International Sale Documents
Introduction
Right paperwork and documentation during importation and exportation is very crucial. Inaccurate or lack of documents can lead to many inconveniences that may include delays, increase in trade costs and rejected deals. When participating in international trade, it is crucial to ensure the right documentation is applied. The correct type of documentation plays a very significant role in both receiving and making payments. By following the right paperwork, the risks facing the customer paying for the goods are reduced. The risk of the supplier failing to deliver the goods or services is also reduced. With the right documented paperwork, the supplier can state the amount to be paid and when the payment is expected to be received. Once the consumer accepts this document, it becomes legally binding and in the event one party fails to adhere, it attracts legal implications.
Paperwork needed for international trade usually varies greatly form one transaction to the other. This would definitely depend on the destination of the commodity and the commodity itself. The destination is very important in determining the type of document used since different countries have unique trade regulations and policies. Some countries have introduced free trade with their partners meaning documentation is minimized in this case. It is however noted that however flexible the rules of international trade May be, documentation will still be very important.
Basically, there will be two primary documents, the transportation document and the invoice. The consumer will provide the supplier with the document requirements needed for the transaction to take place in their country. It is important to note that other specific documents are not subject to negotiation because the consumer importing the goods will need it to clear some of the custom payments at the port. A letter of credit method of payment may be employed in export sales. The sale of goods across borders comes with challenges that are different from those of domestic trading. The supplier and consumer are literally located in different geographical locations. It is interesting that in some cases, the goods that are supposed to be traded are in the possession of a third party and not the seller.
International trade will definitely involve a lot of transportation across borders. This would, therefore, translate to mean that either the consumer or supplier will be forced to make arrangements and process the relevant paperwork to ensure both transportation and insurance of the goods while on transit. In essence, both the seller and the buyer need to play their part, with the seller ensuring prompt delivery while the buyer is expected to pay for the delivery of the goods. Sale through shipment has evolved over time to the extent that it has allowed for documentation of goods sold in international borders.
Usually, banks come in handy in international trade since they provide a letter of credit hence providing security to both the supplier and consumer. There is no uniform method of documentation in international sales. However, there exist standard documents that are not missed in any international sale. The jurisdictions of various countries show some consistency in the type of regulations.
The bill of landing is a typical sale document. Its numerous attributes makes it a very important document in international trade. This document is traditionally referred to as negotiable. However, it has been debatable recently whether this document is merely negotiable or transferable. In the English law context, this document is not considered negotiable. An added argument would be that the bill of landing does not have the essential attribute that a basic negotiable document possesses. This document has played a very important role in facilitating international trade.
First and foremost, it functions as a receipt giving evidence that commodities that are relevant to the contract have been transported and is in the possession of the carrier with the intended delivery to the agreed destination. The evidentiary element of this paperwork is relevant to both the seller and the buyer. It is important since with it, the seller and buyer can both confirm whether it adheres to the contract signed before. It is also important in the essence of the carrier due to the potentiality of making a claim in case of damage or loss of the goods.
Secondly and very importantly, the bill of landing is expected to conform to the contract between the seller and the buyer. This becomes important in the sense that the goods are damaged, lost or delivered short of what was agreed. This provides evidence that is needed by the buyer to pursue a legal claim against the seller for breach of contract. Thirdly and significantly, the bill of landing acts as a transferable document of title. It is this element that distinguishes this document from negotiable document as stated above.
A document of title in this case basically means that the buyer acquires the power of demanding prompt delivery of the goods by the carrier. This exclusive right is based on the simple fact that the goods will only be delivered with the handing in of this document. Possession of this document would translate to the ownership of the goods delivered by the carrier. While the carrier is charged with the responsibility of delivering the goods, the seller is expected to hand in to the buyer this title that acts as the ownership of the goods. In the same strength of claiming ownership of the goods, this document can act as security in a commercial bank in a bid to seek loans and raising finance.
The English law of international trade introduces an interesting twist. This concept states that the bill of landing is not as important what is represented by it. Basing on the fact that the goods represented by the bill of landing are not negotiable, it would be illogical if this document became negotiable. In this case, if the buyer acquires the bill of landing without making payment for the goods and transfers it to a third party, the third party cannot rightfully claim the goods. This is due to the fact that this party will not get a valid title for the goods.
It is obvious that there is a great contradiction in application of the terms transferable and negotiable. The distinction lies in the fact that a transferable document is that which can be handed by one individual to the other. This means that the transfer of the document directly transfers the rights of ownership exactly the same as the previous owner and nothing more. A negotiable document on the other hand means that the new owner of the document has more or better rights compared to the one who has transferred it. This bill therefore is not negotiable and lacks the basic elements of a negotiable document.
Certificate of origin
A certificate of origin, commonly abbreviated as CO, is a very important document in facilitating international trade and in particular export sales. This document clearly states that specific goods that are being exported are obtained in totality, processed, manufactured or extracted in a specified country. Declaration by the exporter is also clearly stated in the certificate of origin. This document, due to the indication of the origin of goods has an important element of determining whether these goods will be accepted and the procedure to be followed depending on the country.
This is important in determining the duty that will be applicable to such goods since goods from different countries are imposed on duty depending on the partner relations and trade status between different countries. The certificate of origin is also important in determining the legality of goods basing on the country they come from. Some jurisdictions in some countries have imposed a total or partial ban from a specified country due to both local and international trade dynamics influence by politics and economic rivalry. The goods must be legally accepted before they are imported. There are two main types of certificate of origin used in international trade.
Non preferential certificates of origin indicate that goods from a certain country do not necessarily enjoy preferential treatment in terms of taxes, duty and regulation. This is the main type of document that exists in non-partner states. It does not provide for the privileged treatment of goods or any waiver in the goods being imported. In this context, the goods will undergo the standard procedure and observe import duty to the latter. Preferential certificates of origin are those that provide some form of waiver, tariff reduction or reduction of duty due to origin from countries that are member states and extend the same privileges. Countries that are trade partners such as the commonwealth countries or those that belong to a regional trade block often employ this kind of certificate of origin.
Goods that claim origin from the member states of such trade partners enjoy preferential treatment which includes reduction of tariffs with the aim of promoting trade between the countries in such unions. Certificates of origin are in most cases expected to conform to foreign customs, letters of credit issued or the consumer’s request. In many countries that participate in international trade commerce chambers are the main agent charged with the responsibility of issuing these certificates. It is however important to note that in some nations or trade jurisdictions, the privilege of providing this document has been extended to ministries and other regulatory bodies such as custom authorities.
The responsibility of chambers authority issuing certificates of origin dates back to more than 8 decades ago. This came about with the aim of simplifying the formality of customs. Under such an arrangement, the signatory states are required to make the procedures and processes very straightforward and simplified for traders between the countries that require the certificate of origin. However, due to the widespread presence of chambers of commerce worldwide the chambers of commerce are today charged with the responsibility of issuing this document that regulates export and international trade. The certificate of origin is a basic requirement in some boundaries for part or all goods depending on the jurisdiction. In most typical cases, the country of origin will always be printed on letterheads issued by the exporting company.
The company exporting should however go to the extent of inquiring whether the certificate of origin is needed for trade to take place in the destined country. This is because some countries have strict regulations in offering certificates of origin since they require it to be legalized by the commercial authorities of the country of destination. For certain specific goods such as textile products, the manufacturer may be charged with the responsibility of issuing the certificate off origin. Countries with free trade agreements have more flexible regulations to the extent of not needing a certificate of origin in the trade of certain goods. The certificate of origin is the most important certificate in goods shipment in international trade.
As noted above, different countries have unique bodies that issue and regulate the certificate of origin. The trade relations between the countries participating in the trade will no doubt determine the type of certificate of origin. Companies with preferential certificates of origin have due advantage over others since this would mean reduced trade tariffs and a waiver on most of the goods exported.
Insurance policy
International trade insurance policies are relevant in cushioning the importers and exporters of certain risks such as damage of goods or loss. This indemnity will depend on the type of good and insurance plan applied for by the traders. Indemnity means that the insurance company bears the responsibility of compensating these companies in the event that such risks happen. Insurance agencies ensure that trade is carried out effectively and efficiently in collaboration with banks and other bodies that facilitate the trade. The insurance companies particularly cushion the exporting companies of the most probable risk thereby encouraging these companies to expand their trade perimeters and trade across borders. The exporters are in turn able to seize this opportunity and expand their trading activities to many other countries.
The insurance agencies develop great in economies and companies with the capability of extending their services globally. Along with banks, governments and other regulatory bodies and trade intermediaries, insurance agencies constantly develop products that are aimed at promoting international sales. The insurance companies can use their experience in international trade in covering the most common risks of a new exporter in the case that the exporter does not have the institutional reach. The insurance agencies are very dynamic in the type of products they develop from time to time. Of course this will be greatly influenced by the world trade environment and shifting trade regulations in the world. Different trade policies are made annually and trade partners are forged over time.
It would therefore be necessary that these insurance companies develop new products over time in order to remain relevant in the international front. However, there exist basic trade policies that most insurance companies offer to their subscribers. Foreign currency policy is an example. However, the most common types of policies that regulate trade include cargo and product liability policies. The export credit policy blesses the exporter with the unique ability of exporters to issue the importers trade terms that are open. The insurance company will in this case cushion the exporter of non-payment by the importer and will take much of the payment responsibility in case of defaulted payment. Provided the exporting company has the will and ability to pay for the shipment of the goods and a pledge of payment that may be futile for three months, the insurance agency cushions the risk that comes with the credit extension.
Cargo insurance policy is the type that covers goods that are in transit. This type of policy can be subscribed to by either the importer or exporter basing on the terms of the trade contract between the two parties. This type of policy covers any loss or damage of the goods either during shipment or when they are in warehouses of either country participating in this trade. Certain sudden or unexpected risks that may befall the goods when they are entering the foreign company are also insured under this policy. An example of such a circumstance is in the event that goods are damaged during inspection in the foreign country.
Product liability is also covered under some of these common international trade policies. In case a customer is injured during the shipment of the goods, the liability will be very significant. In most cases, both the importer and exporter pay for this policy as one of the blanket policy in the insurance of their goods. Specific coverage therefore needs to be added to certain goods so as to cover the customers. Alternatively, the importer and exporter can pay for the policies separately to cover this kind of liability.
Commercial invoice
A commercial invoice is a document that identifies and clearly states the buyer and seller of a commodity, a good or service. In international trade, a commercial invoice will clearly state the importing and exporting companies. The commercial invoices are required to have certain types of details common to such a type of document. These include the date, mode of transport and delivery terms and conditions. This document also has the prices of the goods being traded and the discounts that are tied with such goods. The great detail of this document alone explains the importance and significance of such a document in international trade. This document will provide all the details pertaining to the goods that the exporter is selling.
A commercial invoice is in this effect considered the most significant document involved in international trade. It is noteworthy that trade almost never takes place in the absence of this document. Custom clearance will definitely need this document. This will still apply in the sense of goods that are considered samples and have no commercial objective or value. It is this document that provides a reference to which the buyer and other authorities refer to for the details of the shipment. This therefore means that the commercial invoice should be as accurate and as clear as possible since it provides the core information about the good being traded. This document is more of a custom requirement than it is a transport requirement. This is because it is needed by custom clearance authorities to clear the goods.
Usually, two copies of this commercial invoice are needed. One of the commercial invoices should accompany the goods to custom clearance while the other invoice is expected to be attached to the landing bill. The importance of this document means that it is very important in the paperwork that accompanies international trade and export.
Bibliography
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