Common trade documents in foreign trade
Common trade documents
Both buyers and sellers can issue contracts. If the seller issues it, it can be referred to as a Sales Confirmation, and if the buyer issues it, it can be referred to as a Purchase Confirmation. The contents of the contract include the names and addresses of both the buyer and seller, the signing time and place, the name of the traded goods, the trade terms, payment methods, breach of contract responsibilities, and additional terms. In theory, the contract should be in duplicate, with each party holding a signed original as proof. However, in international trade practice, this is not strictly enforced, and a faxed copy is generally accepted. More importantly, it depends on commercial credit, as well as practical means such as advance payments and letters of credit.
****2 Proforma Invoice****
A proforma invoice is an informal invoice. Sometimes, at the request of the importer, the exporter will issue a non-binding invoice that lists the names, specifications, and unit prices of the goods for sale. This is a form of quotation from the seller to the potential buyer. Sometimes, proforma invoices are also used by importers to apply for import licenses or approval for foreign exchange from their national trade management agencies or foreign exchange management agencies, or as a basis for applying for bank loans. Since the proforma invoice is not a formal invoice, it cannot be used for collection or negotiation. The unit prices listed on it are only estimates made by the importer based on the current situation, and have no final binding force for both parties. Therefore, the proforma invoice is only an estimate, and a formal commercial invoice must be drawn up separately for the final transaction. In actual business transactions, if the proforma invoice has the content of a quotation and constitutes a legal offer, it can replace the quotation and can even be used as a sales confirmation. Sales confirmation and proforma invoices can sometimes be interchangeable. For example, if a customer requests a proforma invoice from the exporter, many companies usually issue a sales contract or sales confirmation to the customer.
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- In export business, the commercial invoice should clearly list out the terms that may cause disputes. If a letter of credit is used, the terms on the letter of credit should be consistent with those on the commercial invoice. The format of the commercial invoice varies depending on the specific requirements of different countries and clients. Generally, it should include the words “Commercial Invoice”, the names and addresses of both the buyer and the seller, the description of the goods, the commercial invoice number, the contract date and number, the quantity, unit price and total amount, the trade terms, the payment method, the transportation method and the shipment period, etc. The purpose of the commercial invoice can be summarized as follows:
- ①As a quotation. ②As confirmation of sale. ③To enable the buyer to apply for: A. Import licenses. B. Foreign exchange licenses. C. Opening of letters of credit.
****3 Invoice (Invoice)** **
Or referred to as Commercial Invoice. The concept of “invoice” in foreign trade is completely different from that of domestic financial invoices. In foreign trade, an invoice is a document prepared by the seller of goods to illustrate the name, quantity, unit price, total value, and other information of the goods, as well as other information about the goods. Price is the primary content of the commercial invoice. The commercial invoice is generally written in English. It is a list of delivery prices issued by the exporting enterprise for the buyer to collect payment. It is the basis for the buyer and seller to deliver goods, receive goods, keep accounts, pay and clear customs. There is no unified format for the invoice, but the content is generally the same, mainly including: invoice number, date of issue, export contract number, letter of credit number, name and address of consignee, name and address of consignor, transportation mark, and the name, specification, quantity, packaging type, unit price, total value, shipment location and destination, etc. The content of the invoice must comply with the provisions of the sales contract. When using a letter of credit for payment, it must strictly comply with the provisions of the letter of credit, and there must be no slightest difference. In addition, the invoice generally needs to be officially signed by the consignor to take effect. The end of the invoice usually has the words “E&O.E.”, which means “errors and omissions excepted”, indicating that this invoice can be changed if there are any errors or omissions.
Function of Commercial Invoice:
(1) Commercial invoice is a legal proof of transaction and a certificate of goods sent by the seller to the buyer.
(2) Commercial invoice is a voucher for both parties to pay and record the payment of goods.
(3) Commercial invoice is a voucher for both parties to handle customs clearance and taxation.
(4) Commercial invoice is the basis for the seller to prepare other export documents.
(5) In the absence of using a bill of exchange, commercial invoice can replace it as a payment voucher.
In summary, the main function of an invoice is to provide importers with proof of receiving goods, recording transactions, paying loans, and as evidence for customs clearance and taxation.
Packing List and Weight List:
Packing list and weight list are supplementary documents of the commercial invoice. They are also prepared by the seller and mainly used to describe the packaging situation of the goods, including product name, quantity (number or box number), weight (net weight, gross weight), volume, buyer and seller, with gross weight and volume being the primary content. The packing list and weight list are also written in English, and the format is not limited. The packing list is mainly used for industrial products, and each package of goods is described in detail with its name, specification, etc., so that the customs inspection and importers can check them. The style is similar to that of the invoice, but the value of the goods does not need to be indicated. The weight list is mostly used for primary products priced by weight, indicating the weight of each item, and some also list the gross weight and net weight of each item. Its function is the same as that of the packing list.
****5 Bill of Landing (B/L)
Depending on the mode of transportation, it is divided into air waybill (AWB) and ocean bill of loading (B/L) and others. But in practice, ocean bill of loading is the most common, and air waybill is the second most common. When we talk about bill of landing, we usually refer to ocean bill of loading. It is a certificate issued by the captain or the shipping company or their agents, proving that the goods have been received, agreeing to transport the goods to the designated destination and deliver them to the consignee. The bill of landing is proof of ownership of the goods and is the core document provided by the seller. In China’s export business, foreign certification usually requires the provision of a “full set of clean on board bills of lading marked as freight prepaid and blank endorsed.” There is no fixed number of originals and copies of the bill of landing. According to convention, the bill of landing generally issues three originals and three copies, or the corresponding number of copies according to the consignee’s requirements. Any original can be used to pick up the goods. Once the goods have been picked up, the remaining original bill of landing becomes invalid. To ensure property rights, the consignee generally requires submission of a full set of original bills of landing. There is no limit to the number of copies of the bill of landing, and they can only be used as a reference and cannot be used to pick up the goods. The ways of signing the bill of landing include: original bill of landing, telegraphic bill of landing, and ocean bill of loading.
****6 Letter of Credit
A letter of credit is a document issued by a bank at the request of the importer, guaranteeing that the importer has the ability to pay the specified amount to the exporter. It is a conditional payment commitment from the bank.
A draft is a written order from the issuer to the payer, instructing the payer to pay a specific amount to the designated payee within a specified period (immediate or deferred). It is commonly used in letter of credit transactions, with the bank providing a blank draft for the exporter to fill out and the payer to sign to confirm payment.
****8 Insurance Policy and Insurance Certificate
They are the insurance contracts between the insurer (insurance company) and the insured (generally the importer or exporter) that serve as the basis for the insured to claim and the insurer to compensate in case of loss of insured goods within the scope of the insurance contract. The insurance policy (commonly known as “big insurance policy”) is a formal insurance contract, while the insurance certificate (commonly known as “small insurance policy”) is a simplified insurance contract. In actual business, most Chinese insurance companies issue insurance policies and use insurance certificates less frequently.
****9 Inspection Certificate
Various inspection certificates are used to prove the quality, quantity, weight, or sanitary conditions of goods. According to national regulations, some types of products are subject to mandatory inspection before import and export. In China, such certificates are generally issued by the China Inspection and Quarantine (CIQ). If the contract or letter of credit does not specify otherwise, the import and export companies or the manufacturing enterprises can issue the certificates according to different situations.
****10 Certificate of Origin
A Certificate of Origin is a document that certifies the origin of goods and is one of the main bases for the importing country’s customs to levy tariffs and conduct trade statistics. The importing country’s customs adopts different national policies and tariff treatments based on it. The Certificate of Origin can generally be divided into three categories: the general Certificate of Origin, the Generalized System of Preferences Certificate of Origin (also known as GSP Certificate of Origin Form A), and some professional Certificate of Origins. The general Certificate of Origin (CO) is the most commonly used document to prove the origin or place of manufacture of goods at the request of the importer. For example, the Chinese Certificate of Origin indicates that the goods originate from China, and the importing country grants different tariff treatments based on it. It is also a certificate for the exporting country to enjoy quota treatment and for the importing country to implement different trade policies for different exporting countries. In China, any export product that meets the requirements of the “Regulations of the People’s Republic of China on the Origin of Import and Export Goods” can apply for a general Certificate of Origin. The Generalized System of Preferences Certificate of Origin (GSP Certificate of Origin Form A) is a certificate that proves that the exported goods originate from the beneficiary country, issued at the request of the beneficiary country, and can make the goods enjoy universal preferential tariff treatment in the beneficiary country. The beneficiary countries of the Generalized System of Preferences include: the 27 EU countries (Netherlands, Belgium, Luxembourg, Denmark, the UK, Ireland, Germany, France, Italy, Greece, Portugal, Spain, Austria, Finland, Sweden, Poland, the Czech Republic, Slovakia, Latvia, Estonia, Lithuania, Hungary, Malta, Cyprus, Slovenia, Bulgaria, Romania), Norway, Switzerland, Turkey, Russia, Belarus, Ukraine, Kazakhstan, Japan, Canada, Australia, New Zealand, the United States, etc.
However, not all of the preferential treatments given by the Generalized System of Preferences (GSP) are offered to China. The United States, for example, does not offer GSP benefits to China. Therefore, a Form A is not required for exports to the United States. There is also a type of specialized certificate of origin, such as a textile certificate of origin. When exporting textiles to European Union countries, a textile certificate of origin is generally required. This type of certificate of origin is issued by the economic and trade commission (department, bureau) of the exporting country. Certificates of origin should be applied for before the date of shipment (generally referring to the date of departure of the vessel). C/O is generally written in English and should include the certificate number, shipper, consignee, port of destination, port of shipment, mode of transportation, destination country (region), shipping mark (filling in the shipping mark, or N/M if there is no shipping mark), commodity name, package quantity and type, commodity code (HS CODE), gross weight, invoice number and date, and exporter’s declaration, among other information. The contents of Form A are generally similar to those of C/O, with some minor differences. It is important to note that C/O and Form A should not be confused with one another. It can be understood in this way: Form A is only provided by specific developed countries for export, while C/O is provided for exports to other countries (generally countries that offer China most favored nation treatment, which is a much broader scope, considering that there are only a few developed countries in the world).
In China, certificates of origin are generally issued by the inspection and quarantine bureau or the China Council for the Promotion of International Trade, but only the inspection and quarantine bureau can issue Form A.
****1** 1 Export Collection Sales Invoice **
The export collection sales invoice is a foreign exchange income declaration document uniformly distributed by the State Administration of Foreign Exchange. Before export, it is obtained from the State Administration of Foreign Exchange, filled out according to the format, and submitted as one of the customs declaration documents to the customs. After customs clearance, it is stamped and returned. After receiving payment from abroad, it is submitted to the State Administration of Foreign Exchange together with the bank’s collection of foreign exchange receipts for verification, and then a tax refund can be processed.
****12** Customs Declaration Form **
The customs declaration form is a necessary document for customs clearance. It is filled out and submitted to the customs when exporting.
****13** Freight Document Certificates **
In addition to the bill of lading, there are also some commonly seen freight documents, such as the consignment note, the loading list, the delivery order, etc.
****Part 3** **
****(1) Consignment Note (Booking **Note or Booking Form/Booking Sheet) **
The consignment note is filled out by the consignor and is a document for applying for a berth from the carrier (shipping company) or its agent and handling the consignment of goods. The carrier accepts the consignment when it considers it appropriate based on the content of the consignment note, as well as the vessel’s route, ports of call, sailing schedule, and available space.
****(2) Shipping Order (S/O) or Booking Confirmation **
The shipping order is generally referred to as S/O and has different names for different shipping companies, such as stowage notice, booking confirmation, Booking Conformation, etc. When the consignor receives the S/O, it means that the shipping company has accepted the consignor’s transportation application, issued to the consignor, and it is a document that commands the captain to load the goods to be carried. The shipping order can be used as a basis for loading the ship, and is also one of the main documents for the shipper to apply for export goods declaration procedures with the customs, so the shipping order is also called the customs declaration. For the consignor, the shipping order is proof of the consignment of goods. For the shipping company or its agent, the shipping order is an instructive document notifying the carrier to accept the shipment of the goods.
****(3) Delivery Order (D/O) **
The delivery order, or D/O for short, is a voucher that the consignee can use to collect goods from the port’s loading and unloading department, by presenting the original bill of lading or the telegraphic release copy to the carrier or its agent.
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