Essential Documents Used in Foreign Trade Transactions Worldwide

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Foreign Trade

Foreign trade can be described as the exchange of goods and services between nations. For smooth trades between these nations a few documents are necessary. We will be discussing these documents below.

Documents Used for Foreign Trade In Categories:

Shipping and Transportation Documents

1. Bill of Lading
2. Airway Bills
3. Shipping Note
4. Mate’s Receipt
5. Ship Manifest
6. Dock Lading Account
7. Mail Transfer

Customs and Legal Documents
8. Bill of Entry
9. Bill of Sight
10. Customs and Exercise Function
11. Dock Warrant

Invoices and Payment Documents
12. Consular Invoice
13. Export Invoice
14. Freight Note
15. Bill of Exchange

Certificates and Licenses
16. Certificate of Origin
17. License
18. Insurance Certificate

Other Relevant Documents
19. Indents
20. Calling Forward Note
21. Ship Report

Bill of Lading:

A Bill of Lading is a document that provides details of goods being transported between two countries.

It serves as evidence of shipment and acts as a document of title, allowing the holder to claim ownership of the goods.

Types of Bill of Lading:

1. Clean Bill of Lading:
   • This indicates that the goods are in good condition, free from any irregularities or damages.
2. Dirty or Foul Bill of Lading:
   • This type highlights that the goods have deficiencies, irregularities, or damages.

Purpose of a Bill of Lading:
A. To serve as evidence of shipment.
B. To act as proof of ownership.
C. To provide details of the parties involved in the transaction.
D. To show details of the goods being transported.

Air Waybills

The Air Waybill (AWB), also known as the Air Consignment Note (ACN), is the contractual document issued by an airline (or its agent) for the transportation of goods or cargo from one airport to another.

The cargo agent or the airline itself prepares and signs this contract by issuing the air waybill, which follows a standard format approved by the International Air Transport Association (IATA).

Shipping Note

A document submitted by the ship’s master to customs authorities upon arrival at a port. It contains details about the ship, crew, passengers, cargo, and the port of departure.

Goods cannot be offloaded until this report is received.

Dock Lading Account In Foreign Trade

A document issued to the ship’s master upon arrival at a port. It provides a reference number, details of the cargo, and records of any damaged goods.

 Mail Transfer In Foreign Trade

A mail transfer is a form of remittance communicated through telegram, telex, or fax.

In foreign payments, it refers to an order issued by a local bank to its overseas correspondent to make a payment.

Typically, the foreign creditor receives the payment via letter or airmail.

Bill of Sight In Foreign Trade

A document used in import trade when a full description of goods cannot initially be provided.

It allows the goods to be landed and inspected by customs while a complete description is submitted later.

Customs and Exercise Functions

A document lodged with customs authorities that specifies the value of exported goods and their destination country.

This information helps the Ministry of Trade calculate imports, exports, and the balance of trade.

Dock Warrant

This is a document acknowledging receipt of goods delivered to a warehouse.

It entitles the holder to take possession of the goods and confirms they are stored pending clearance or loading.

Export Invoice

A document sent by the exporter to the importer, providing a detailed summary of the goods dispatched.

It includes the list of goods, terms of sale, quantity, price, name of the ship, and the total amount payable.

Freight Note

A document issued by a shipping company to show the carriage charges for transporting a specific cargo on a specified journey.

It provides a breakdown of shipping costs for the consignment.

Bill of Exchange

A Bill of Exchange is a written, unconditional order addressed by one person to another, instructing the recipient to pay a specified sum of money either immediately or on a stated future date to the bearer or a designated individual.

Certificate of Origin

This is a document that certifies the origin of goods to be exported, indicating where they were produced and which country they belong to.

It is prepared by the exporter as required by the importing country. This document is particularly important when the importing country applies preferential tariffs to goods from specific nations.

For example, ECOWAS may impose preferential tariffs on goods originating from its member countries.

The purposes of the Certificate of Origin include:
A. Indicating the origin of the goods.
B. Serving as a tool for applying preferential tariffs.
C. Determining the outflow of foreign exchange to the country of origin.

Indent

In the context of foreign trade indent meaning; if the response to the letter of inquiry is satisfactory, the prospective importer can issue a purchase order.

Types of Indents

1. Open Indent
   • An open indent does not specify the name of any particular supplier. The agent is simply instructed to procure the required goods and oversee their shipment.
2. Closed Indent
   • A closed indent specifies the name of a particular supplier. The agent is obligated to procure the goods from that specific supplier and supervise their shipment.

Means of Payment In Foreign Trade

• Mail Transfer
  • This is a payment method where a bank sends an order via letter or air mail to its foreign agent to pay a foreign creditor a specific sum of money. It is similar to a cheque but cannot be transferred.
• Telegraphic Transfer
  • A method for settling international trade debts through a cable or telegraphic message sent by a bank in one country to another. It is one of the fastest methods of transferring money in foreign trade.
• Guaranteed Mail Transfer
  • Similar to mail transfer, but the remitting bank guarantees payment on the agreed date.
• Traveller’s Cheques
  • Orders drawn on commercial banks that travellers and businessmen can use to settle bills in other countries. Beneficiaries can obtain foreign currency to settle debts abroad while preventing misuse.
• Documentary Credit
  • A method of financing foreign trade where the importer opens a credit line in favor of the exporter at a bank in the exporter’s country. The exporter receives payment after presenting the required documents.
• Bank Draft
  • A secure payment instrument issued by a bank on behalf of the buyer, guaranteeing payment to the seller.
• Letter of Hypothecation
  • A document that gives the bank the right to sell goods pledged as security if the borrower defaults on payment. The letter is typically used when the bank is unable to obtain the goods on its own, without having received such a letter.
• Foreign Bill of Exchange
  • A negotiable instrument used in international trade where one party orders another to pay a specified amount to a third party on a particular date.

 Read also: Introduction To Commerce (Scope, Characteristics & Functions)