Documents Used in International Trade
Transcript of Documents Used in International Trade
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PRESENTATION
Course: International Financial
Managementy (MSBA-2nd Semester)
Prepared by: Mian Shabir Hussain
Presented To: Prof. Muhammad Imran Sb
Presented by:
Mian Shabir Hussain
Muhammad Nadim
H. M. Iqbal
H. M. Imran
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ROLE OF BANKING
SECTOR
DOCUMENTS USED
INTERNATIONAL
TRADE
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International trade is the exchange ofgoods and services across internationalboundaries or territories. In most
countries, it represents a significant share
of GDP. While international trade has beenpresent throughout much of history its
economic, social, and political importance
has been on the rise in recent centuries.
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Industrialization, advancedtransportation, globalization,
multinational corporations outsourcing
and specially Financial Institutions(Banking sector) are all having a major
impact. Increasing international trade is
basic to Globalization.
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ROLE OF BANKING SECTOR
TO PROMOTINGINTERNATIONAL TRADE
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INTERNATIONAL TRADE IS
INEVITABLE?
It is impossible to be in international trade withoutinvolving your bank for all the services they provide
such as advice on financial issues and the potentialrisks involved.
A free trade or market economy can only function ifthose who supply goods and services are assuredpayment; and in return, those who pay receive goodsand services.
Contd
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This seemingly obvious statement gains considerable
complexity international trade, particularly when
geo-political borders representing separate economies
at varying stages of market systems development are
involved.
The non-convertibility of a multitude (large number)of currencies in today's world market still represents
a serious barrier to the free flow of goods in
international trade.
Contd
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A critical hurdle of SMEs is the lack of information on
international trade processes, documentation andbanking procedures necessary to carry on with
business abroad.
For result oriented and cost effective internationaltrade, these organizations need access to accurate and
timely information and a sound knowledge of banking.
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ROLE OF BANKS
Banks play a crucial role in helping to overcome
hurdles in international trade and perform the
following functions in promotion of trade:
International banking system Speed International Payment Transfers
Bankers Share Expertise
Facilities to Exporters and Importers
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TYPES OF FACILITIES FOR EXPORTERS
Rupee Export Credit (pre-shipment and
post-shipment)
Pre-shipment Credit in Foreign Currency
Negotiation of Bills under L/C
Export Bill Rediscounting
Bank Guarantees
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TYPES OF FACILITIES FOR IMPORTERS
Letter of Credit
Collection of Import Bills
Financing of import
Bank Guarantees
Remittances
Forex & Treasury Services
Resident Foreign Currency A/Cs
Correspondent Banking Services
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DOCUMENTS USED IN
INTERNATIONAL
TRADE
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CLASSIFICATION OF DOCUMENTS
a. Commercial documents
b. Official documents
c. Insurance documents
d. Transport documents
e. Financial and financing documents
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A. COMMERCIAL DOCUMENTS:
Invoice
Certificate of origin
Weight notes or certificates
Packing List
Quality or Inspection certificate
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INVOICE
An invoice is a commercial document issued by a seller
to a buyer, indicating the products, quantities and
agreed prices for products or services with which the
seller has already provided the Buyer. An invoice
indicates that, unless paid in advance, payment is due
by the buyer to the seller, according to the agreed
terms. Invoices are often called Bills.
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TYPES OF INVOICE
Proforma Invoice:It is a memorandum of the terms of a contract of sale wherein the
seller gives the quotation to the potential buyer. If the buyerapproves its terms, he sends a definite order for supply. Such aninvoice is marked with the word Proforma Invoice.
Commercial Invoice:A commercial invoice is a bill for the goods from the seller to thebuyer. Commercial invoice are utilized by customs officials todetermine the value of the goods in order to assess customs dutiesand taxes.
Certified Invoice:
An invoice bearing a signed statement by someone in theimporters country who has inspected the goods and found that thegoods are in accordance with the specific contract of the proformaand that the goods are of a specific country of origin.
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CERTIFICATE OF ORIGIN
It is a specified document certifying the country of
origin of the merchandise required by certain
foreign countries for tariff purposes. This certificate
is issued by Chamber of Commerce, Trade
Association or any other authorized body of the
exporting country and it sometimes requires the
signature of the consul of the country to which it is
designed.
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WEIGHT NOTES OR CERTIFICATES
This certificate indicates the weight of thegoods issued by a public agency. It can be
evidenced by means of a separate document, or
by a weight stamp/declaration of weight
superimposed on the transport document by
the carrier or his agent.
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PACKING LIST
The exporter must prepare a packing list
showing description of items, number of
containers/boxes with specification of net
weight & gross weight etc. to enable theimporter of the goods to check the shipment.
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QUALITY OR INSPECTION CERTIFICATE
This is a certificate declaring that the goods havebeen examined and found to be in accordance
with the contract of sale. It is signed by the
manufacturer or supplier or any recognized
independent inspection body as required by the
importer.
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B. OFFICIAL DOCUMENTS
y Consular Invoice: It is an invoice made out in a specially
printed form of the exporter and is shown before the consul
of importing country stationed in the exporters country as
being correct in all respect. The consular of the importing
country then certifies the invoice. A consular invoice enables
the importer country to have all accurate record of the
merchandise shipped.
y Legalized Invoice: Some Middle East countries require
that the commercial invoice should be countersigned andstamped by the authorized officer in their Embassy or the
consulate in the exporters country instead of consular
invoice.
Contd.
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y Black-listed Certificate: Under this certificate, theexporter has to provide a Black-listed certificate evidencing
that all parties involved including the bank and shipping lineare not black-listed. Due to strained political relation or any
other reasons some countries do not allow transactions with
some particular countries. These countries and the exporters
are treated as Black-listed.
y Health, Veterinary and Sanitary Certificate/Photo
Sanitary Certificate, Certificate of Analysis: Thiscertificate is generally needed in purchase of foodstuff, hides
and livestock and in the use of packing materials. It is issuedby the recognized health authorities in the exporting
countries. The certificate confirms that the shipment meets
the required health, veterinary and sanitary standards.
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C. INSURANCE DOCUMENTS
There are some risks of damage, loss or destruction ofgoods during the time of transit. Marine Insurance plays a
very vital role in this respect. The scope of Marine
Insurance extends to Sea, Land and Air conveyances only
in respect of good from one country to another country orone place to another place with short distance through the
vessel, craft which the goods are carried or conveyed.
Marine insurance comprises of the following:
y Marine Cargo Insurance
y Marine Hull Insurance
y Freight
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TYPES OF MARINE INSURANCE POLICIES
There are various types of marine insurance policies, whichdiffer in respect of the cover provided to the insured. The main
types are as follows:
y Floating policy:A floating policy is a contract of insurancemeans to cover a number of shipments, the details of which are not
finalized when the insurance contract is concluded. Under thefloating policy, insurance cover is given in general terms and
details of shipments are declared subsequently and endorsed in the
policy.
y Time policy: It covers the subject matter of insurance for aperiod of time.
y Voyage policy: It insures the subject matter from one
place to another irrespective of the length of time taken.
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y Mixed policy: It covers both a voyage and a period of timeexceeding 30 days.
y Open cover or Blank policy: This policy isautomatically covers all the shipments of the exporter up toan estimated amount during a given period.
y
Specific policy:A specific policy is a contract ofinsurance, which covers a specific shipment.
y Valued policy:A valued policy is one, which specifies theagreed value of merchandise insured.
y Unvalued policy: In this type of policy, the value of themerchandise insured is not specified. The insurable value ofthe goods is ascertained later on subject to the limit of thesum insured.
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D. TRANSPORT DOCUMENTS:
These documents indicates that the goods, which are
delivered to the named shippers, airlines or transporters,
must be carried to a named port, airport or place of delivery.
Following transport documents are being used at present in
the international trade:
Airway Bill/Air consignment Note
Mates Receipt
Bill of Lading
Railway consignment Note/Railway Receipt
Roadway Bill
Post Parcel Documents
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Airway Bill/Air consignment Note: This documentconfirms the delivery of goods to an airline or its agent for
transportation by air to a named consignee according to thedefined and agreed terms.
Mates Receipt: It is a prima facie evidence of the quantity
and condition of the goods received. When the goods aredelivered to the shipping company for transportation, at first a
temporary receipt is issued by the ships Chief Officer
acknowledging the delivery of the goods alongside the carrying
vessel which is known as Mates Receipt. On the basis of Mates
receipt, the shipper has to pay the port dues and other charges.
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Bill of Lading:A bill of lading is a document which is issuedy the transportation carrier to the shipper acknowledging that
they have received the shipment of goods and that they havebeen placed on board a particular vessel which is bound for a
particular destination and states the terms in which these
goods received are to be carried.
Normally a bill of lading contains the port of shipment and of
destination, the name of consignee, the number, contents and
identification marks of the goods shipped and the amount of
freight paid or to pay.
The bill of lading serves three main purposes,1. as a document of title of the goods
2. as a receipt from the shipping company and
3. as a contract for transportation of the goods.
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Railway consignment Note/Railway Receipt: Whenthe exporter or his agent delivers a consignment to the
railway authorities for its onward carriage to a named
destination, they issued a receipt, indicating the details of theconsignment and destination to which they would carry it.
This document is called the Rail Consignment Note or
Railway Receipt.
Roadway Bill: It is an internationally approved documentof transaction when goods are being sent by road through the
countries that had ratified the CMR (Convention
Merchandise Routers).
Post Parcel Documents: It is a receipt issued by PostOffice for the parcel. The post office has received for direct
delivery to the addressee. It is not a document of title of goods
and generally contains the post office stamp.
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E. FINANCIAL AND FINANCING
DOCUMENTS
There are some documents used for payment
in international trade transaction such as:
Letter of Credit
Bill of Exchange
Promissory Note
Trust Receipt
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Thank you