Documents Used in Foreign Trade

The most important documents used in foreign trade are the following:

(1) Shipping documents that acknowledge the shipment (dispatch) or taking charge of the goods. They are usually documents of title to the goods, which means that the holder of the document is entitled to take possession of the goods. In general, these documents can also be sold or bought, that is to say they are negotiable.

The most important shipping document, especially in sea transport, is the Bill of Lading (B/L). The Bill of Lading is made out by the shipowner usually in sets of three originals with two copies. The originals are sent to the buyer by separate mails (airmail or surface mail), one remains with the seller and one is given to the master of the ship. The B/L states the name of the ship carrying the goods, the port of embarkation and the port of destination, and the rate of freight. It also gives the quantity, quality and value of the goods taken on board, specifying the marks and numbers on the packages. A B/L is said to be clean if the goods it refers to have been loaded in apparent good order and condition. If the packages are damaged in any way this will be marked on the bill, which in this case is called 'dirty', or 'foul' or 'claused'.

A Waybill is made out when the goods are carried by rail or road. It is usually prepared by the carrier and, in addition to the description of the goods and the names of the importer and the exporter, normally gives the conditions of the contract of carriage.

A Railway Consignment Note is a document used in international railway transport similar to the B/L, made out by the sender of the goods, handed to the carrier and signed by the person to whom the goods have been delivered, to prove that delivery has been made.

An Air Waybill or Air Consignment Note is used when the goods are transported by air freight.

(2) Insurance documents. They must be effective from the day of shipment and usually must cover 110 per cent of the CIF value of the goods.

(3) Invoices. These usually give the full description of the goods (quantity, quality and price), the name and address of the buyer and seller, the means of transport, etc.

The following types of invoices are used:

(a) Commercial Invoice;

(b) Consular Invoice, which is often required by the customs to confirm the country of origin. It is certified by the consul of the importing country in the exporting country. It enables import duties to be correctly charged;

(c) Customs Invoice.

(4) Various certificates that may be needed for the importation of the goods. The most important ones are:

(a) the Certificate of Origin, which states the Country from which the goods have originated. The identification of the true country of origin is necessary because tariffs may differ according to the country of origin.

(b) the certificate of quality

Means of Payment in Foreign Trade

Means of payment (also called method of settlement) is the instrument by which payment is made. Among numerous instruments we distinguish between payment in cash, by cheque (A.E. check), bank transfer, SWIFT, draft, bank money order, telegraphic transfer (TT), mail transfer (MT), Bill of Exchange. Gene­rally speaking, means of payment is the instrument of payment where certain instructions are written.

The simplest way is to pay in cash that is money in coins or notes. This, however, is very rarely used in foreign trade. A cheque is a written order by a person (a drawer) to a bank (a drawee) to pay a certain sum of money from the person's bank account to another person (a payee). Payments of large sums of money are usually made by cheque rather than cash and the drawer of the che­que will wish to make sure the cheque does not fall into wrong hands.

A cheque made out as payable on demand (an open cheque) can be cashed or negotiated by any person who holds it. To minimize such a possible loss it is usual to cross the cheque. A crossed cheque can only be paid into a bank ac­count. The crossing is two parallel lines placed across the cheque with or without the words “not negotiable” or “a.c.” - “payee only” or “and company”. This is called a general crossing. A special crossing is the one where the words are added to general crossing specifying the bank at which the cheque is to be presented.

A Bill of Exchange is an unconditional order in writing addressed by one per­son to another and signed by the person giving it, requiring the person to whom it is addressed to pay on demand (a sight draft) or at a fixed or deter­mined future date (a term draft) a certain amount of money to a specified per­son or to the bearer. A Bill of Exchange is sometimes called a draft, especially if payment is made from one bank to another. It is often used in foreign trade. The buyer signs an agreement to pay on the due date by writing across the face of the bill the word “accepted” together with his name and the name of his bank, where the amount will be paid. The terms of payment of the bill may be 50, 60, 90 days after sight (D/S). In some countries three extra days are allowed for payment. They are called “days of grace”.

The person drawing the bill is called the drawer, the person upon whom it is drawn (to whom it is addressed) is called the drawee, who becomes acceptor after he has accepted the bill

If the drawee is willing to pay, he signs across the face of the bill:

Accepted

Payable at

The Sheffield City Bank

A.White & Co.

When payment is made through a post office (which does not very often happens in international trade) money orders are used, either TT or MT.

The credit card is becoming a very important means of payment in consumer transactions and is replacing the cheque in the everyday payments. It first appeared in the USA and is now spreading throughout the world. The best known credit cards in use are Barclay Cards, Access Cards, Diners Club Cards;, Ameri­can Express Cards, Eurocard/Mastercard, Visa Cards. A special kind of credit card is the cheque card.