International Trade requires two types of documents
- Operational / Commercial Documents
- Regulatory Documents
Operational/Commercial Documents are classified into 4 categories:
- Financial Documents
- Commercial Documents
- Transport Documents
- Risk Covering Documents
1) Financial Documents:
The most used financial document in International trade is Bill of exchange.
As per the Negotiable Instrument Act, 1881 bill of exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer (the person who present the BOE) of the instrument.
Some of the key points of BOE
- It is a negotiable instrument.
- It is signed by the drawer or maker
- It directs to pay to a certain person (Drawee) a certain amount.
The BOE is of two types
- Sight Bill of Exchange
- Usance Bill of Exchange
A) Sight Bill of Exchange: It is also known as payment at sight or demand or presentation. Under such bill of exchange, the drawee has to make payment on presentation.
B) Usance Bill of Exchange: Usance it a credit period is given to the drawee by the drawer. Here as per the credit period is given in the BOE, drawee is supposed to make payment after the credit period on the given or mentioned date.
2) Commercial Documents:
It is required by both the parties i.e. Buyer as well as Seller. Following is the list of commercial documents
Invoice (Commercial, Custom, Consular, Legalized), Certificate of Origin, Packing List, Weight Certificate, Certificate of Analysis and quality, Certificate of Inspection, Health Certificate.
3) Transport Documents:
The transportation of goods can be done through various mode i.e. Land, Air, Sea or combination of one or two modes. Bill of Lading is the most important transport document. There are various types of Bill of Lading.
4) Risk Covering Documents:
To cover the physical risk of the goods, we have to cover it with the Insurance.
a) Insurance Policy:
There are many minor and major threats which the carrier has to pass before reaching the destination. So to protect the goods the exporter takes the insurance of it. Insurance is an undertaking given by the insurers promising to pay or secure payment of money as compensation in case the goods under movement or otherwise are subjected to loss.
b) Specific Policy:
In Marine Insurance specific policies are issued to cover a specific single transit. Cover ends as soon as the arrival of cargo at destination.
c) Open Policy:
A Marine Cargo Open Policy is the agreement between a merchant and their insurance company to insure all goods in transit within that agreement for an indefinite period until the agreement is canceled by either party.
d) Insurance Cover Note:
A temporary document issued by an insurance company that provides insurance coverage until a final insurance policy can be issued. The note features the name of the insured, the insurer, the coverage, and what is being covered by the insurance. Insurance companies issue a cover note in order to provide an individual with proof of insurance before all the insurance paperwork has been processed.
Regulatory documents are required for compliance with regulatory authority’s requirements. As per exchange control regulations, details of all goods exported are required to be declared on certain specified forms. These forms are known as Export declaration forms. Some of such forms are GR / SDF, SOFTEX etc.
In simple terms we can say, it is required for compliance with regulations of either exporter’s country or importer’s country.
a) EDF (Exporter Declaration Form):
There are four forms, as per the consignment, the exporter has to fill.
i) GR (Guaranteed Remittance) Form:
The exporter has to realize export proceeds within 6 months of shipment of goods.
ii) SDF (Statutory Declaration Form):
A document submitted to the customs authorities by the exporter verifying that shipping bill is accurate & complete.
iii) PP (Post Parcel) Form:
It is required if the export is made through Post Parcel.
It is required if the export of software is to be made.