In Export Documentation it is necessary for clarity in essential elements fundamental to export. The letter of credit is a basic underlying requirement in its progress. It provides a dependable mode of payment.
A letter of credit symbolises:
- It is an undertaking by the bank to make payment.
- It has to be in writing.
- The bank is called the issuing bank.
- According to the steps set down by the buyer and his request to the issuing bank it is given to the seller called the beneficiary.
- With it the buyer instructs the bank to make payment to the beneficiary or give a draft i.e. bill of exchange.
- The amount for payment has to be specified.
- It has to be cleared within a fixed time against valid documents.
- The letter of credit may be revocable or irrevocable
Other methods of payment, for eg. by cash along with the order exist. Or by open account where the buyer on receiving goods at an agreed time remits payment.
For a safe and smooth journeys end of the export transaction furnishing dependable documentation guards against any future conflict.
Bill of lading
This is issued by a carrier as a receipt for goods to be transported to the point of disembarkation. It contains the covenants for transfer. A bill of lading is a document of title of the custody of the merchandise in its possession. The letter of credit determines the port of loading and the port of discharge. Further the letter of credit contains directions of the manner the goods have to be allocated which have to be strictly adhered to. Any overlying markings showing the defect in their packaging or condition results in the bill of lading being rejected.
All this shows that both the bill of lading and letter of credit have to be shielded with impeccable export documentation.
The exporter has to provide sound insurance to the buyer. Necessary insurance policy and certificates have to be issued. The export documentation has to be very sensitive to the extent of coverage and risk agreed upon between the parties from the very inception of their contract.
Export documentation process
An important feature of this process is the role of international freight forwarders. They act on behalf of the exporter to move cargo finally to the customer. Having inside knowledge about the peculiar, changing foreign rules and regulations relevant to shipping and trade. Inputs by them on freight costs, port charges, insurance, and fees governing different transactions help in preparing price quotations. Best and protective packing of merchandise can be supplied and arranged by them. They also assist in reviewing entire documentation process. They deal with cargo on its arrival at the port. They deal with customs brokers. Lastly they may forward the documents to the customer or paying the bank.
Export Declaration Number
The exporter is required to fill up at the port of export all the details describing the nature and content of his goods. The customs department after thoroughly going through these details issues an Export Declaration Number EDN.
Certificate of Origin
This witnesses the country where the goods sought to be exported have been manufactured.