Documents Involved in

International Trade
MODULE III

What is Foreign Trade

Foreign trade is nothing but trade between the different countries of the
world.

It is also Known as International trade, External trade or Inter-Regional

trade.

It consists of imports, exports and entrepot.

The inflow of goods in a country is called import trade

Outflow of goods from a country is called export trade

Goods imported for the purpose of re-export after some processing

operations is called entrepot trade

Importance of Foreign Trade

Specialization at the world level - Some countries have abundant

natural resources

Optimum Allocation and Utilization of Resources - Rational allocation

and utilization of resources at the international level

Equality of Prices - Prices can be stabilised by foreign trade

Availability of Multiple Choices

Ensures quality and standard goods

Raises standard of living of the people

Importance of Foreign Trade

Generate employment opportunities

Facilitate economic development

Assistance during natural calamities

Brings reputation and helps earn goodwill

Promotes World Peace

Classification of Documents

The international Trade documents may be classified as under

Commercial documents

Official documents

Insurance documents

Transport documents

Financial and financing documents

Commercial Documents

Invoice - Issued by the seller to a buyer, indicating the products,

quantities and agreed prices

Proforma Invoice

Commercial Invoice

Certified Invoice

Certificate of Origin

Packing List

Quality or Inspection Certificate

Official Documents

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

Legalized Invoice: Some Middle East countries require that the commercial invoice
should be countersigned and stamped by the authorized officer in their Embassy or
the consulate in the exporters country instead of consular invoice.

Black-listed Certificate: Under this certificate, the exporter has to provide a Blacklisted certificate evidencing that all parties involved including the bank and shipping
line are not black-listed

Health, Veterinary and Sanitary Certificate/Photo Sanitary Certificate, Certificate of

Analysis: This certificate is generally needed in purchase of foodstuff, hides and
livestock and in the use of packing materials. It is issued by the recognized health
authorities in the exporting countries. The certificate confirms that the shipment
meets the required health, veterinary and sanitary standards.

Insurance Documents
There are some risks of damage, loss or destruction of goods during the
time of transit. Thus Marine Insurance plays a very vital role in this respect

There are various types of marine insurance policies

Floating Policy - Cover a number of shipments

Time Policy Covers for a period of time

Voyage Policy - Covers from one place to another irrespective of the length of
time taken

Open cover or Blank policy: This policy is automatically covers all the
shipments of the exporter up to an estimated amount during a given period.

Transport Documents
This document 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

Airway Bill/Air consignment Note

Mates Receipt

Bill of Lading

Railway consignment Note/Railway Receipt

Roadway Bill

Post Parcel Documents

Financial and Financing Documents

Letter of Credit

Bill of Exchange

Promissory Note

Trust Receipt

Financing of Export/ Deemed Export: Pre ship (Packing Credit, etc.), and
Post Ship Finance (Export Credit)

ECGC

Uniform Custom Practices of Documentary Credits

ECGC

Export Credit Guarantee Corporation of India Ltd.

ECGC is a Government of India Enterprise which provides export credit insurance

facilities to exporters and banks in India

It functions under the administrative control of Ministry of Commerce & Industry,

and is managed by a Board of Directors comprising representatives of the
Government, Reserve Bank of India, banking , insurance and exporting community.

ECGC is the seventh largest credit insurer of the world in terms of coverage of
national exports.

ECGC is essentially an export promotion organization, seeking to improve the

competitive capacity of Indian exporters by giving them credit insurance covers
comparable to those available to their competitors from most other countries.

Uniform Custom Practices of

Documentary Credits

Introduced by International Chamber of Commerce (ICC)

UCP 600 are the latest revision of the Uniform Customs introduced in
2007

UCP is a set of rules on the issuance and use ofletters of credit

INCOTERMS

International Commercial Terms (Incoterms) are internationally

recognized standard trade terms used in sales contracts. Theyre used
to make sure buyer and seller know:

Who is responsible for the cost of transporting the goods, including insurance,
taxes and duties

Where the goods should be picked up from and transported to

Who is responsible for the goods at each step during transportation

Inco Terms are also defined by International Chamber of Commerce

(ICC)

INCOTERMS

EXW (Ex Works)

FCA (Free Carrier)

CPT (Carriage Paid To)

CIP (Carriage and Insurance Paid)

DAT (Delivered at Terminal)

DAP (Delivered at Place)

DDP/DTP (Delivered Duty Paid)

FAS (Free Alongside Ship)

INCOTERMS

FOB (Free on Board)

CFR (Cost and Freight)

CIF (Cost, Insurance and Freight)