of the scheme :-
·         Goods should not be subject to any import license or import restriction. They must be goods which fall under the open general list of the RBI.
·         They must not fall under any negative list of imports
·         Consignment must be of a single product and not a combination of products.
·         Sensitive Item are not permitted under this scheme.
·         Assessment must not require any bond.
·         Assessment should not require original inspection of goods.
·         Importer must be regularly importing that item.
·         Bulk imports from manufacture and test certificate of manufacturer is produced.


Under the scheme, the importer must file Bill of Entry having green colour band for identification. Bill of Entry must be self assessed and must be submitted along with proof of previous clearance of goods.


Incoterms 2000 Summary
Legal Name:
How to say it:
Summary of Obligations:
EXW
EX Works
Buyer
o    Arrange carriage
o    Bears all cost + risk
Seller
o    Makes goods available at his own premises
FCA
Free Carrier
Buyer
o    Arrange carriage or have seller arrange carriage on buyer’s behalf
Seller
o    Bears  cost + risk of delivery to carrier
o    arranges and pays for the pre-carriage in the country of export
FAS
Free Alongside Ship
Buyer
o    Arrange carriage
o    Bears risk+cost after goods are placed alongside ship
Seller
o    Bears risk+cost of placing goods alongside ship
FOB
Free On Board
Buyer
o    Arrange carriage
o    Bears risk/cost after goods pass ship’s rail
Seller
o    Bears risk+cost until goods pass ship’s rail
CFR
Cost & Freight
Buyer
o    Bears risk after goods pass ship’s rail
o    Bears such costs as are not for the seller’s account under the contract of carriage
Seller
o    arranges and pays for the main carriage
o    Bears risk  until goods pass ship’s rail
o    Bears cost until port of destination
CIF
Cost, Insurance, & Freight
Buyer
o    Bears risk after goods pass ship’s rail
o    Bears such costs as are not for the seller’s account under the contract of carriage
Seller
o    arranges and pays for the main carriage
o    arranges insurance
o    Bears risk  until goods pass ship’s rail
o    Bears cost until port of destination
CPT
Carriage Paid To
Buyer
o    Bears risk once goods are delivered to the carrier
Seller
o    arranges and pays for the main carriage
o    bears risk until the goods are delivered to the carrier
o    bears cost until place of destination



CIP



Carriage & Insurance Paid To



Buyer
o    Bears risk once goods are delivered to the carrier
Seller
o    arranges and pays for the main carriage but without assuming the risk of the main carriage
o    bears risk until the goods are delivered to the carrier
o    bears cost until place of destination
DAF
Delivered at Frontier
Buyer
o    Bears risk +cost once goods are delivered at frontier
o    arranges for customs clearance
Seller
o    Arrange Carriage
o    must make the goods available upon arrival at the agreed destination
o    bears risk+cost until goods are delivered at the frontier
DES
Delivered Ex Ship
Buyer
o    bears risk+cost once goods are at their disposal on board the ship
Seller
o    Arranges carriage
o    must make the goods available upon arrival at the agreed destination
o    bears risk+cost until goods are placed at the disposal of the buyer on board the ship
DEQ
Delivered Ex Quay
Buyer
o    bears risk+cost once goods are at their disposal on the quay (unloaded at the port of destination)
Seller
o    Arranges carriage
o    must make the goods available upon arrival at the agreed destination
o    bears risk+cost until goods are placed at the disposal of the buyer on the quay
DDU
Delivered Duty Unpaid
Buyer
o    Responsible for the costs and risks for the unloading at place of destination, duties and any subsequent delivery beyond the place of destination
Seller
o    Arranges carriage
o    must make the goods available upon arrival at the agreed destination
o    bears risk +cost until goods are placed at the disposal of the buyer
DDP
Delivered Duty Paid
Buyer
o    Responsible for the costs and risks for the unloading at place of destination and any subsequent delivery beyond the place of destination
Seller
o    Arranges carriage
o    must make the goods available upon arrival at the agreed destination
o    bears risk +cost until goods are placed at the disposal of the buyer
o    pays all duties