EXPORT DOCUMENTS For International Letter of Credit

 EXPORT DOCUMENTS

Documents required for an international sale can vary significantly from transaction to transaction, depending on the destination and the product being shipped. At a minimum, there will be two documents: the invoice and the transport document. The buyer will usually provide the seller with a list of documents needed to get the goods into his country as expeditiously and inexpensively as possible. Some documentary requirements are not open to negotiation, as they are needed by the importer to clear customs at the port of destination. This presentation discusses documentation in relation to export letters of credit.

When the letter of credit payment method is used for an export sale, each document presented under the terms and conditions of the letter of credit must:

1)  Conform to all L/C terms and conditions.

2)  Comply with the UCP 500.

3)  Agree with the data content of every other document.

For the following documents listed, the number in parenthesis refers to the relevant UCP 500 article.

THE BILL OF EXCHANGE / DRAFT (UCP Article 9)

Almost every letter of credit presentation and documentary collection is accompanied by a draft. This demand for payment is drawn by the seller on the payee. The payee on a letter of credit draft is almost always a bank.  For a documentary collection it would be the buyer.

COMMERCIAL INVOICE (UCP Article 37)

The accounting document claiming payment from the buyer.

Normally an export invoice would include:

– Seller’s name and address

– Buyer’s name and address

– Issue Date

– Invoice Number

– Shipping marks and numbers

– Term of Sale: e.g. FOB, etc.

– Shipping information

– Info required by L/C

– Country of Origin

– L/C number

– Merchandise description, P.O. number, unit price, and total price

CONSULAR INVOICE / VISAED INVOICE (UCP Articles 20, 21)

For exchange control and balance of payments reasons, some countries do not allow the import of merchandise unless accompanied by a certificate issued by one of its officials in the exporter’s country. These certificates evidence that the shipment meets certain statutory or other regulations of the importing country. A visaed invoice is an original or copy of an invoice, which has been originally signed and/or stamped by a consulate official.

INSURANCE POLICY OR CERTIFICATE (UCP Article 34, 35, 36)

Every export sale should be covered by insurance. Who provides the coverage depends on the INCOTERM used. Insurance overage on exports is a complicated issue that we can not fully cover on this site.  For more information on export insurance, we suggest that you contact your business insurance agent or freight forwarder as to who can provide insurance on an as needed basis” or “by blanket policy” on an annual basis.

CERTIFICATES

When a letter of credit calls for a document to be issued as a “certificate”, that document must be signed.  Certificates come in a many different forms depending on the product and the country of destination. L/C’s often require that certificates be issued by reputable third party inspection surveyors such as the Societe Generale de Surveillance (SGS) or the US Department of Agriculture. It is important to remember that each certificate required by an L/C will increase the cost of goods sold. Some of the most common certificates are discussed below.

Certificates should always be issued before the goods are shipped. Certificates issued after the goods arrived in the country of import defeat the purpose of the letter of credit.

CERTIFICATE OF ORIGIN (UCP Articles 20, 21)

A signed statement certifying the country of origin of the goods being sold is sometimes required by regulation in the buyer’s country.  This document may be as simple as a certificate signed by the seller. Certain countries may require it to be issued by a third party such a Chamber of Commerce, or be notarized, legalized, or visaed by their Embassy or Consulate.

INSPECTION CERTIFICATE (UCP Articles 20, 21)

An independent firm would usually conduct the inspection to ensure that the merchandise conforms to the buyer’s criteria. Inspection certificates should be based on quantifiable criteria. When an L/C is the method of payment, the criteria should be specifically spelled out in the letter of credit.

WEIGHT LIST OR CERTIFICATE (UCP Articles 38, 20, 21)

Not synonymous to a packing list. This document breaks down the shipment by weight. This is generally needed only if a “certificate” is required.

USDA INSPECTION CERTIFICATE (UCP Articles 20, 21)

This certificate is issued by the US Department of Agriculture and covers grade and condition for agricultural products. It provides evidence that the produce was in good condition at the date and time of inspection and can be useful in the event of a damage claim.

PHYTOSANITARY CERTIFICATE (UCP Articles 20, 21)

Numerous foreign governments and buyers require a “phyto” for fresh plants and plant products. This certificate states that the product has been inspected and is free of harmful pests and plant diseases. They are issued by the USDA Animal and Plant Health Inspection Service.

PACKING LIST (UCP Articles 20, 21)

A mirror of the merchandise covered by the invoice, the packing list omit prices, but itemizes the merchandise by number of cartons, packages, etc., and the contents of each. It generally does not have to be signed unless called for in the L/C.

OTHER MISCELLANEOUS DOCUMENTS (UCP Articles 20, 21)

UCP 500 ARTICLE 21: “WHEN DOCUMENTS OTHER THAN TRANSPORT DOCUMENTS, INSURANCE DOCUMENTS AND COMMERCIAL INVOICES ARE CALLED FOR, THE CREDIT SHOULD STIPULATE BY WHOM SUCH DOCUMENTS ARE TO BE ISSUED AND THEIR WORDING OR DATA CONTENT. IF THE CREDIT DOES NOT SO STIPULATE, BANKS WILL ACCEPT SUCH DOCUMENTS AS PRESENTED, PROVIDED THAT THEIR

DATA IS NOT INCONSISTENT WITH ANY OTHER STIPULATED DOCUMENT PRESENTED.”

SELECTED REFERENCES TO DOCUMENTS IN THE UCP 500 DOCUMENT TOPIC UCP 500 ARTICLES

Authentication requirements – UCP 20

Copies of – UCP 20

Conforming – UCP 14

Content of – UCP 21

Documents v. Goods/ Services/ Performance – UCP 4

Dated prior to L/C issuance – UCP 22

Discrepancies – UCP 14

Examination – UCP 13

Fraudulent Documents – UCP 15

Issuer, ambiguity about – UCP 20

Lost Documents – UCP 16

Non-stipulated Documents – UCP 13

Originals – UCP 20

Required Documents –  UCP 5

Signature on – UCP 20

Stale Documents – UCP 43

Email: apply@grandcityinvestment.com
Website: https://grandcityinvestment.com
SKYPE: dr.williams09787