Shipping Documents
Export and import of goods and services and the corresponding payment mechanism require an extensive documentation procedure. There are specific and unique documents that are used in international trade pertaining to sale contract, title of goods, mode of transport, etc.
The following are the most important documents:
- Bill of exchange
- Invoice
- Bill of lading
- Insurance certificate
- Certificate of origin
- Packing list and related documents
- Shipping bill
Table of Content
Most of the documentary credits require the above documents to be submitted in accordance with the Uniform Customs and Practice (UCP) provisions and sale contract. Let us discuss the meaning and functions of various documents:
Bill of Exchange
The bill of exchange serves as a legal document reflecting the payment obligation of the drawee owing to the trade transaction. The bill of exchange under LC is drawn by the beneficiary, i.e. exporter, on the issuing bank, with the relevant LC number under which it is drawn and the issuing bank name, with other details like sight or number of acceptance days in case of usance bills, the bill amount in LC currency, date of bill of exchange, etc.
Invoice
This is the basic commercial document pertaining to sale details like description of goods, quantity and value in unit terms and the total value of goods. Invoice is raised by the exporter in the name of the importer. It has details like the contract number, order number or pro forma invoice number related to the transaction. It also specifies the invoice value along with the Incoterms applicable. If raised under an LC, it should specify the LC number and abide by both the sales contract and LC terms.
Bill of Lading
It is the document that shows the movement of goods from the port of acceptance to the port of destination when goods are transported by ships. The bill of lading is the receipt issued by the shipping company or his agent with details regarding shipment like description, quantity, quality, etc. It also specifies the date of shipment, name of the vessel and the name of the consignee.
The bill of lading also contains details regarding the payment of freight. The bill of lading is ‘the document of title’ to the goods that are being shipped. This document is issued by the shipping company to the exporter. The exporter then sends the original bill of lading to the importer’s bank through his banker. The importer needs to produce the original bill of lading at customs or bonded warehouse without which he will not get the delivery of goods.
Thus, the bill of lading is one of the most important documents in international trade transactions. If the transaction is under LC, the bill of lading will contain details regarding the LC number, which is similar to the invoice. It is drawn to the order of the shipper and blank endorsed in the favour of the issuing bank as per the stipulations of the LC.
Insurance Certificate
The transport of goods through ships entails risk and hence the insurance of the shipment is necessary. The insurance certificate or policy is the document issued by an insurance company ensuring the insurance of the voyage of shipment from the port of shipment to the port of destination. It is generally taken for 110% of the CIF value. The claim is payable in the country of the applicant.
The insurance document provides the description of the shipment covered for insurance in conformity with LC terms. It is bank endorsed and sent in original along with other documents like bill of lading, invoice, etc., wherever applicable. The insurance cover is effective from the date of shipment to the point of termination of coverage mentioned in the policy.
Certificate of Origin
It is meant for determining the country of origin of goods. It is issued and signed by an independent authority like the chamber of commerce and contains full description related to the goods being shipped, invoice value, bill of lading number, etc.
The packing list provides the detailed description of shipment and accompanies the other documents like invoice and bill of lading. Other documents include quality certificate, weight list, etc., some of which may be as per the demand of LC terms. For example, the importer may ask for a quality certificate to accompany the documents. The certificate provides details regarding the quality of the shipment from an authorised quality certification agency.
Shipping Bill
The shipping bill is the document to be filed with the customs authority by exporters for making shipments. It is required for any goods moving out of the country for getting approval from customs.
It contains details like order or LC number and date, invoice number and date, name of the shipper, consignee, place of receipt of cargo, port of loading, port of discharge, final destination place, terms of payment, terms of delivery of cargo, marks and numbers of packages, number of packages, unit price, FOB value of goods, total value of goods in local currency of the country. The shipping bill should also provide details regarding the scheme of export viz., free bill, drawback, DEEC, DEPB, DFRC or EPCG, etc.
In addition to the aforementioned documents, there are also other forms/documents traditionally used in export/imports. With the Electronic Data Interchange (EDI) system, the forms are now filled online. The number of forms required has also been reduced. For example, earlier RBI required the submission of declaration forms like GR/SDF/ SOFTEX towards declaring the amount of foreign exchange expected to be received by exporters.
