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Commerce Notes

Documents used in International Trade explained

DOCUMENTS USED IN INTERNATIONAL TRADE

1.   Indent: This is an order by an importer to an agent requesting the agent to buy goods on behalf of the importer. There are two types:

  1. Open Indent: This is an order which gives the agent freedom to buy goods from any firm or manufacturer he considers suitable
  2. Closed Indent: In this order, the importer specifies the firm or manufacturer from whom the agent should buy the goods required.

2.   Bill of Lading: This is a document of title giving the holder a right to take possession of the goods to which it refers. It is the document of contract between the exporter and the shipping company (ship owner) for the carriage of goods to their destination. It is made out in triplicates.

The bill of lading contains the following information:

  1. The name of the ship carrying the goods (consignment)
  2. The shippers name – i.e. the name of the person sending the goods. In other words the consignor’s name.
  3. Full description of the goods i.e. quantity, type, etc.
  4. The names of the ports of embarkation (i.e. the port from which the ship is taking off and disembarkation (i.e. the port to which the ship is taking the goods)
  5. The rate of freight
  6. The name of the consignee i.e. the person receiving the goods
  7. The date of shipment e.t.c.

A bill of lading could be either:

  1. A clean bill of lading: This is a bill of lading signed without any qualification clause i.e. without any words to the effect that the goods are damaged. It is taken as proof that the goods were in good condition when loaded.
  • A dirty bill of lading (or foul bill of lading): Where a bill of lading bears qualifying clauses such as “two sack broken” or “one case damaged”, the bill of lading is referred to as a foul bill or dirty bill.

A dirty bill of lading is therefore a bill of lading which bears an endorsement by the master of a ship to the effect that the goods are defective.

EVALUATION

  1. List five information contained in a bill of lading.
  2. State two uses of indent in international trade.

IMPORTANCE (FUNCTIONS OR PURPOSE) OF THE BILL OF LADING
  1. It is a contract between the exporter and the shipping company. It is therefore an evidence of the contract to carry the goods.
  2. It is a document of title that shows the owner or buyer of the goods. It therefore gives power to the owner or consignee to obtain delivery of the goods.
  3. It serves as a receipt for the goods and thus establishes that the goods are on board the ship
  4. It is a document of evidence that the goods has been shipped
  5. It is a negotiable instrument. It is transferable only by endorsement and can therefore be used as security for loans.

3.      Consular Invoice: This is an invoice that has been signed by the consul of the country to which the goods is to be consigned. The invoice is signed to prevent understating the price so as to pay less customs duty.

A consular invoice is therefore a special invoice which customs authorities request from the importer to enable them to know the appropriate duties chargeable. The invoice will ensure correct payment of duties by showing the correct price of the goods. It is a special form of invoice legalized by a consul in an importing country.

PURPOSE OF CONSULAR INVOICE

  1. To prevent understatement of prices
  2. To ensure correct payment of customs duties

4. Certificate of Origin: This is a document signed by the customs officer of the exporting country to show the country from which the goods have been exported or where it originated from. This document is important when the importing country has a preferential tariff applicable only to certain countries e.g. ECOWAS member states.

Uses of the Certificate of Origin

  1. It shows where the goods come from
  2. It serves as an instrument for preferential tariff
  3. It helps to determine outflow of foreign exchange to the country of origin

5. Bill of Sight: This is a temporary document which enables goods to be examined by customs officials before the arrival of shipping documents.

A bill of sight is submitted to the customs authorities if a full description of the imported goods cannot be provided e.g. due to the non – arrival of shipping documents (i.e. bill of lading). It enables the goods to be landed and their inspection is done while a full description of the goods will be provided later.

6. Bill of entry: This is a document that contains detailed particulars (information) of all imported goods coming into the country. It provides the customs with particulars of goods imported.

7. Export/Import Licence: This is an authority to import or export given by the Ministry of Industry to an individual or company. It gives access to the importer to purchase foreign exchange for this purpose.

EVALUATION

  1. State three importance of the Certificate of Origin in International Trade.
  2. Write short notes on the following: A. Bill of Sight B. Bill of Entry

8. Letter of Hypothecation: This is a letter an exporter send together with the shipping document empowering a bank to sell the goods in the foreign country for the best price available if the importer fails to accept (or pay) the bill or pay for the goods.

9. Documentary Credit: This is a bill of exchange to which various shipping documents like bill of lading, export invoice and insurance policy are attached.

NB: The underlisted documents which are also in used in foreign trade have been mentioned in connection with other topics already taught.

  1. Ship’s Manifest
  2. Charter Party
  3. Export Invoice
  4. Freight Note
  5. Airway Bill/Consignment Note
  6. Dock Warrant
  7. Certificate of Insurance or Insurance Policy
  8. Shipping Note

EVALUATION

  1. Write short notes on the following showing their main uses in foreign trade A. Shipping Note B. Shipping Manifest C. Bill of Sight D. Dock Warrant (e) Bill of entry
  2. Explain the three types of Charter Party.

READING ASSIGNMENT

Essential Commerce for SSS by O.A. Longe Page 53 – 64

GENERAL EVALUATION QUESTIONS

  1. Give five reasons why small scale retail businesses may fail
  2. List five instances where a manufacturer may decide to sell his goods directly to the consumer
  3. State eight features of hawking
  4. Explain five reasons why tariffs are imposed on imports
  5. Explain five features of itinerant trading

WEEKEND ASSIGNMENT

  1. A contract of carriage is same as A. charter party B. consignment note C. delivery note D. ships manifest
  2. In international trade, _______ is used to show the exact country where the goods are imported A. bill  of lading B. consular invoice C. shipping note D. certificate of origin
  3. A “dirty bill” is used to indicate whether the goods arriving a port are ______ A. being awaited B. on transit C. damaged D. delivered
  4. A contract for the hire of ship is known as A. charter party B. ship brokers C. shipper’s council D. shipping conference
  5. A receipt given by a warehouse keeper for goods lodged in the warehouse is called A. consular invoice B. dividend warrant C. dock warrant D. pro forma invoice

THEORY

  1. List four documents used in Foreign Trade
  2. What is an Airway Bill

EVALUATION

1.         List three documents used in foreign trade

2.         Explain the use of the consular invoice in international trade.

READING ASSIGNMENT

Essential Commerce for SSS by O.A. Longe Page 53 – 64

GENERAL EVALUATION QUESTIONS

  1. Give five examples of small scale retail outlets
  2. Explain five reasons for the survival of small scale retailers
  3. State five aids to trade and explain how each facilitates trade
  4. Explain any five reasons why commerce is important in the life of a nation
  5. Illustrate with a labeled diagram the main divisions and subdivisions of production

WEEKEND ASSIGNMENT

  1. Direct exchange of goods for goods between two countries is known as A. counter trade B. entrepot trade C. barter trade D. multilateral trade
  2. In international trade, which of the following performs the same functions as the consignment note A. export license B. insurance certificate C. bill of lading D. certificate of origin
  3. The use of sealed large metal boxes for transporting goods is known as A. packaging B. standardization C. containerization D. bulk carrying
  4. A document completed by a ship’s captain which gives full details of goods carried on his ship for a particular voyage is known as A. bill of lading B. consignment C. ship manifest D. waybill
  5. Which of the following is used only in international trade A. Bill of Exchange B. Purchase Order C. Bill of lading D. Pro – formal Invoice

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