Procedure and Steps Involved in Import of Goods

Import Procedure:

Import trade refers to the purchase of goods from a foreign country. The procedure for import trade differs from country to country depending upon the import policy, statutory requirements and customs policies of different countries. In almost all countries of the world import trade is controlled by the government. The objectives of these controls are proper use of foreign exchange restrictions, protection of indigenous industries etc. The imports of goods have to follow a procedure. This procedure involves a number of steps.

The steps taken in import procedure are discussed as follows:

(i) Trade Enquiry:

The first stage in an import transaction, like any other transaction of purchase and sale relates to making trade enquiries. An enquiry is a written request from the intending buyer or his agent for information regarding the price and the terms on which the exporter will be able to supply goods.

The importer should mention in the enquiry all the details such as the goods required, their description, catalogue number or grade, size, weight and the quantity required. Similarly, the time and method of delivery, method of packing, terms and conditions in regard to payment should also be indicated.

In reply to this enquiry, the importer will receive a quotation from the exporter. The quotation contains the details as to the goods available, their quality etc., the price at which the goods will be supplied and the terms and conditions of the sale.

(ii) Procurement of Import Licence and Quota:

The import trade in India is controlled under the Imports and Exports (Control) Act, 1947. A person or a firm cannot import goods into India without a valid import licence. An import licence may be either general licence or specific licence. Under a general licence goods can be imported from any country, whereas a specific or individual licence authorises to import only from specific countries.

The Government of India declares its import policy in the Import Trade Control Policy Book called the Red Book. Every importer must first find out whether he can import the goods he wants or not, and how much of a certain class of goods he can import during the period covered by the relevant Red Book.

For the purpose of issuing licence, the importers are divided into three categories:

(a) Established importer,

(b) Actual users, and

(c) Registered exporters, i.e., those import under any of the export promotion schemes.

In order to obtain an import licence, the intending importer has to make an application in the prescribed form to the licensing authority. If the person imported goods of the class in which he is interested now during the basic period prescribed for such class, he is treated as an established importer.

An established importer can make an application to secure a Quota Certificate. The certificate specifies the quantity and value of goods which the importer can import. For this, he furnishes details of the goods imported in any one year in basic period prescribed for the goods together with documentary evidence for the same, including a certificate from a chartered accountant in the prescribed form certifying the c.i.f. value of the goods imported in the selected year.

The c.i.f. value includes the invoice price of the goods and the freight and insurance paid for the goods in transit. The quota certificate entitles the established importer to import upto the value indicated therein (called Quota) which is calculated on the basis of past imports. If the importer is an actual user, that is, he wants to import goods for his own use in industrial manufacturing process he has to obtain licence through the prescribed sponsoring authority.

The sponsoring authority certifies his requirements and recommends the grant of licence. In case of small industries having a capital of less than Rs. 5 lakhs, they have to apply for licences through the Director of Industries of the state where the industry is located or some other authority expressly prescribed by the Government.

Registered exporter importing against exports made under a scheme of export promotion and others have to obtain licence from the Chief Controller of Exports and Imports. The Government issues from time to time a list of commodities and products which can be imported by obtaining a general permission only. This is called as O.G.L. or Open General Licence list.

(iii) Obtaining Foreign Exchange:

After obtaining the licence (or quota, in case of an established importer), the importer has to make arrangement for obtaining necessary foreign exchange since the importer has to make payment for the imports in the currency of the exporting country.

The foreign exchange reserves in many countries are controlled by the Government and are released through its central bank. In India, the Exchange Control Department of the Reserve Bank of India deals with the foreign exchange. For this the importer has to submit an application in the prescribed form along-with the import licence to any exchange bank as per the provisions of Exchange Control Act.

The exchange bank endorses and forwards the applications to the Exchange Control Department of the Reserve Bank of India. The Reserve Bank of India sanctions the release of foreign exchange after scrutinizing the application on the basis of exchange policy of the Government of India in force at the time of application.

The importer gets the necessary foreign exchange from the exchange bank concerned. It is to be noted that whereas import licence is issued for a particular period, exchange is released only for a specific transaction. With liberalisation of economy, most of the restrictions have been removed as rupee has become convertible on current account.

(iv) Placing the Indent or Order:

After the initial formalities are over and the importer has obtained the licence quota and the necessary amount of foreign exchange, the next step in the import of goods is that of placing the order. This order is known as Indent. An indent is an order placed by an importer with an exporter for the supply of certain goods.

It contains the instructions from the importer as to the quantity and quality of goods required, method of forwarding them, nature of packing, mode of settling payment and the price etc. An indent is usually prepared in duplicate or triplicate. The indent may be of several types like open indent, closed indent and Confirmatory indent.

In open indent, all the necessary particulars of goods, price, etc. are not mentioned in the indent, the exporter has the discretion to complete the formalities, at his own end. On the other hand, if full particulars of goods, the price, the brand, packing, shipping, insurance etc. are mentioned clearly, it is called a closed indent. A confirmatory indent is one where an order is placed subject to the confirmation by the importer’s agent.

(v) Despatching a Letter of Credit:

Generally, foreign traders are not acquainted to each other and so the exporter before shipping the goods wants to be sure about the creditworthiness of the importer. The exporter wants to be sure that there is no risk of non-payment. Usually, for this purpose he asks the importers to send a letter of credit to him.

A letter of credit, popularly known as ‘L/C or ‘L.C is an undertaking by its issuer (usually importer’s bank) that the bills of exchange drawn by the foreign dealer, on the importer will be honoured on presentation upto a specified amount.

(vi) Obtaining Necessary Documents:

After despatching a letter of credit, the importer has not to do much. On receipt of the letter of credit, the exporter arranges for the shipment of goods and sends Advice Note to the importer immediately after the shipment of goods. An Advice Note is a document sent to a purchaser of goods to inform him that goods have been despatched. It may also indicate the probable date on which the ship is expected to reach the port of destination.

e importer for the invoice value of goods. The shipping documents such as the bill of lading, invoice, insurance policy, certificate of origin, consumer invoice etc., are also attached to the bill of exchange. Such bill of exchange with all these attached documents is called Documentary Bill. Documentary bill of exchange is forwarded to the importer through a foreign exchange bank which has a branch or an agent in the importer’s country for collecting the payment of the bill.

There are two types of documentary bills:

(a) D/P, D.P. (or Documents against payment) bills.

(b) D/A, D.A. (or Document against acceptance) bills.

If the bill of exchange is a D/P bill, then the documents of title of goods are delivered to the drawee (i.e., importer) only on the payment of the bill in full. D/P bill may be sight bill or usance bill. In case of sight bill, the payment has to be made immediately on the presentation of the bill. But usually a grace period of 24 hours is granted.

Usance bill is to be paid within a particular period after sight. If the bill is a D/A bill, then the documents of title of goods are released to the drawee on his acceptance of the bill and it is retained by the banker till the date of maturity. Usually 30 to 90 days are provided for the payment of the bill.

(vii) Customs Formalities and Clearing of Goods:

After receiving the documents of title of the goods, the importer’s only concern is to take delivery of the goods, when the ship arrives at the port and to bring them to his own place of business. The importer has to comply with many formalities for taking delivery of goods. Unless the following mentioned formalities are complied with, the goods lie in the custody of the Custom House.

(a) To obtain endorsement for delivery or delivery order:

When the ship carrying the goods arrives at the port, the importer, first of all, has to obtain the endorsement on the back of the bill of lading by the shipping company. Sometimes the shipping company, instead of endorsing the bill in his favour, issues a delivery order to him. This endorsement of delivery order will entitle the importer to take the delivery of the goods.

The shipping company makes this endorsement or issues the delivery order only after the payment of freight. If the exporter has not paid the freight, i.e., when the bill, of lading is marked freight forward, the importer has to pay the freight in order to get green signal for the delivery of goods.

(b) To pay Dock dues and obtain Port Trust Dues Receipts:

The importer has to submit two copies of a form known as ‘Application to import’ duly filled in to the ‘Lading and Shipping Dues Office’. This office levies a charge on all imported goods for services rendered by the dock authorities in connection with lading of goods. After paying the necessary charges, the importer receive back one copy of the application to import as a receipt ‘Port Trust Dues Receipt’.

(c) Bill of Entry:

The importer will then fill in form called Bill of Entry. This is a form supplied by the custom office and is to be filled in triplicate. The bill of entry contains the particulars regarding the name and address of the importer, the name of the ship, packages number, marks, quantity, value, description of goods, the name of the country wherefrom goods have been imported and custom duty payable.

The bill of entry forms are of three types and are printed in three colours-Black, Blue and Violet. A black form is used for non-dutiable or free goods, the blue form is used for goods to be sold within the country and the violet form is used for re-exportable goods, i.e., goods meant for re-export. The importer has to submit three forms of bill of entry along-with Port Trust Dues Receipt to the customs office.

(d) Bill of Sight:

If the importer is not is a position to supply the detailed particulars of goods because of insufficiency of information supplied to him by the exporter, he has to prepare a statement called a bill of sight. The bill of sight contains only the information possessed by the importer along-with a remark that he is not in a position to give complete information about the goods. The bill of sight enables him to open the package and examine the goods in the presence of custom officer so as to complete the bill of entry.

(e) To pay Customs or Import Duty:

There are three types of imported goods:

(i) Non dutiable or free goods,

(ii) Goods which are to be sold within the country or which are for home consumption, and

(iii) Re-exportable goods i.e. goods meant for re-export. If the goods are duty free, no import duty is to be paid at the custom office.

Custom authorities will permit the delivery of such goods after usual examination of the goods. But if the goods are liable for duty, the importer has to pay custom or import duty which may be based on weight or measurement of goods, called Specific Duty or on the value of imported goods Ad-valorem Ditty.

There are three types of import duties. On some goods quite low duties are levied and they are called revenue duties. On some others, quite high duties are charged to give protection to home industries against foreign competition. While goods imported from certain nations are given preferential treatment for the levy of import duties and in their case full protective duties are not charged.

(f) Bonded and Duty paid Warehouses:

The port trust and custom authorities maintain two types of warehouses-Bonded and Duty paid. These warehouses are situated near the dock and are very useful to importers who do not have godown of their own to store the imported goods or who, for business reasons, do not wish to carry them to their own godowns.

The goods on which the duty has already been paid by the importer can be kept in the duty paid warehouses for which a receipt called ‘warehouse receipt’ is issued to him. This receipt is a document of title and is transferable. The bonded warehouses are meant for goods on which duty has been paid by the importer. If the importer cannot pay the duty, he may keep the goods in Bonded warehouses for which he is issued a receipt, called ‘Dock Warrant’. Dock Warrant, also like warehouses receipt, is a document of title and is transferable.

The bonded warehouses are used by the importer when:

(i) He has no godown of his own.他没有自己的仓库

(ii) He cannot pay the duty immediately.

(iii) He wants to re-export the goods and thereby does not want to pay the duty.

(iv) He wants to pay the duty in installments.

A nominal rent is charged for the use of these warehouses. One special advantage of these warehouses is that the importer can sell the goods and transfer the title of goods merely by endorsing warehouse receipt or dock-warrant. This will save the importer from the trouble and expenses of carrying the goods from the warehouses to his godown.

(g) Appointment of clearing Agents:

By now we understand that the importer has to fulfill many legal formalities before he can take delivery of goods. The importer may take the delivery of the goods himself at the port. But it involves much of time, expenses and difficulty. Thus, to save himself from the botheration of complying with all the complicated formalities, the importer may appoint clearing agents for taking the delivery of the goods for him. Clearing agents are the specialised persons engaged in the work of performing various formalities required for taking the delivery of goods on behalf of others. They charge some remuneration on performing these valuable services.

(viii) Making the Payment:

The mode and time of making payment is determined according to the terms and conditions as agreed to earlier between the importer and the exporter. In case of a D/P bill the documents of title are released to the importer only on the payment of the bill in full. If the bill is a D/A bill, the documents of title of the goods are released to the importer on his acceptance of the bill. The bill is retained by the banker till the date of maturity. Usually, 30 to 90 days are allowed to the importer for making the payment of such bills.

(ix) Closing the Transactions:

The last step in the import trade procedure is closing the transaction. If the goods are to the satisfaction of the importer, the transaction is closed. But if he is not satisfied with the quality of goods or if there is any shortage, he will write to the exporter and settle the matter. In case the goods have been damaged in transit, he will claim compensation from the insurance company. The insurance company will pay him the compensation under an advice to the exporter.

In reality, an export exercise is concluded successfully only after the exporter has been able to deliver the consignment in accordance with the export contract and receive payment for the goods.

This involves practice of prescribed procedure to be performed (Branch 2000). The fact is that one does not need only to be very well informed about his/her export company, his/her products, his/her suppliers, his/her export chain, his/her market, the world market, but one also needs to know the export rules and terms, the different cultures that one targets and the final customers’ needs.

Then comes fulfilling these needs by the most competitive way and by adding value to one’s services. This is so because all sell the same products with minor changes , but what makes the difference is the method and the value added services one provides to the ultimate consumers. Simply speaking, that making an export company is an easy process, but making d successful and long lasting export company is a very difficult task Therefore, it seems pertinent now to make you learn the various steps’ involved in the processing of an export order.

These are listed as follows:

1. Having an Export Order:

Processing of an export order starts with the receipt of an export order. An export order, simply stated, means that there should be an agreement in the form of a document, between the exporter and importer before the exporter actually starts producing or procuring goods for shipment. Generally an export order may take the form of proforma invoice or purchase order or letter of credit. You have already learnt these just in the preceding section.

2. Examination and Confirmation of Order:

Having received an export order, the exporter should examine it with reference to the terms and conditions of the contract. In fact, this is the most crucial stage as all subsequent actions and reactions depend on the terms and conditions of the export order.

The examination of an export order, therefore, includes items like product description, terms of payment, terms of shipment, inspection and insurance requirement, documents realising payment and the last date of negotiation of documents with the bank. Having being satisfied with these, the export order is confirmed by the exporter.

3. Manufacturing or Procuring Goods:

The Reserve Bank of India (RBI), under the export credit (interest subsidy) scheme, extends pre-shipment credit to exporter to finance working capital needs for purchase of raw materials, processing them and converting them into finished goods for the purpose of exports. The exporter approaches the bank on the basis of laid down procedures for the pre-shipment credit. Having received credit, the exporter starts to manufacture / procure and pack the goods for shipment overseas.

4. Clearance from Central Excise:

As soon as goods have been manufactured/ procured, the process for obtaining clearance from central excise duty starts. The Central Excise and Sale Act of India and the related rules provide the refund of excise duty paid. There are two alternative schemes whereby 100 per cent rebate on duty is given to export products on the submission of the proof of shipment.

The first scheme is to make payment of the excise duty at the time of removing the export consignment from the factory and file a claim for rebate of duty after exportation of goods. The second scheme is to remove goods from factory/warehouse without payment but under an appropriate bond with the excise authorities. The exporter needs to apply on a form known as AR4 or AR4A to the Central Excise Range Superintendent for obtaining excise clearance.

Form A is filed when goods are to be cleared after examination by the excise inspector. In all other cases, form AR4A is filed.

5. Pre-Shipment Inspection:

There are number of-goods whose export requires quality certification as per the Government of India’s notification. Consequently, the Indian custom authorities will require the submission of an inspection certificate issued by the competent and designated authority before permitting the shipment of goods takes place.

Inspection of export goods may be conducted under:

(i) Consignment-wise Inspection

(ii) In-process Quality Control, and

(iii) Self-Certification.

The Inspection Certificate is issued in triplicate. The original copy is for the customs verification. The second copy of the certificate is sent to the importer and the third copy remains with the exporter for his reference purpose.

6. Appointment of Clearing and Forwarding Agents:

On completion of the process of obtaining the Inspection Certificate from the custom agencies, the exporter appoints clearing and forwarding agents who perform a number of functions on behalf of the exporter.

The main functions performed by these agents include packing, marking and labeling of consignment, arrangement for transport to the port arrangement for shipment overseas, customs clearance of cargo, procurement of transport and other documents.

In order to facilitate the exporter in discharging his duties, the following documents are submitted to the agent:

(i) Commercial invoice in 8-10 copies

(ii) Customs Declaration Form in triplicate

(iii) Packing list

(iv) Letter of Credit (original)

(v) Inspection Certificate (original)

(vi) G.R. Form (in original and duplicate)

(vii) AR4/ AR4A (in original and duplicate)

(viii) GP-l/GP-2 (original)

(ix) Railway Receipt/Lorry Way Bill, as the case may be

7. Goods to Port of Shipment:

ADVERTISEMENTS:

After the excise clearance and pre-shipment inspection formalities are completed, the goods to be exported are packed, marked and labeled. Proper marking, labeling and packing help quick and safe transportation of goods. The export department takes steps to reserve space on the ship through which goods are to be sent to the importer.

The shipping space can be reserved either through the clearing and forwarding agent or freight broker who works on behalf of the shipping company or directly from the shipping company. Once the space is reserved, the shipping company issues a document known as Shipping Order. This order serves as a proof of space reservation.

If goods are sent through a road carrier to the port, no specific formality is involved. In case, the goods are sent by rail to the port of shipment, allotment of wagon needs to be obtained from the Railway Board.

The following documents are submitted to the booking railway yard/station:

(i) Forwarding Note (A Railway Document)

(ii) Shipping Order

(iii) Wagon Registration Fee Receipt

Once wagons have been allotted, goods are loaded, for which railways will issue Railway Receipt (RR). Then, this receipt and other documents are sent to the clearing and forwarding agent at the port town. At the same time, the production/export department takes insurance policy in duplicate for risk coverage (internal as well as overseas) for the goods to be exported.

8. Port Formalities and Customs Clearance:

Having received the documents from the export department, the clearing and forwarding agent takes delivery of the cargo from the railway station or the road transport company and stores it in the warehouse. He also obtains customs clearance and permission from the port authorities to bring the cargo into the shipment shed.

The custom department grants permission for export at the office of the customs and physical verification of goods in the shipment shed. The clearance for export is given on the Shipping Bill.

The clearing and forwarding agent is required to submit the following documents with the Customs House for obtaining customs clearance and permission:

(i) Shipping Bill

(ii) Contract Form

(iii) Letter of Credit, if applicable

(iv) Commercial Invoice

(v) GR Form

(vi) Inspection Certificate

(vii) AR4/AR4A Form

(viii) Packing List, if needed

After receiving documents from the export department, the clearing and forwarding agent presents the Port Trust Document to the Shed Superintendent of the port. He obtains carting order bringing the cargo to the transit shed for physical examination by the Dock Appraiser.

The Dock Appraiser is presented the following documents to facilitate him in physical examination of export goods:

(i) Shipping Bill

(ii) Commercial Invoice

(iii) Packing List

(iv) AR4/ AR4A Form and Gate Pass

(v) GR Form (duplicate)

(vi) Inspection Certificate (original)

The Dock Appraiser, after making examination, makes ‘Let Export’ endorsement on the duplicate copy of the Shipping Bill and hands over it to the Forwarding Agent. All these documents are presented to the Preventive Officer who puts an endorsement ‘Let Ship’ on the duplicate copy of the Shipping Bill. The preventive officer supervises the loading of cargo on board the vessel.

After the goods are loaded on board the vessel, the captain of the ship issues a receipt known as ‘Mate’s Receipt’ to the Shed Superintendent of the port concern. The forwarding, agent after paying port charges, takes the delivery of the ‘Mate Receipt’. He submits to Shipping Company and requests it to issue the Bill of Lading.

9. Dispatch of Documents by Forwarding Agent to the Exporter:

After obtaining the Bill of Lading from the Shipping Company, the clearing and forwarding agent dispatches all the documents to his / her exporter.

These documents include:

(i) Commercial Invoice (attested by the customs)

(ii) Export Promotion Copy

(iii) Drawback Copy

(iv) Clean on Board Bill of Lading

(v) Letter of Credit

(vi) AR4/ AR4A and Gate Pass

(vii) GR Form (in duplicate)

10. Certificate of Origin:

On receipt of above documents from the forwarding agent, the exporter now applies to the Chamber of Commerce for a Certificate of Origin and obtains it. If the goods are exported to countries offering GSP concessions, the exporter needs to procure the GSP Certificate of Origin from the concerned authority like Export Inspection Agency.

11. Dispatch of Shipment Advice to the Importer:

At last, the exporter sends ‘Shipment Advice’ to the importer intimating the date of shipment of the consignment by a named vessel and its expected time of arrival at the destination port of the importer.

The following documents are also sent to the importer to facilitate him for taking delivery of the’ consignment:

(i) Bill of Lading (non-negotiable copy)

(ii) Commercial Invoice

(iii) Packing List

(iv) Customs Invoice

12. Submission of Documents to Bank:

At the end of the process, the exporter presents the following documents to his bank for realisation of his amount due to the importer:

(i) Commercial Invoice’

(ii) Certificate of Origin

(iii) Packing List

(iv) Letter of Credit

(v) Marine Insurance Policy

(vi) GR Form

(vii) Bill of Lading

(viii) Bill of Exchange

(ix) Bank Certification

(x) Commercial Invoice

13. Claiming Export Incentives:

On completion of the processing of an export order at the three levels of shipment i.e., pre-shipment, shipment and post-shipment, the exporter claims for export incentives admissible to him / her.

7 Important Documents Used in Import Trade

Some of the most important documents used in import trade are as follows: (i) Indent (ii) Bill of Lading (iii) Bill of Entry (iv) Letter of Credit (v) Bill of Sight (vi) Dock Challan (vii) Dock Warrant.

There are many documents used in import trade which have already been discussed in the Import Procedure.

To name a few, the most important documents used in import trade are:

(i) Indent:

An indent is an order placed by an importer with the exporter for the supply of certain goods. It is usually prepared in duplicate or triplicate. The indent may be of several types like open indent, closed indent and confirmatory indent.

An indent contains the following information:

(a) Quantity of goods to be imported

(b) Quality of goods

(c) Method of forwarding the goods

(d) Nature of packing

(e) Mode of setting payment

(f) Price to be charged

(g) Sale of delivery

(ii) Bill of Lading:

It is an acknowledgement of receipt of goods on board of the ship. It contains terms and conditions on which the goods are to be taken to the port of destination. The exporter sends one copy of bill of lading to the importer enabling him to clear the goods from the ship.

(iii) Bill of Entry:

This is a form supplied by the custom office to the importer and is to be filled in triplicate.

The bill of entry contains following particulars:(a) Name and address of the importer

(b) Name of the ship

(c) Package number

(d) Marks on the package 

(f) Quantity and value of goods

(g) Name, address and country of the exporter

(h) Port of destination

(i) Custom duty payable

(iv) Letter of Credit:

A letter of credit, popularly known as ‘L/C or ‘L.C:’ is an undertaking by the issuer (usually importer’s bank) that the bills of exchange drawn by the foreign dealer on the importer will he honoured on presentation up to a specified amount. Letter of credit is needed because exporter wants to be sure that payments will be made as agreed by the importer.

(v) Bill of Sight:

If the importer is not in a position to supply the detailed particulars of goods because of insufficient information supplied by the exporter, he (importer) has to prepare a statement called ‘bill of sight’. The bill of sight contains only the information possessed by the importer along-with a remark that he is not in a position to give complete information about the goods. The bill of sight enables him to open the package and examine the goods in the presence of custom officer so as to complete the bill of entry.

(vi) Dock Challan:

It is a form to be filled by the importer or his clearing agent in the dock for payment of dock charges. Dock charges are paid when all the formalities of the customs are completed. The goods imported will be delivered only when dock charges are paid.

(vii) Dock Warrant:

This is document issued by Warehouse keepers to the persons who have deposited the goods with them.

Import Trade: Special Document # 1. Bill of Lading:

This is the most important document accompanying bills of exchange drawn under letters of credit. The Bill of Lading is the evidence that the goods have been dispatched. It gives the importer title to the goods and enables him to claim them on arrival at the destination.

A Bill of Lading is signed by the master of a ship or by the ship owners or their agents. The implication of signing a bill of lading is that the signatory acknowledges the receipt of certain specified goods to be delivered to the consignee. The bill specifies the amount of shipment, the destination and the condition under which goods are received for carriage.

A Bill of Lading looked at from other angle, is a receipt for goods delivered to carrier for transportation of a contract between the shipper and the carrier for transportation of the goods and their delivery to the consignee or his order and a document of title to the goods.

The bills of lading are prepared by the shipper on the forms supplied by the shipping company. A bill contains the date and place of shipment, the name of the carrying vessel, the name of the consignor and the consignee, the port of destination, the number, contents and identification mark of the goods shipped and the amount of freight ‘paid’ or to be paid.

The particular of the packages, their markings, their contents and the amount of the freight are entered in the space provided for them.

Usually four sets of bills of lading are prepared; three are signed and one is left unsigned. The unsigned one is retained by the ship’s master for his own use. In commercial contracts, usually three copies—though more or less may be prepared—are signed. Goods are released only on surrender of the bill at the destination and where one copy has been surrendered, the other copies become void.

eristics of a negotiable instrument transferable by endorsement. Goods shipped under a bill of lading are often deliverable to a person named or to his order or just to order in which case the title to the goods can be, transferred by endorsement and delivery of the bill of lading.

A bill of lading without having any name of a particular consignee or delivery constitutes transference. The bill of lading is not a negotiable instrument in exactly the same sense as a bill of exchange. When a bill of lading is transferred, the transferee acquires no better title than the transferer. In the case of a wholly negotiable instrument, the transferee gets a title without any defect of the transferer’s title.

The true nature of a bill of lading is that it is only a quasi-negotiable instrument. It is transferred “subject to equities,” i.e. even if the transferee takes it for value and in good faith, he will not have the goods if the instrument is in any affected by fraud.

When freight is payable by the consignor in freight trade contract, the bill of lading must be marked “freight paid” or freight receipt must be attached. If words such as “freight pre-payable” or “freight to be prepaid” or words to similar effect appear on the bill, they will not be accepted as evidence of the payment of the freight.

The lieu on the goods lies with the carriers and he has the right not to deliver the goods until the charges are paid. Therefore, one who is in possession of a bill of lading for consideration acquires the document subject to the carrier’s lieu representing his charges.

A bill of lading which indicates that the goods are in apparent good condition without any qualification, is known as a “clean” bill of lading. If, on the other hand, the bill bears some remark relating to a defect in packing, it is known as a ‘foul’ bill of lading. It is not an acceptable document unless specifically provided for in the foreign trade contract.

Import Trade: Special Document # 2. Invoices and Certificates:

The commercial invoice, the consular invoice, the certificate o origin and the packing list are the documents that accompany bill of exchange drawn under letters of credit. These invoices and certificates contain the detailed descriptions of the goods shipped, their prices and other charges, the country of origin of the goods and other particulars of the transaction.

The documents to be included and their form are decided in terms of contract between the parties (the exporters and the importer).

Comercial Invoice:

It is a book keeping device for both the seller and the buyer and n a document of title. It is not negotiable. This invoice exercises control on accuracy as well as a check of actual goods against the invoice and the invoice against the copy of the order.

It also enables to check whether the agreed price has been changed and costs of damage have been calculated. In case a letter of credit is used, banks check invoice against the letter of credit. Any excess amount in the invoice indicates inaccuracy, this understanding or deliberative overcharge the invoice, by the seller which is brought to the notice of the buyer rectification.

Certificate of Origin:

The certificate of Origin is a declaration testifying the origin of exports. The laws of some countries require a certificate of origin of imported goods before clearance by customs and assessment of duty. This is required where goods from certain countries receive preferential treatment or where there is prohibition of goods partially or totally from some countries.

Where the certificate of origin is endorsed on the back of the relative invoice, the whole document is known as “Certified Invoice”. The certificate is signed by the shipper and is countersigned by some authority appointed or recognized for the purpose (say the secretary of a chamber of commerce).

Packing List:

This list indicates the exact nature, quantity and quality of the contents of each package in a shipment. This enables the importer to check whether goods are according to the order he has placed. Bank may require such a list. Packing lists facilitate customs clearance also. In International purchasing, Marine Insurance policy is very important. ‘Perils of the Sea’ are insured against.

Marking of Packages indicate the exact nature, quantity and quality of the contents of each package in a shipment. To identify and check the goods by the importer, marking of packages are necessary. Banks may need markings; customs clearance also needs markings of Packages.

Import Trade: Special Document # 3. Letter of Credit:

The importer is asked to open a “Letter of Credit” with a bank. The banker issues a ‘letter’ addressed to the exporter authorizing him o ship the goods and draw the sight bill of exchange on the banker, ‘he importer must have an account opened at the bank or he must exposit the requisite amount with it before he can ask the bank to open “Letter of Credit”.

As soon as the exporter receives a Letter of credit, he presents a sight documentary bill to a banker who pays him immediately the amount of the bill.

Features of a Letter of Credit:

1. At the top of the Letter of Credit there is the name of the issuing bank. The exporter will decide whether the bank is acceptable to him.

2. The name and full address of the seller is mentioned.

3. The amount of credit is clearly stated.

4. The name of the importer is mentioned.

5. The tenor of the draft or drafts is clearly stated in the letter of credit.

6. The letter of credit mentions the documents to be attached to the draft drawn under it. It is prepared by the importer and given to the bank of issue.

7. There is the expiry date for the whole operation to be completed.

8. The term of credit, revocable or irrevocable, confirmed or unconfirmed is mentioned.

9. Any other condition demanded by the importer is mentioned in the Letter of Credit.