AF_CM02_ International Trade Procedures

Unit 2: Trade documents

In this second unit, you are going to find out what are the main trade documents required in an international transaction. You will also find the rules and tips for completing them.

The objectives you are expected to achieve are:

  1. To know the commercial and other trade documents required to make intra-community supplies and purchases or an import-export trade operation.
  2. Complete and process commercial documents,such as a proforma invoice, a commercial invoice,a packing list...

TO KNOW MORE
Here is an article that deals with the amount of documents required for an international transaction; the author, from the WB policy research, analyses the time cost to deal with all these trade documents.
/ The time costof documents to trade

1.1International commercial documents

In any international trade transaction there are some documents that are required in order to the carry out the correct operation procedure. This is also the case in national trade but the amount of commercial and additional trade documents is not the same, it is lower.

Belowis a summary of the main commercial documents used in international trade, in some occasions they are only required in trade with third countries but in the majority in both; intra-Community and third countries trade.

Proforma invoice:

With this document the seller provides a detailed offer of sale, either on its own initiative or as a result of a potential client request. Sometimes it works as an order. It must contain all information necessary to establish the terms and conditions of the trade (trader’s identification, a complete description of goods, price, delivery and payment terms...). If this offer is accepted, this will be the origin of a sales contract.

It usually has an expiration date after which the commercial offer will not have the same conditions.

The structure is the same as a commercial invoice but with the indication of proforma.

Here you have a website where you can download a template, in open office (free software), to produce your pro forma invoices.

/ Proforma invoice template

Commercial invoice:

It is an administrative document issued by the seller at the time of sale that has an accounting function for both the seller and the buyer. It’s common to write it in English for universality reasons.

If it is not a community sale, the buyer always needs this document to carry out customs formalities in the import country and it's also essential to carry out the export formalities in the origin country.

The commercial invoice is the buyer's evidence of acquiring asset ownership.

The commercial invoice must contain the information necessary to make it useful and appropriate to proceed to the office of the importing country.

It must contain:

  • Data of seller and buyer ( VAT identification number, name, address, …)
  • Date of issue
  • Exact description and quality of the goods
  • Unit price and global currency in which it is expressed
  • Marks, number of packages and packaging (pallets, boxes, drums, ...)
  • Gross weight, net weight and volume
  • Agreed Incoterm
  • Delivery form and place, payment form (bank account, deadline, …)
  • Reference the order or the proforma invoice
  • Origin of goods
  • TARIC or HS code
  • Means of transport and shipper
  • Any other information requested by the buyer or seller needs to be included...Exchange (purchase)

Here you have a website where you can download a template, in open office (free software), to create your commercial invoices.

/ Commercial invoice template

Packing list:

In this document the seller describes all the delivered goods. The packing list details the content of each package or unit load (in packages, containers, boxes...) and also shows the gross and net weight, the number of packets and the brand identification.

It always accompanies the commercial Invoice. Despite the fact that in community trade it is not compulsory, its use is widespread.

The following website provides you with more information about the packing list and also a template and some filled examples to help you completeyour packing list documents.

Packing list

IMPORTANT

These trade documents described above are used in both intra-Community and foreign trade. The number of issued copies depends on the transaction, thus there is no compulsory number to be issued. For example, the commercial invoice has to have, at least, three copies.

Other commercial documents:

There are other commercial documents that sometimes are used in a foreign trade transaction apart from the basic ones. These documents have to be issued depending on the destination country laws. Some examples are weight note, consular invoice and customs invoice.

A1. Practising creating a commercial invoice

In this activity you have to create a commercial invoice, you can use the template given in the content or your own.

Imagine you are the seller; your company is “Cheese House S.A”, located in La Seu d’Urgell (Lleida) Spain, 21 Majorstreet. Identification VAT number is ES A27071970.

The buyer is Cheese International, Ltd. Located in London State, Great Britain ZIP SW 15 OLT

VAT Identification is GB 458794289.

Transaction data:

  • Supply order (proforma invoice) number: SP100601
  • Date: 3rd of December, 2014.
  • Invoice number: GB0021/14
  • Payment terms:
  • Bank transfer to supplier bank, IBAN number: ES7777 8888 99 12345678910
  • Due date: 3rd January
  • Delivery terms:
  • Shipper: SCP Barcelona, Travesia de les Corts 5, (08190), Barcelona.
  • Main transport: By air.

Goods description:

  • Reference product number: 4009046
  • Content: 240 units of 120 days matured cheese.
  • TARIC code: 0406 90 00 00
  • United weight: 2,5kg
  • Unit price: 20 €
  • Net weight: 246,76 kg
  • Gross weight: 256,75 kg
  • Package: 12 units

Further information:

You can invent other data that you consider should be provided or that you need to create the document.

1.2Freight documents

In international trade, by definition, goods pass from one country of origin to a destination one, sometimes located thousands of kilometres away. For this reason, all aspects of transport and logistics operations are of great importance.

The documentation related to the transport is very important for the following reasons:

  • It is the proof of the goods received by the carrier (the person who delivers them to the rightful owner).
  • It is the evidence of the existence of a contract of carriage.
  • It allows the withdrawal of goods by the person who has title.
  • Some documents are allowed to be used as a credit title.

The most common documents, depending on the means of transport are:

  • Maritime transport: Bill of Lading (B/L) or Charter party (C/P)
  • road transport: Roadway Bill (CMR)
  • rail transport: Railway Bill (CIM)
  • Air transport: Airway Bill (AWB)
  • Multimodal transportation: FIATA multimodal Bill of Lading

TO KNOW MORE

To know a bit more about logistics and transport in international trade, the following video shows the EU online management tool that tracks the moment of goods imported from foreign countries or travelling through EU members. This tool called TRACES is really important to protect customers and to facilitate trade.

Traces: protecting customers, facilitating trade

1.3Customs documents

Single Administrative Document (SAD):

The SAD is the documentused in the EU within the framework of trade with third countries; thatis to say, for the exportation of goods from EU to foreign countries and for the importation of non-EU to EU.It is required as an administrative document to clear the goods at customs.

ATA Carnet:

This document is used for temporary admission and exportation. This international customs document permits the movement of goods between EU and foreign countries only for temporary purposes, not for sales. Thus, the admission in the delivery country is tax-free. For example, goods to be shown in an international fair, or when goods need to be re-exported on a specified date in the near future.

Certificate of Origin (CO):

Origin certificates are documents issued by the Chamber of Commerce or another government agency and filled in by the seller, to prove the origin of the goods in an international transaction; that is, to certify that the goods have been manufactured or produced in a certain country.

There are several trade agreements between EU and third countries; thesesometimes consist oftrade without any customs duty tax or with lower ones. For this reason, the CO is the key when applying the tariffs at customs on importation goods.

Examples of Certificates of Origin are:

EUR-1: This certificate is granted by the EU goods and justifies preferential origin with those countries with a preferential agreement. It's needed for trade between the EU and Mediterranean countries, ACP countries (Africa, Caribbean and Pacific, EFTA countries and OCT (overseas territories). It’s also needed for trade with between EU members and Ceuta, Melilla, because are territories out of EU customs territory.

FORM-A:This certification is issued by the countries which have signed "Generalised Scheme of Preferences" (GSP) when exporting goods to EU. This unilateral agreement allows underdeveloped or developing countries exporters to pay less or no duties on their exports to the EU so as to enhance this countries growth by giving better access to European markets.

Customs value declaration (DV-1):

In the EU the customs value declaration must be presented with the SAD when imported goods have to be cleared at customs, however it will be exempt unless goods exceed 10.000€ in value.

Now, you are ready to start practising some vocabulary related to international trade documents.

A2. Practising international trade documents’ names

Here you have a link to a crossword where you can practise in a funny way some important trade documents. It’s important for you to know that if it is a document where the name is formed by two words, you will need to put a hyphen between both words.

/ crossword of trade documents

1.4Insurance documents and specific certifications:

1.4.1. Insurance documents

International trade implies, as we have said, long distance transportation, so it’s necessary to protect goods from any risk, damage or lost along these routes. Depending on the agreed international commercial terms, the seller or the buyer will arrange the goods’ insurance. Insurance documents have to be presented with commercial and freight documents.

1.4.2. Specific certifications

There are other trade documents that are used depending on the goods, the seller’s or buyer’s needs or the country that the goods are going to be delivered to. In this case, the information about specific certifications should

Some examples of specific certifications are: quality certifications, export o import license, environmental certifications…

A3. True or false activity on trade documents

In this activity you have to analyse the followingstatements and decide whether they are true or false.In case they are some of them false, try to correct and make them true.

1)DV-1 is a customs document always used both in foreign trade and in intra-Community trade.

2) The proforma invoice sometimes has a deadline.

3)If you are an exporter and you are trading with a Caribbean country which has signed a free trade agreement with EU, you must show at customs the certificate of origin named FORM-A.

4)The proforma invoice and the commercial invoice could be used for the same purpose in a transaction because they have the same trade function.

5)It’s compulsory to include the original signature of the seller in the commercial invoice

6)The commercial invoice is a commercial document that is used in both foreign and intra-Community trade.

A4. Classifyingvocabulary of trade documents

After you have completed the three previous activities youshould know enough about trade documents;however you have to be sure that you use them in the correct transaction. Thus, you need to know if each document has to be used only in foreign trade or also in intra-Community trade.

Here you have a matching exercise to practise this content; you have to go to the link given below.In the web page, you will find two columns. You have to move the boxes in the right column, referred to the type of transaction (Foreign trade or both Intra-Community and foreign trade) with the suitable document in the left columns.

/ practise matching items in trade documents

A5. Finding the Spanish translation ofEnglish trade documents

This activity comes from the previous one. With the same trade documents given in the previous activity, you are required to translate or search for the corresponding one into your own language.

You can do this activity by fulfilling the greed given below.

Both, Intra-Community and foreign trade / Foreign trade only / Spanish translation

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AF_CM02_ International Trade Procedures / Unit 2