When we refer to documentation in the process of export, we usually refer to the preparation of documents which the shipper uses to collect money for the goods shipped. Therefore, this is the final of the transaction and an important step.
Documents are prepared according to terms of payment between exporter and his buyer. However, no matter it is L / C payment or DP, DA or open account, exporter must prepare his documents to satisfy the following parties:
(I) Exporter must prepare his documents to satisfy The Buyer’s Bank who has open the L/C to exporter if it is L/C payment, otherwise exporter will have delay in receiving the proceeds of the goods have shipped.
(ii) Exporter must prepare his documents to satisfy the customs otherwise the customs will make delay in clearing the goods through Customs.
(iii) Exporter must prepare his documents to satisfy the buyer giving him the correct information in all respect, particularly all the packing details in order to enable him to distribute the merchandise correctly to the retail stores.
Now, let us go through each piece of paper needed in the set of documents and note the essential information it should contain:
Commercial Invoice
This is the document that exporters use to collect money from their buyers. Therefore, it must contain the correct unit price with the indication of FOB the shipping port, or CIF or C&F at the shipping destination. If the terms used are FOB the shipping port, then it is simple and easy. The following example will satisfy the bank and the customs:
Style No. Quantity Description Unit price FOB Bangladesh Total FOB Amount
1234 1000 dzns Men’s 100% Cotton Woven Shirt US $ 80000.00 US $ 80000.00
Based on the above, the customs will impose duty on US$80000.00.
However, if the terms used are CIF destination, exporter must show how much freight and insurance premium paid so that duty is only imposed on the net FOB value, not the total CIF value, like this:
Style No. Quantity Description Unit price CIF New York Total CIF Amount
1234 1000 dzns Men’s 100% Cotton Woven Shirt US $ 86000.00 US $ 86000.00
For Customs purpose:
Total CIF Amount US $ 86000.00
Less Sea Freight Prepaid US $ 5000.00
Less Insurance Premium Prepaid US $ 1000
Total FOB Amount US $ 80000.00
When exporter shows the above CIF breakdown on the invoice, the customs will impose duty on the FOB value. However please note exporter has to be truthful about the sea freight amount and insurance premium. Exporter must get them from the Bill of Lading, where the freight amount prepaid is shown, and the insurance premium from the insurance company. Exporter cannot inflate these figures to save duty. Otherwise, Exporter may create delays or even bigger trouble for his buyer.
The second important thing in the preparation of invoice that the invoice must provide a full description of the merchandise so that the customs officer can determine what duty rate he should use.
Packing List
There is no hard and fast rule as to how exactly it should be prepared. Exporter can use his own format. As long as he can show the following, it will be acceptable:
• The contents of each of the cartons shipped, including the color and size assortment.
• The measurements and gross weight of each carton. Please note, some garments are subject to duty by percentage of the FOB value only, but some garments are subject to duty by percentage of the FOB value and weight (How much per kg). Therefore on packing list exporter must indicate the gross weight, net weight and net net weight clearly. (Full detail on “weight list” below.)
Weight List
Sometimes the buyer may ask for this on the L/C. If he does, then exporter should prepare it and submit it to the bank as one of the documents required for L/C negotiation. If buyer does not ask for it, then exporter should include this information in the packing list.
For arrangement of transportation, and for customs purpose, weight information is needed. However, exporter may put it on
• The invoice.
• The packing list,
• The weight list.
However, exporter does not have to repeat it in all these 3 documents to create extra work for his shipping department. He can handle the weight information as follows:
• If the L/C says such weight information is needed on the invoice, he should follow the L/C and put such information on the invoice, and repeat it on the packing list.
• If the L/C does not specify the need of weight information on the invoice, he may omit it on the invoice, but put it on the packing list.
• If the L/C requires a weight list, then he put the weight information on the weight list and repeats it on the packing list, but you may omit it on the invoice.
Weight information should truly be put on the packing list where it belongs, regardless of what the L/C says. However, if the L/C says it should be on the invoice, exporter should follow the L/C too. If the L/C requires a weight list, he should follow it also.
The weight information in question should consist of:
• Gross Weight: Gross weight means the weight of the goods including all packing materials. Exporter should provide weight per carton and the total weight of the shipment which should be the same as, or similar to that on the Bill of Lading
• Net Weight: Net weight means gross weight less only the export carton and inner boxes if used. Net weight will include the packing materials used for the individual piece of merchandise, For example, the individual poly bag, cardboard and paper hangtag etc.
• Net Net (Gross) Weight: Net Net weight means the weight of the merchandise excluding all packing materials. In other words, it is the weight of the garment without hangtag, price ticket or even a piece of pin. He should provide this information for each dz, each carton and for the whole shipment. Based on this information provided, weight duty, if any, will be paid.
If the L/C requires to provide Gross weight and net weight, he should know, it is Gross weight and Net Net weight needed, and he will provide Gross weight and Net Net weight, but call it Net weight on the document.
Net weight is needed for duty purpose; net weight is of no practical purpose it is for reference only.
Bill Of Lading
If the shipment is to be made on board, B/L (Bill of Lading) is usually used. In preparation of the B/L the most important thing is the use of the correct consignee and notifies party. Exporter should use the exact wording as stated on the L/C opened by his buyer so that he will not have any discrepancy against the L/C. In regard to the other aspect of the B/L, he can just follow the format as provided by the shipping line.
However sometimes the buyer’s L/C may require the exporter to do the following for their convenience:
• They want to send one original B/L to their customs broker directly by courier service, and submit the balance 2 original B/L to exporter’s bank for negotiation of their L/C.
• They also want to consign the shipment to them ( use their company name as the consignee) instead of consigning the shipment to their bank.
• Exporter send his buyer one of the 3 original Bills of Lading directly, outside of the bank channel, but in such case the B/L will have to be consigned to the L/C opening bank, and not the buyer.
• Exporter consigns, the shipment to the buyer or his broker, but in this case, exporter will not send him an original B/L. Exporter should send him a non-negotiable copy of the B/L.
From the above, exporter should understand that this particular buyer would want exporter to make him the legal owner of the goods and give him the title document (the B/L) before he pays for the goods. This means he is allowed by the exporter to take possession of the goods before he pays for them. If exporter’s documents are prepared in such a way that there no discrepancy whatever, the buyer must pay although he may delay payment for one to two weeks if he wishes. However, if discrepancies are found on exporter’s documents, he may refuse to pay until exporter takes legal action to force him to pay in court. Therefore, when exporter receives an L/C with such unfair terms, exporter should request his buyer to amend it.
Air Way Bill
Air way bill is used for air shipment, with similar function of B/L on board shipment. However, there is some important difference between Air waybill and Bill of Lading
On board shipments, the buyer needs at least one original B/L to take possession of the goods. However, on air shipments, the buyer does not need original Air waybill, or even a copy of the Air waybill to take possession of the goods. If the shipment is consigned to the buyer, the buyer can legally claim the goods from the airline. In fact, the airline will notify the buyer to claim the goods. As long as the buyer can identify himself as the consignee, he is allowed to take the goods from the airline.
Therefore, when exporter makes shipments by air, unless he has received payment up front, he should not consign the goods to the buyer. He should always consign the goods to the bank making the bank the legal owner of the goods. The bank will only pass the title to his buyer when his buyer pays the bank for the goods. When the bank passes the title to his buyer, it is responsible to pay him.
If by mistake, exporter has consigned the goods to his buyer, it is at his buyer mercy to pay him.
OTHER Documents
Other than the above mentioned documents, of course there are others to be prepared for negotiation of the L/C such as:
• Draft
• Beneficiary Statement
• Some kind of certificate
Other than the draft which is an instrument for the bank to collect the money from the buyer, the other documents are designed by the buyer or his bank to provide some extra protection for the buyer. Exporter just prepares them as instructed by the L/C to avoid discrepancies.
If the payment term agreed is not L/C, but D/P or D/A, then exporter just prepares documents needed by his buyer to enable him to take possession of the goods and pass the goods through customs. These documents are to be sent from exporter’s bank to his buyer’s bank for his buyer to pick up and pay his bank.
Export Documents Examination & Negotiation System
As per UCP-500, 1993 revision there are four types of credit. These areas are:
• Sight payment
• Deferred payment
• By acceptance
• Negotiation
Negotiation stands for payment of value to the exporter against the documents stipulated in the L/C. The bank giving the value is known as negotiating bank. Negotiating bank firstly examines the documents presented by the exporter. Upon satisfaction bank pays the value to the exporter. The export documents are mainly categorized into four groups:
• Transport Documents
• Insurance Documents
• Commercial invoice
• Other Documents
Other Documents include the following documents as required by the L/C:
• Inspection Certificate
• Certificate of Origin / GSP Certificate
• Packing list/ Weight list
• Shipping Certificate
• Phyto Sanitary Certificate / Food Inspection Certificate
• Health Certificate
• Certificate of Analysis
• Fumigate Certificate
• Radio Activity Certificate
As the negotiating bank is giving the value before repatriation of the export proceeds it is advisable to examine the documents with reasonable care whether any discrepancy (S) is observed in the documents. If documents are in order bank negotiates the same. Otherwise, bank gives the exporter reasonable time to remove the discrepancies or sends the documents on collection basis. Bank officers assigned for examining the export documents may use a checklist for their convenience.
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Documents are prepared according to terms of payment between exporter and his buyer. However, no matter it is L / C payment or DP, DA or open account, exporter must prepare his documents to satisfy the following parties:
(I) Exporter must prepare his documents to satisfy The Buyer’s Bank who has open the L/C to exporter if it is L/C payment, otherwise exporter will have delay in receiving the proceeds of the goods have shipped.
(ii) Exporter must prepare his documents to satisfy the customs otherwise the customs will make delay in clearing the goods through Customs.
(iii) Exporter must prepare his documents to satisfy the buyer giving him the correct information in all respect, particularly all the packing details in order to enable him to distribute the merchandise correctly to the retail stores.
Now, let us go through each piece of paper needed in the set of documents and note the essential information it should contain:
Commercial Invoice
This is the document that exporters use to collect money from their buyers. Therefore, it must contain the correct unit price with the indication of FOB the shipping port, or CIF or C&F at the shipping destination. If the terms used are FOB the shipping port, then it is simple and easy. The following example will satisfy the bank and the customs:
Style No. Quantity Description Unit price FOB Bangladesh Total FOB Amount
1234 1000 dzns Men’s 100% Cotton Woven Shirt US $ 80000.00 US $ 80000.00
Based on the above, the customs will impose duty on US$80000.00.
However, if the terms used are CIF destination, exporter must show how much freight and insurance premium paid so that duty is only imposed on the net FOB value, not the total CIF value, like this:
Style No. Quantity Description Unit price CIF New York Total CIF Amount
1234 1000 dzns Men’s 100% Cotton Woven Shirt US $ 86000.00 US $ 86000.00
For Customs purpose:
Total CIF Amount US $ 86000.00
Less Sea Freight Prepaid US $ 5000.00
Less Insurance Premium Prepaid US $ 1000
Total FOB Amount US $ 80000.00
When exporter shows the above CIF breakdown on the invoice, the customs will impose duty on the FOB value. However please note exporter has to be truthful about the sea freight amount and insurance premium. Exporter must get them from the Bill of Lading, where the freight amount prepaid is shown, and the insurance premium from the insurance company. Exporter cannot inflate these figures to save duty. Otherwise, Exporter may create delays or even bigger trouble for his buyer.
The second important thing in the preparation of invoice that the invoice must provide a full description of the merchandise so that the customs officer can determine what duty rate he should use.
Packing List
There is no hard and fast rule as to how exactly it should be prepared. Exporter can use his own format. As long as he can show the following, it will be acceptable:
• The contents of each of the cartons shipped, including the color and size assortment.
• The measurements and gross weight of each carton. Please note, some garments are subject to duty by percentage of the FOB value only, but some garments are subject to duty by percentage of the FOB value and weight (How much per kg). Therefore on packing list exporter must indicate the gross weight, net weight and net net weight clearly. (Full detail on “weight list” below.)
Weight List
Sometimes the buyer may ask for this on the L/C. If he does, then exporter should prepare it and submit it to the bank as one of the documents required for L/C negotiation. If buyer does not ask for it, then exporter should include this information in the packing list.
For arrangement of transportation, and for customs purpose, weight information is needed. However, exporter may put it on
• The invoice.
• The packing list,
• The weight list.
However, exporter does not have to repeat it in all these 3 documents to create extra work for his shipping department. He can handle the weight information as follows:
• If the L/C says such weight information is needed on the invoice, he should follow the L/C and put such information on the invoice, and repeat it on the packing list.
• If the L/C does not specify the need of weight information on the invoice, he may omit it on the invoice, but put it on the packing list.
• If the L/C requires a weight list, then he put the weight information on the weight list and repeats it on the packing list, but you may omit it on the invoice.
Weight information should truly be put on the packing list where it belongs, regardless of what the L/C says. However, if the L/C says it should be on the invoice, exporter should follow the L/C too. If the L/C requires a weight list, he should follow it also.
The weight information in question should consist of:
• Gross Weight: Gross weight means the weight of the goods including all packing materials. Exporter should provide weight per carton and the total weight of the shipment which should be the same as, or similar to that on the Bill of Lading
• Net Weight: Net weight means gross weight less only the export carton and inner boxes if used. Net weight will include the packing materials used for the individual piece of merchandise, For example, the individual poly bag, cardboard and paper hangtag etc.
• Net Net (Gross) Weight: Net Net weight means the weight of the merchandise excluding all packing materials. In other words, it is the weight of the garment without hangtag, price ticket or even a piece of pin. He should provide this information for each dz, each carton and for the whole shipment. Based on this information provided, weight duty, if any, will be paid.
If the L/C requires to provide Gross weight and net weight, he should know, it is Gross weight and Net Net weight needed, and he will provide Gross weight and Net Net weight, but call it Net weight on the document.
Net weight is needed for duty purpose; net weight is of no practical purpose it is for reference only.
Bill Of Lading
If the shipment is to be made on board, B/L (Bill of Lading) is usually used. In preparation of the B/L the most important thing is the use of the correct consignee and notifies party. Exporter should use the exact wording as stated on the L/C opened by his buyer so that he will not have any discrepancy against the L/C. In regard to the other aspect of the B/L, he can just follow the format as provided by the shipping line.
However sometimes the buyer’s L/C may require the exporter to do the following for their convenience:
• They want to send one original B/L to their customs broker directly by courier service, and submit the balance 2 original B/L to exporter’s bank for negotiation of their L/C.
• They also want to consign the shipment to them ( use their company name as the consignee) instead of consigning the shipment to their bank.
• Exporter send his buyer one of the 3 original Bills of Lading directly, outside of the bank channel, but in such case the B/L will have to be consigned to the L/C opening bank, and not the buyer.
• Exporter consigns, the shipment to the buyer or his broker, but in this case, exporter will not send him an original B/L. Exporter should send him a non-negotiable copy of the B/L.
From the above, exporter should understand that this particular buyer would want exporter to make him the legal owner of the goods and give him the title document (the B/L) before he pays for the goods. This means he is allowed by the exporter to take possession of the goods before he pays for them. If exporter’s documents are prepared in such a way that there no discrepancy whatever, the buyer must pay although he may delay payment for one to two weeks if he wishes. However, if discrepancies are found on exporter’s documents, he may refuse to pay until exporter takes legal action to force him to pay in court. Therefore, when exporter receives an L/C with such unfair terms, exporter should request his buyer to amend it.
Air Way Bill
Air way bill is used for air shipment, with similar function of B/L on board shipment. However, there is some important difference between Air waybill and Bill of Lading
On board shipments, the buyer needs at least one original B/L to take possession of the goods. However, on air shipments, the buyer does not need original Air waybill, or even a copy of the Air waybill to take possession of the goods. If the shipment is consigned to the buyer, the buyer can legally claim the goods from the airline. In fact, the airline will notify the buyer to claim the goods. As long as the buyer can identify himself as the consignee, he is allowed to take the goods from the airline.
Therefore, when exporter makes shipments by air, unless he has received payment up front, he should not consign the goods to the buyer. He should always consign the goods to the bank making the bank the legal owner of the goods. The bank will only pass the title to his buyer when his buyer pays the bank for the goods. When the bank passes the title to his buyer, it is responsible to pay him.
If by mistake, exporter has consigned the goods to his buyer, it is at his buyer mercy to pay him.
OTHER Documents
Other than the above mentioned documents, of course there are others to be prepared for negotiation of the L/C such as:
• Draft
• Beneficiary Statement
• Some kind of certificate
Other than the draft which is an instrument for the bank to collect the money from the buyer, the other documents are designed by the buyer or his bank to provide some extra protection for the buyer. Exporter just prepares them as instructed by the L/C to avoid discrepancies.
If the payment term agreed is not L/C, but D/P or D/A, then exporter just prepares documents needed by his buyer to enable him to take possession of the goods and pass the goods through customs. These documents are to be sent from exporter’s bank to his buyer’s bank for his buyer to pick up and pay his bank.
Export Documents Examination & Negotiation System
As per UCP-500, 1993 revision there are four types of credit. These areas are:
• Sight payment
• Deferred payment
• By acceptance
• Negotiation
Negotiation stands for payment of value to the exporter against the documents stipulated in the L/C. The bank giving the value is known as negotiating bank. Negotiating bank firstly examines the documents presented by the exporter. Upon satisfaction bank pays the value to the exporter. The export documents are mainly categorized into four groups:
• Transport Documents
• Insurance Documents
• Commercial invoice
• Other Documents
Other Documents include the following documents as required by the L/C:
• Inspection Certificate
• Certificate of Origin / GSP Certificate
• Packing list/ Weight list
• Shipping Certificate
• Phyto Sanitary Certificate / Food Inspection Certificate
• Health Certificate
• Certificate of Analysis
• Fumigate Certificate
• Radio Activity Certificate
As the negotiating bank is giving the value before repatriation of the export proceeds it is advisable to examine the documents with reasonable care whether any discrepancy (S) is observed in the documents. If documents are in order bank negotiates the same. Otherwise, bank gives the exporter reasonable time to remove the discrepancies or sends the documents on collection basis. Bank officers assigned for examining the export documents may use a checklist for their convenience.
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