9 Documents Generated in Post Export Shipment Banking Activities

Embarking on an export venture involves a well-coordinated process, starting with the crucial step of securing an export order. Often synonymous with a ProForma Invoice or a Letter of Credit, an export order sets the stage by outlining agreed-upon terms and conditions between the exporter and importer. Before proceeding, the exporter carefully reviews the Export Order (EO) to ensure satisfaction. Only then do they delve into fulfilling the terms, carrying out activities in alignment with the agreement. This initial document lays the groundwork for a successful export transaction.

In the journey of international trade, exporters can tap into the Reserve Bank of India’s (RBI) export credit scheme for a crucial line of pre-shipment credit, aiding in managing working capital requirements. Post manufacturing or procurement of goods, the exporter navigates the procedural landscape. This involves obtaining central excise duty clearance and adhering to pre-shipment inspections mandated by Indian customs authorities. Upon successful completion, a designated body issues a certificate, paving the way for the involvement of clearing and forwarding agents. These agents play a pivotal role in preparing consignments for overseas shipment, ensuring compliance, and obtaining essential documentation for a smooth clearance process.

Essential Documentation in International Trade Banking Activities

Here are some of main documents in international trade banking activities:

1. Commercial Invoice

Purpose: A detailed document provided by the exporter to the buyer, specifying the type and quantity of goods shipped, their value, and other relevant information.

Key Information:

Description of Goods: A thorough and accurate description of the goods being shipped, including specifications, model numbers, and any other relevant details that help identify the products precisely.
Incoterms (International Commercial Terms): Clearly outlines the agreed-upon shipping terms, indicating the responsibilities and costs associated with the transportation of the goods from the seller to the buyer.
Packaging Information: Specifies the type of packaging used for the goods, providing details on how the items are packed, labeled, and secured for transit.

2. Certificate of Origin

Purpose: Confirms the origin of the goods being exported and is often required by customs authorities in the importing country to determine applicable tariffs and trade agreements.

Key Information:

Exporter Declaration: Includes a declaration by the exporter affirming the accuracy of the stated origin, ensuring compliance with international trade regulations and providing transparency to customs authorities.
Product Specifics: Specifies any unique characteristics or processes that contribute to the determination of the goods’ origin, ensuring a thorough understanding of the manufacturing or production methods involved.
Authorized Signatures and Seals: Bears the authorized signatures and seals of relevant authorities, adding an additional layer of authenticity to the document and verifying its legitimacy in the international trade context.

3. Marine Insurance Policy

Purpose: Provides insurance coverage for the goods during their transportation by sea, protecting against potential risks such as damage or loss.

Key Information:

Exclusions and Limitations: Clearly outlines any specific risks or circumstances excluded from coverage and sets limitations on the extent of protection, offering transparency to the insured party.
Premium Calculation: Explains how the insurance premium is calculated, taking into account factors such as the nature of the goods, shipping route, and the level of coverage desired, allowing for a clear understanding of associated costs.
Policy Duration: Specifies the period during which the insurance policy is valid, ensuring that the goods are covered for the entire duration of their sea transportation and facilitating timely renewal if necessary.

4. Bill of Exchange

Purpose: A written order from the exporter to the importer, instructing the latter to pay a specified amount at a predetermined future date.

Key Information:

Accepted and Endorsed: Indicates whether the bill of exchange has been accepted by the importer, signifying their agreement to the payment terms. It may also include any endorsements if the bill is transferred to another party.
Drawee’s Confirmation: Specifies the drawee’s confirmation of the correctness of the amount mentioned, providing assurance to both parties regarding the accuracy of the financial transaction.
Place of Payment: Specifies the location or financial institution where the payment is to be made, offering clarity on the logistical aspects of fulfilling the payment obligation.

5. Bill of Lading

Purpose: Acknowledges receipt of the goods for shipment and serves as a document of title, providing evidence of ownership and facilitating the transfer of goods between parties.

Key Information:

Container or Vessel Details: Specifies the details of the container or vessel used for transportation, including identification numbers, names, and other relevant information, aiding in tracking and logistics.
Delivery Instructions: Provides instructions on the delivery of goods at the destination, including any specific requirements or conditions that need to be met upon arrival, ensuring a smooth transfer from the carrier to the consignee.
Notations and Remarks: Contains any additional notations or remarks made during the transportation process, such as observations about the condition of the goods upon receipt or any incidents that occurred during shipment.

6. Packing List

Purpose: Provides a detailed breakdown of the contents of each package in the shipment, aiding in customs clearance and assisting the buyer in verifying the received goods.

Key Information:

Handling and Storage Instructions: Includes specific instructions for handling and storing the goods during transit and upon arrival, ensuring that the items are treated appropriately to prevent damage.
Harmonized System (HS) Codes: Indicates the Harmonized System codes for each item in the shipment, aiding customs officials in accurately classifying the goods and applying the correct tariffs or trade regulations.
Special Packaging Instructions: Specifies if any items require special packaging considerations, such as fragile goods needing additional cushioning, hazardous materials requiring specific labeling, or temperature-sensitive items needing climate-controlled packaging.

7. GR Form (Goods Received Form)

Purpose: Acknowledges the receipt of goods by the importer and is often required by customs authorities for clearance.

Key Information:

Inspection Results: Includes details on any inspections conducted upon receiving the goods, noting the condition of the items and ensuring they meet the specified quality standards.
Authorized Signatures: Features the authorized signatures of individuals responsible for verifying the receipt of goods, enhancing the document’s authenticity and confirming that the goods have been received as per the shipping documents.
Discrepancy Notifications: Specifies any discrepancies or variances observed during the goods’ inspection, alerting relevant parties to potential issues and facilitating the resolution of discrepancies through communication and documentation.

8. Letter of Credit

Purpose: A financial instrument issued by a bank on behalf of the buyer, guaranteeing payment to the seller upon the fulfillment of specified conditions.

Key Information:

Confirmation of Compliance: Specifies that the seller must comply with all the terms and conditions outlined in the letter of credit to receive payment, emphasizing the importance of adherence to the agreed-upon conditions.
Issuing Bank Details: Includes comprehensive information about the issuing bank, such as its name, location, and contact details, facilitating communication between the involved parties and ensuring clarity on the financial institution responsible for the letter of credit.
Clause for Amendments: Addresses the possibility of amendments to the letter of credit, providing a framework for making changes to terms, conditions, or other details with mutual agreement between the buyer and the seller.

9. Bank Certification

Purpose: A document issued by a bank to certify various aspects of the trade transaction, such as the authenticity of signatures, documents, or the financial standing of the parties involved.

Key Information:

Notary or Authentication Details: Specifies the notary or authentication details associated with the certification, including the date and location of the notarization or authentication, adding an additional layer of validation to the document.
Legal Compliance Assurance: Provides an assurance that the trade transaction and associated documents comply with relevant legal regulations, further enhancing the credibility and acceptance of the certification by authorities and other stakeholders.
Expiration or Validity Period: Specifies the expiration date or validity period of the bank certification, indicating the timeframe during which the document is considered valid and reliable, streamlining its use within the designated time frame.

These documents collectively ensure a smooth and secure post-export banking process by providing transparency, legal assurance, and financial security for all parties involved in international trade.

Final Words

The effective use of these nine documents is vital for a smooth post-export banking process in international trade. From the initial Export Order to the practicalities of marine insurance, each document serves a crucial role in ensuring transparency, following regulations, and securing financial transactions.

The collaboration between exporters and banks, supported by the Reserve Bank of India’s export credit scheme, underscores the importance of regulatory frameworks and financial tools. These essential documents, including commercial invoices, certificates of origin, bills of lading, and others, not only simplify transactions but also protect the interests of all involved parties. As exporters navigate through procedures, these documents represent the necessary steps for a successful and secure global trade experience.

Also Read : ECGC – Export Credit Guarantee Corporation of India: Safeguarding Exporters` Interests