Section Three Documents & Review

1. Section Three Documents & Review

2. Documents are sets of materials to justify the international trade and thus are the base for international settlement. In general, documents required in international settlement include drafts, invoices, B/L, insurance documents and others attached. They are useful in the following ways: Certificate of contract implementation Claims for cargo Basis for payment

3. Fundamental requirements for preparing documents mentioned are: Accuracy. Documents should be reported with the conformity with other documents related and certificates involved. Integrity. Documents should be integrated in terms of contents, copies and sets. Without delay. Submitting date under L/C should follow the shipment date and documents rendering date as well as validity of L/C. Good trim.

4. Banks under L/C as agencies rely upon documents to claim rights of customers on their behalf and to accomplish settlements in international trade. According to UCP600, only banks specified, confirming bank and issuing bank are responsible for the review of documents, and nor are other parties related. The review of documents is aimed to make decision on whether the documents are matched among each other, which entails banks compliance with such matching principle among certificates and documents.

5. L/C practice involves in only documents’ business. Over years, when banks refer to the matching principles, they could only review the careful but artificial conformity among L/C and documents required, which could be certified in various editions of UCP. Thus in practice, provided that the beneficiary submits documents with such minor discrepancy as word-spelling error with no ambiguity, the bank should

6. reject payment accordingly, which drives the L/C a means of payment refusal instead of a payment tool. Hot discussion and dissatisfaction concerning the matching principle follow. UCP 600 thus emphasizes non-conflict and non-contradiction as actual conformity and should not be taken by banks as the reason for payment refusal, which has greatly facilitated the review of documents.

7. Chapter 8 Draft, Invoice & Packing Document Learning target: 1. How to define documentary bills and invoices? 2. What do documentary bills and invoices serve for? 3. What are the main items involved in each document? 4. How are they being reviewed under L/C?

8. 8.1 Draft 8.1.1 Draft under collection and Draft under Letter of Credit Draft under collection refers to the commercial draft and financial bill as the certificate of payment claim issued by the exporter indicating his eligibility to collect payment and the dispatch of goods with other commercial documents attached to certify.

9. Draft under Letter of Credit refers to the unconditional order by the exporter to the bank, requiring the bank to which it is addressed to pay on demand or at a fixed future date a certain sum of money or to the order of the exporter himself or the person the exporter specifies. Drafts under Letter of Credit functions as the certificate of withdraw of money specified in Letter of Credit related.

10. 8.1.2 Attentions should be paid when preparing the draft. 1) Draft under L/C should follow its rules and regulation of L/C. 2) Draft under collection should be in accordance with international general practice related and rules of bills. 3) The amount and the currency should not conflict with L/C and the contract it affiliated with.

11. 8.1.3 Essentials of Draft Review Review of documents generally takes the draft and invoice as the first two documents to review and examine insurance and shipment documents with invoices as the reference. (1) Amount 1) The amount in draft could not exceed what L/C requirement. 2) The currency and amount in draft must in strict conformity with invoices’. 3) Amount in figures and words agree. (2) Tenor 1) Issuing date. The issuing date of documentary draft should not earlier than that of B/L and later than L/C validity.

12. 2) Presentation date. The presentation date is often the one specified in L/C. (3) Parties 1) Payee. Unless otherwise provided in L/C, the payee is the negotiating bank or the one to the order hereof. 2) Payer. The applicator should not be taken as the payer in accordance with regulations of L/C. Negotiating L/C requires draft drawn on it, so the issuing bank is the payer.

13. 3) Issuer. The issuer or his or her signature should be in strict conformity with the beneficiary of L/C. (4) Others 1) provided that the L/C requires wording of “DRAWINGCLAUSE”, the name of the issuing bank, L/C No. and the issuing date should be the same with L/C. 2) If the draft entails endorsement, endorsement should be made properly rather than be constrained. 3）unless otherwise provided in L/C，draft should not be issued with no right of resource.

14. 8.2 Invoices 8.2.1 Commercial Invoice Commercial invoice is the cargos manifest the exporter trades to the importer and the payment settlement between them. Commercial invoice functions as following: A manifest traded by the exporter to the importer; Certificate of accounting, valuating and inspection of goods at the importer’s side; One of document in a whole set of Customs declaration and clearance for either exporter or importer; Payment details substituting the draft; Details for other documents related.

15. 8.2.1.1 Invoice Preparing Commercial invoice contains the major items as invoice Number, its nomination, issuing date and issuer, the title, the mark, good description, quantity, unit price and total amount, among which the good description, unit price and total amount are critical to the functions outlined above. 1) Seller’ item should be the same with what the L/C and the contract regulate and filled with full name and address. 2) Buyer’s item is also called the consignee or the receipt, which should be the same with L/C applicator under L/C payment in case of no relevant regulations in L/C, or should be the buyer’s name in the contract or the ordered name under collection. 3) Invoice No. is fabricated by the exporter and should not to be forgotten, which is the No. of the draft for the same consignment.

16. 4) The issuing date of invoice should be later than that of the L/C’s issuing date and before the shipment date, or at least before the submitting date or expiry of L/C. 5) Place of departure and the destination should be filled in accordance with both L/C and B/L. 6) Transportation carriage item should show both carriage name and voyage No. after the advice from the carriers or agencies. 7) Marks should be written word by word in accordance with those in other documents. In case of no regulation in L/C, marks could be prepared in accordance with contract’s requirements. And provided that no such specification occurred in L/C and contract, marks could be printed to the seller’s will but be shown on all documents related in the same way.

17. Here below is the sample of invoice for reference (8-2).

19. 8.2.1.2 Inspection Essentials of invoice (1) Issuer. Under UCP600，the issuer is not required signature in invoice but required to certify that the issuing of invoice is taken by the beneficiary. (2) Receiver. Invoices often types words like “TO”，“SOLD TO MESSRS”, "FORACCOUNTAND RISK OF MESSRS", "CONSIGNED TO". The receipt of invoice can be name and address of importer the applicator if no specific regulation in L/C. (3) The description of goods should be the same with L/C’s. (4) The amount should not be more than L/C’s. The exceeding amount in invoice should be deducted to collection, unless otherwise provided in L/C.

20. 8.2.2 Customs Invoice Customs invoice is the document required in its necessity and form by the Customs at the importer’s end for Customs clearance and for the purposes as import totaling, reexamination of origin and importing commodities’ price make-up. Customs invoice is used to inspect the cargo listed for the importer evaluate and levy tariffs by the Customs, adopted as evidence of cargo origin and examination for the exporting price by the Custom. Customs invoice forms are specified particularly by Customs in importing countries and regions. Canada and America Customs invoices are the usual.

21. 8.2.3 Proforma Invoice Proforma invoice is an informal invoice same with commercial invoice in contents used for offer by the exporter. The word proforma” can be read in proforma invoice and thereof admits alterations in appliance with signed contract.

22. 8.2.4 Consular Invoice Consular invoice can be deemed as legal invoice or visa invoice, an invoice issued by the consular in exporting countries or neighboring regions across the importing countries. Consular invoice is taken for institution of Certificate of Origin and Import License and statistics collection for importing Customs.

23. 8.2.5 Manufacturer Invoice A manufacturer invoice can be defined as an invoice priced by local currency issued by the producer of exporting goods for importing Customs’ reference to price evaluating and tariffs levying.

24. 8.3 Packing Documents 8.3.1 General Concept Packing documents aim at showing details of cargo package, volume and measurement for the importer, Customs count and for commodity quarantine. Packing documents includes Packing List (P/L), Weigh List/Memo and Measurement List. Their contents are approximately the same with invoices but exclude unit price and total amount and focus on packing details. Gross weigh, net weight and measurement are the particulars. Here below is the sample of packing list for reference (8-6).

25. The packing list is a more detailed version of the commercial invoice but without price information. Generally speaking, the packing list should include the following elements: Name and address of seller Name of “packing list” Name and address of buyer Invoice number Order or contract number Date of issuance

26. Quantities and descriptions of the goods Shipping details including: weight of the goods, number of packages, and shipping marks and number Quantity and description of contents of each package, carton, crate or container Any other information as required in the documentary credit Here below is the sample for reference.

27. Summary Documents are sets of materials to justify the international trade and thus are the base for international settlement. Commercial invoice is the cargos manifest the exporter trades to the importer and the payment settlement between them. Customs invoice is the document required in its necessity and form by the Customs at the importer’s end for Customs clearance and for the purposes as import totaling, reexamination of origin and importing commodities’ price make-up.

28. Proforma invoice is an informal invoice same with commercial invoice in contents used for offer by the exporter. Consular invoice is taken for institution of Certificate of Origin and Import License and statistics collection for importing Customs. A manufacturer invoice can be defined as an invoice priced by local currency issued by the producer of exporting goods for importing Customs’ reference to price evaluating and tariffs levying.

29. Key Words Draft under collection 托收项下的汇票 Draft under letter of credit 信用证项下的汇票 Customs Invoice 海关发票 Proforma invoice 形式发票 Consular invoice 领事发票 Certified invoice 证实发票 Manufacturer Invoice 制造商发票 Bank invoice 银行发票 Packing list 装箱单 Packing document 包装单据