What is Exports Documentation?

The key and the backbone to international trade is the consignment documentation. A defective document can raise many problems and lead to monetary losses and setback to the company.

The exports documents can be broadly classified as into

• 1. Commercial Documents
• 2. Regulatory Documents

It is very important to understand the role of export documentation & procedure involved in exports from India for efficient transportation of goods, realization of payments, compliance for availing government benefits and for customs clearance of goods.

What are the objectives of exports Commercial documents?

The exporters from India use commercial documents;

• To effect physical transfer of goods from the exporter’s premise to the importer’s premise.
• To transfer title of goods from the exporter to the importer and
• Realization of export proceeds by the exporter from the importer.

These commercial documents are further divided into

• Pre-Shipment Documents and
• Post Shipment Commercial Documents.

What are Pre-Shipment export documents?

This document marks the beginning of any sales contract. When the exporter receives an enquiry from the customer a Proforma Invoice is provided to the importer. The main details of the proforma invoice are name and address of the exporter, name and address of the intending importer, nature of goods, mode of transportation, unit price in terms of internationally accepted quotation, name of the country of origin of goods, name of the country of final destination, period required for executing contract after receipt of confirmed order and finally signature of the exporter.

The main importance of the document is to further negotiate the contract and obtain import license and the foreign exchange required to complete the contract.

 

Pre-Shipment export documents are eight in numbers as mentioned below;

• 1. Proforma invoice
• 2. Intimation for Inspection
• 3. Shipping Instructions
• 4. Insurance Declaration
• 5. Shipping Orders
• 6. Mate’s Receipt
• 7. Application for Certificate of Origin and
• 8. Letter to the Bank for Collection/Negotiation of Documents.

What are post export shipment commercial documents?

They consist of commercial documents with records of commercial transactions and include written records. They are also eight in numbers. These documents need to be sent to the importer in order to effect delivery and payments.

The post-shipment documents are:

• 1. Commercial invoice
• 2. Packing list
• 3. Certification of inspection/quality control (where required)
• 4. Bill of lading/Combined Transportation Documentation
• 5. Shipping Advice
• 6. Certificate of origin
• 7. Insurance Certificate/Policy (In case of CIF export sales contract)
• 8. Bill of Exchange

What are regulatory documents?

The regulatory documents differ from country to country and are required to be prepared at the pre-shipment stage. These documents are for complying with various rules and regulations under important laws like Export Inspection, Customs and Foreign Exchange. These are:

• Shipping Bill/Bill of Export: They are standardized and prescribed by the Central Excise Authorities.
• For export of goods.
• For export of duty-free goods.
• For export of dutiable goods.
• For export of goods under claim for duty drawback.
• Export Application/Dock Challan: Standardized and prescribed by the Port Trust Authorities.
• Receipt for Payment of Port Charges
• Vehicle Ticket
• Exchange Control Declaration Forms: SDF/GR/PP forms are standardized and prescribed by RBI
• Freight Payment Certificate
• Insurance Premium Payment Certificate

All of these above stated commercial and regulatory documents have been segregated on the basis of use. The major reason for these documents is to effect payment, shipment, describe the goods and complete formalities related to excise, customs and foreign exchange.

Let us examine few commercial and regulatory documents:

What is a Proforma Invoice?

This document is used both in import export, and marks the beginning of any sales contract. The moment when the exporter receives an enquiry, Proforma Invoice is provided to the importer. The main details of the proforma invoice are name and address of the exporter, name and address of the intending importer, nature of goods, mode of transportation, unit price in terms of internationally accepted quotation, name of the country of origin of goods, name of the country of final destination, period required for executing contract after receipt of confirmed order and finally signature of the exporter. The main importance of the document is to further negotiate the contract in export import business and obtain import license and the foreign exchange required to complete the contract.

What is a Commercial Invoice?

This document contains all the particulars and details in respect of name and address of exporter, name and name, address of buyer importer, date, description of goods, price per unit at particular location, quantity, total value, packing specifications, terms of sale (FOB, CIF etc), identification marks of the package, total number of packages, name and number of the vessel or flight, bill of lading number, place and country of destination, country of origin of goods, terms of payment, and finally signature of the exporter etc.

There are special invoicing procedures in respect of exports to certain countries like Canada, U.S.A. and Australia. This is known as Customs Invoice. Some countries like Uganda, Mexico, Sudan and Tanzania require special customs invoices namely Legalized and Consular Invoices. The importance of the Commercial Invoice is as follows:

• 1. It is the prime evidence of the contract of sale.
• 2. It is required for fulfilling export formalities like pre-shipment inspection, excise and customs
• 3. It is necessary for carrying out accounting activities.
• 4. It is required for collection/ negotiation of documents through banks.
• 5. It is also required for claiming incentives.

What is a Packaging List?

It is a statement of the contents of the total number of packs in the consignment. It contains all the details of the packaging and volume of the goods and also the container number / customs seals number if applicable.

Packing list is an important document as on the basis if this, the transporter accepts the goods in full or declares a short shipment.

What is a Bill of Lading?

A Bill of Lading (usually called B/L) is a document issued by the Carrier Company or their Agent to acknowledge receipt of cargo for the shipment. Although the term historically related only to carriage by sea, a bill of lading may today be used for any type of carriage of goods. A Bill of lading is one of three crucial documents used in International Trade to ensure that Exporters receive payment and the Importers receive the merchandise. The other two major documents are a) Policy of Insurance and b) Invoice. Whereas a bill of lading is negotiable, both a policy and an invoice are assignable.

A bill of lading must be transferable, and serves three main functions:

• It is a conclusive receipt, i.e. an acknowledgement that the goods have been loaded onboard vessel; and
• It contains or evidences the terms of the contract of carriage; and
• It serves as a document of title to the goods.

Typical export transaction use Incoterms such as CIF, FOB or FAS requiring the exporter/shipper to deliver the goods to the ship, whether onboard or alongside. Nevertheless, the loading itself will usually be done by the carrier himself or by a third party called Stevedore.

Types of Bill of Lading

• An On-Board bill of lading denotes that merchandise has been physically loaded onto a vessel, such as a freighter or cargo plane.
• A Received-for-Shipment bill of lading denotes that merchandise has been received, but is not guaranteed to have been loaded onto the vessel.(Typically, it will be issued by a freight-forwarder at a port or depot).
Such bills can be converted upon being loaded.
• A straight bill of lading is used when payment has been made in advance of shipment and requires a carrier to deliver the merchandise to the appropriate party.
• An Order bill of lading is used when shipping merchandise prior to payment, requiring a carrier to deliver the merchandise to the importer, and at the endorsement of the exporter the carrier may transfer title to the importer.

What is an Airway bill?

It is a receipt issued by an airline in lieu of carriage of goods. Similar to Bill of Lading, it is also a transport document but is not negotiable. In other words, it is not a document of title. The goods are delivered to the consignee without the production of an airway bill. The importance of Airway bill can be seen as it is a contract of carriage, customs declaration form and as a document for freight collect or payment details.

What is a Shipping Bill?

An exporter, while sending goods from one country to another has to go through various formalities including submitting various applications, acquiring licenses, paying duties and so on. To acquire a clearance for export from Customs, an exporter will have to submit an application which is called the ‘shipping bill’. One cannot load the goods unless the exporter files the shipping bill. The export may be by air, vehicle, or vessel, shipping bill / bill of export (for land export) has to be submitted to custom before loading onboard vessel/aircraft or crossing the border.

A shipping bill is to be submitted electronically. The goods can only be taken for shipment once any of the following documents duly passed is obtained from Custom :-

• At seaport/ airport - Shipping bill
• At land customs station - Bill of export
• For Goods transshipment - Bill of transshipment

Meaning and Purpose – Cargo Insurance, commonly known as Marine Insurance, is a most important and mandatory export document. The insurance cover the risk of loss or damage of goods in transit from seller’s warehouse to buyer’s warehouse. Marine insurance transfers the liability of the goods from the parties and intermediaries those who are involved in the process to the insurance company. However, the legal liability of the intermediaries handling the goods is limited. The Exporter, who is actually bearing the sole responsibility of the goods, should buy an insurance policy and get coverage for the exported goods against any possible loss or damage. The carrier of the goods, be it the airline or the shipping company, may bear the cost of damages and losses to the goods while on board. However, the compensation agreed upon is mostly on a ‘per package’ or ‘per consignment’ basis. The coverage so provided may not be sufficient to cover the cost of the goods shipped. Therefore, Exporters always prefer to move their consignments only after getting it insured.

Marine insurance is also necessary to meet the contractual obligations for exports. To align with agreements such as Cost Insurance & Freight (CIF) or Carriage and Insurance paid (CIP), it is mandatory for the exporter to take up marine insurance to honor the contractual obligation. Similarly, in the case of other contractual terms like Delivered Duty Paid (DDP) the Seller is not be obligated to take insurance coverage. However, in practice, Exporters always prefer to take the insurance coverage for their consignments.

What are the different types of Insurance ?

a. Freight Insurance – covers the Operator for any loss of freight due to loss and damage of goods in transit; b. Liability Insurance – Marine Liability Insurance protect the liability arising out of ship crashing or colliding during voyage; c. Marine Cargo Insurance - Marine cargo policy refers to the insurance of goods dispatched from the country of origin to the country of destination.

Some of the other documents

Bill of Exchange or Draft : A bill of exchange is a written order (submitted in Duplicate) binding one party to pay a fixed sum of money to another party on demand at some point in the future. This document includes three parties—Drawee – who pays the sum (Buyer); Payee – who receives the sum (usually Banker of the Exporter/Seller); Drawer : the person who makes the Bill of Exchange and directs Drawee to pay the sum to Payee (Exporter/Seller). A Bill of Exchange/Draft orders a debtor to pay a particular amount within a given period of time.

Bank Realisation Certificate (BRC) : Bank Realisation Certificate (BRC) is issued by Banks upon realisation of payment against an export transaction. Any Exporting firm, applying for benefits under Foreign Trade Policy is required to furnish valid BRC as a proof of realisation of payment against exports made. To close the loop for any export transaction, BRC is considered to be the last point of action for Exporting Firm. This is also very important to satisfy various authorities as the proof of realisation against any export sales proceeds.

Electronic Bank Realization Certificate (eBRC) : eBRC is issued by Banks to the Exporters for the purpose of claiming benefits under the various schemes of the Foreign Trade Policy. Using the eBRC platform, Banks can electronically transmit foreign exchange realization certificates from Banks to the DGFT server.

To obtain details of the full list of documents, please get in touch with Exim Guild. ‘Follow That Dream’

By- Antashri Banerjee