1.Revocable L/C
A revocable letter of credit is one which can be amended or cancelled by the
applicant or the issuing bank at any time, without prior notice, discussion or
agreement with the beneficiary. A revocableletter of credit offers no protection to
the beneficiary and is seldom if ever used.that is in the relationwith transferable lc.
2.Irrevocable L/C
An irrevocable letter of credit can not be amended or revoked without the
agreement of ALL the parties to the letter of credit, so it provides the assurance that
providing the beneficiary complies withthe terms, he/she will be paid for the goods
or services. Under UCP 500, a letter of credit is deemedirrevocable unless
otherwise stated .
3.Transferable L/C
Under a transferable letter of credit a beneficiary (the first beneficiary) can ask
theissuing/advising/confirming bank to transfer the letter of credit in whole or in
part to another party/iessuch as supplier/s (second beneficiary/ies). A transferable
letter of credit is usually used when the beneficiary is not the manufacturer/original
supplier of some/all of the goods/services. This processenables the beneficiary to
pay the manufacturer/original supplier by letter of credit. If the bank agrees,this
bank, referred to as the transferring bank, advises the letter of credit to the second
beneficiary/iesin the terms and conditions of the original letter of credit with
certain constraints defined in Article 48of UCP 500.In general, unless the letter of
credit states that it is transferable, it is considered non-transferable .
4.Revolving L/C
Although infrequently used today, revolving letters of credit were a tool created to
allow companiesconducting regular business to issue a letter of credit that could
roll-over without the companyhaving to reapply, thus enabling business flow to
continue without interruption as long as the termsand conditions, quantities, and
other transaction details did not change. In addition, if a letter of creditwere a
revolving one, there were few ways to stop it from rolling over; so, should a
conflict arise between the parties while the letter of credit was in place or should
the products change, there waslittle recourse for either party. In the business world
today, the fact is that, unless required by law or because of high risk, on-going
business is usually conducted without of letters of credit .
5.Standby L/C
As is the case with the revolving letter of credit, standby letters of credit are
infrequently used today.A standby letter of credit is one which is issued as a back-
up or form of insurance for the seller should the buyer default on the agreed-upon
payment terms. A standby letter of credit is issued in the sameway a documentary
credit is in that the collateral needed for issuance is required by the issuing bank
and the beneficiary must comply with every detail as outlined in the letter of credit.
The problem witht his instrument is that the applicant has no guarantee, other than
the sellers word, that the standby will not be drawn against even if payment is
made as agreed. This situation is challenging, especially if the letter of credit is
confirmed and the advising bank sees only documents pertaining to the shipment
as outlined in the letter of credit and has no knowledge of other payments being
made.
With this type of letter of credit, payment does not happen immediately after the documents are
accepted. Some agreed-to period of time passes before the seller receives cash. A deferred
payment letter of credit is obviously a better deal for buyers than for sellers. These are also
known as term or usance letters of credit.
Payment under a sight letter of credit occurs as soon as the beneficiary submits
acceptable documents to the appropriate bank. The bank has a few days to review
the documents and ensure that they meet the requirements in the letter of credit. If
the documents are compliant, payment is made immediately.
financial device
A letter of credit is a financial device developed by merchants as a
convenient and relatively safe mode of dealing with sales of goods to satisfy the
seemingly irreconcilable interests of the seller, who refuses to part with his
goods before he is paid, and a buyer, who wants to have control of the goods
before paying .
Redeemable
The issuing bank redeems the draft and pays cash to the seller if it finds
that the documents submitted by the seller conform with what the letter of
credit requires. The bank then obtains possession of the documents upon paying
the seller. The transaction is completed when the buyer reimburses the issuing
bank and acquires the documents entitling him to the goods. The seller gets paid
only if he delivers the documents of title over the goods while the buyer
acquires the said documents and control over the goods only after
reimbursing the bank.
ELECTRONIC DATA INTERCHANGE system
What is EDI ?
COPING WITH THE INCREASING IMPORTS/EXPORTS THE EXCISE & CUSTOMS HAS
COMPUTERIZED THE MANUAL PROCESS OF ASSESSMENT OF BILLS OF ENTRY,
CLEARING OF SHIPPING BILLS FOR EXPORT & ALL DOCUMENTS RELATING
TOIMPORTS & EXPORTSARE BEINGPROCESSED ON - LINE.
Advantages of EDI :
One of the greatest advantages of EDI is its ability to reduce the cost and time required for reproducing information
that the Exporters / Importers used to furnish on paper. This enables the Customs Department to redirect its
resources to more valuable activities, such as examining the consignments for prohibited goods, to ensure accuracy
and fairness in procedures, and finding ways to assist industry. Import / Export clearances, which once took days to
clear, can now be processed in minutes.
While Customs officers will always need to monitor the process and the physical environment for the subtleties and
anomalies a computer can't register, the facility takes care of the mundane and mechanical aspects to allow officers
to focus more on areas like smuggling, illegal Imports / Exports, Evasion of Duty etc. While much progress has
been made on this, the potential for further advances is huge.
The pilot project was launched in the year 1994-95 at Delhi Customs House which included Electronic
Data Interchange(EDI) as a key element for connecting all the players involved in international trade with
the Customs House electronically.After the successful implementation at Delhi Custom House, the
Customs decided to extend theservice to other customs houses. ICES was made operational for exports
processing at Inland Container Depot, Tughlaqabad in August, 1997; Sahar Air Customs, Mumbai in
November, 1997; Jawahar Lal Nehru Port Trust, New Mumbai in November, 1997; Chennai Air Customs
in December, 1997; Bangalore Air Customs in Feburary, 1998; and Container Freight Station, Patparganj
in March, 1998. Right now, the system is operational at 23 sites throughout the country.
Objectives of EDI
The main objectives set for Indian Customs EDI System by the Customs were:
Computerization of customs related functions including import/export, general manifest control, ex-
bond clearance of warehoused goods, goods imported against export promotion schemes, monitoring
of export promotion schemes.
Provide retrieval of information from other custom locations to have uniformity in assessment and
valuation
Provide management information system for policy making and its effective revenue and
pendency monitoring and
Provide quick and correct information on import/export statistics to Director General of Commercial
Intelligence and Statistics
Commercial Invoice
A document containing a record of the transaction between a seller (exporter) and a buyer
(importer), containing information such as a complete listing and description of the goods
including prices, discounts and quantities, and the delivery and payment terms. A commercial
invoice is often used by government's to determine the true value of goods for the assessment of
Custom duties, and must therefore conform to the regulations of the importing country.
1. It is a bill or record of transaction between seller (shipper) and buyer (recipient), listing a
complete description and sale price of the goods, the name and addresses of shipper,
recipient, and buyer (if not the recipient), and if possible, purchase order or reference
numbers for the transaction. Separate pricing for shipping and insurance should be
attached to the base price when applicable, as should the country of origin of the goods. If
the payment for the goods is secured by a Letter of Credit, all information, payment
terms, and commodity descriptions on the commercial invoice must agree with the Letter
of Credit instructions.
Even if the goods are not part of a sale, as in the case of a loan or transfer of goods to an
affiliate company, the commercial invoice serves the following functions.
2. The commercial invoice is the basis for foreign Customs' identification, classification,
duty/tax assessment, and final approval of entry of the goods. Accurate descriptions help
expedite the clearance process, first by providing OCS with the necessary information to
make customs entry, and secondly in helping Customs quickly identify your commodity.
To further help this identification, you may also want to include the first 6 digits of the
"Harmonized Tariff" classification (these are the international digits; click on OTHER
EXPORT DOCUMENTATION for more information on the Harmonized Tariffs and
SED's )
It is important that the value of the goods be accurate, even if the shipment is a transfer or
loan instead of a sale. Customs will not waive duty/tax simply because an invoice states
"no commercial value" or "no value declared". Customs will assess the goods, and if the
goods are held to merit value, will either demand a new invoice, or, in some countries,
arbitrarily assign value to your goods and base the duty/tax on this assignment.
3. The commercial invoice is the document that confirms the value of goods for insurance
purposes. Although you may choose to insure goods for less than than the commercial
invoice value, the commercial invoice value can never be stated as a lesser value than the
insured amount.
Contents of your commercial invoice include:
Name and address of shipper (seller) as shown on the address label, including a contact
person and telephone number.
Name and address of consignee (ship to), including destination country and postcode, as
shown on the address label. To help ensure prompt delivery, a contact person and
telephone number must be included.
Invoice date.
Name and address of purchaser (importer) if different from the consignee, including a
contact name and telephone number.
What is the item made of? What is it used for? (Include Customs Harmonised Codes, if
known.)
Number of units, unit value and total value of each item. For samples or articles with no
commercial value, a nominal or fair-market value must be stated for customs purposes.
Terms of Sale that define the charges included in the total value on the invoice. For
example: Bill Shipper.
A consular invoice details the contents of a shipment, and affirms that it does not contain any
illegal or questioned items. It is prepared by a consular official working in the importing
countrys consulate in the nation of origin. The document is written in the language used by the
importing country to ensure that customs officials can read and understand it, and includes a seal
confirming that it is official. Such documents may be required for some imports, and can be
recommended in other cases.
Customs officials use this document to determine appropriate tariffs, duties, and other fees in
association with a shipment. It is important to make sure it is correct, and to confirm that the
form is completely filled out. Problems with the consular invoice may result in delays at the dock
or warehouse, in which case a shipment may be held until they can be resolved. With perishable
or critical items, this could create significant problems for the importer.
This document covers all the usual details of a commercial invoice and packing list is written in
the language of the foreign country for which goods are destined. Special forms are obtainable
from the consulate. Consular fees are payable to the consulate certifying and legalizing the
documents. Consular Invoice provides the value, quantity and nature of a shipment and all these
contents are pre-verified. Consular invoices help to speed up the entry of goods into a country.
The countrys consul affixes his/her signature on the invoice and thereby certifies it.
Custom invoice
A customs invoice is a document that travels with your parcel, and contains information about
the items inside your parcel. The customs invoice is required for customs clearance, and your
shipment cant leave the country without one. If you are sending a parcel to another country you
must fill out a customs invoice which specifically details every item you are exporting.
Most of us have flown into another country and had our bags searched as we pass through
security at both the source and destination airports. With parcels, a similar procedure is carried
out.
It is worth noting that documents are the only items that do not need a customs invoice when
they are shipped to or from the EU. However, shipments weighing more than 2.5kg in weight
will be cleared as goods and will require customs clearance, and a customs invoice to be created.
1. Collection address
2. Delivery address
7. Country of manufacture
8. Declaration statement
Certificate of inspection
A document certifying that merchandise (such as perishable goods) was in good condition at the
time of inspection, usually immediately prior to shipment. Pre-shipment inspection is
requirement for importation of goods into many developing countries. When used as a required
document under letter of credit terms, the details and identity of the party providing the
inspection should be mentioned. If this not done, banks will accept any document appearing on
its face to be an inspection certificate issued by any party other than the beneficiary. Companies
specializing in the inspection of goods at ports such as the Swiss SGS or the French Bureau
Veritas have offices in the main exporting countries. There are also companies that specialize in
inspections in certain countries such as Asia Inspection in China and other Asian countries
When shipping high-value products or when you are dealing with a very conscientious customer,
an inspection certificate might be requested. An inspection certificate provides proof that what
you are shipping is, in fact, what the customer ordered, and is also of good quality. If a customer
requests this document, agree to it -- but see that they cover the administrative and inspection
fee. Also, ask them to recommend an independent inspection agency to perform the review at
your end.
If they don't have one, refer to your import/export dream team (e.g., banker, logistics expert,
accountant and lawyer) for a suitable contact.
certificate of origin
A certificate of origin (often abbreviated to C/O or CoO) is a document used in
international trade. In a printed form or as an electronic document, it is completed
by the exporter and certified by a recognized issuing body, attesting that the goods
in a particular export shipment have been produced, manufactured or processed in
a particular country. A "Certificate of Origin" is also called a "Form A"
A Certificate of Origin (COO) is a document that is required by certain foreign countries for tariff
purposes, certifying the country of origin of specified goods .
A Certificate of Origin is usually prepared by the exporter or the freight forwarder and notarized
and attested to by a local Chamber of Commerce or a World Trade Center. Most countries will
accept a general-purpose form identifying the seller, mode of transport, date of export and
consignee and containing a description of the merchandise, but some countries have specific
forms that are required.
Non-preferential certificates of origin[1] are the most common type of certificate. These
certificates of origin see that goods do not benefit from any preferential treatment and do not
emanate from a particular bilateral or multilateral free trade agreement. Chambers that are
authorized to issue certificates of origin are most frequently authorized to issue non-preferential
certificates of origin.
Chamber of Industry
Association of Industry
Economic Chamber
Customs Authority
Department of Trade
Consignor/Consignee
CONTENTS OF CERTIFICATE OF ORIGIN
4.Description of Good(s)
5.Country of Origin
PACKING LIST
A packing list accompanies the international shipment and is used to inform transportation
companies about what they are moving as well as to allow the customer and others involved in
the transaction to check what has been shipped against the proforma invoice. It is a good
safeguard against shipping incorrect cargo!
An export packing list, for example, is far more detailed than a domestic one.
To prepare your packing list, delete all the prices on the invoice and double-check to see that the
number of cases, weight (net, gross, metric) and measurements appear on the invoice.
Then rename the document "PACKING LIST" in big, bold letters and you're all set. Never
substitute a packing list for a commercial invoice.
It can be used as further evidence to support a method of payment (make sure you match
your product description to that of any payment instrument).
It will be used by a Custom's Broker for clearance and entry into a country.
It is used by the buyer-seller to compare what has been ordered to what has been shipped.
It is used for the electronic export information (EEI) and is often used by U.S. and
foreign customs officials to verify goods.
What can go wrong if you don't complete a packing list accurately? Plenty -- ranging from not
getting your goods delivered to the desired destination to not getting paid.
An export packing list should be securely attached to the outside of each shipping container,
preferably in a waterproof packet or envelope clearly marked "Packing List Enclosed." Shippers
and forwarding agents determine the total weight and volume of the shipment, and whether the
correct cargo as indicated is being shipped -- all based on the packing list.
In addition, customs officials at port of entry and port of exit may use the packing list to check
the cargo.
Your freight forwarder, customs broker, bank and customer should indicate how many copies
they will need, and where each copy will need to be attached and distributed, some weeks in
advance. I always make 3-4 extra copies for my file just in case.
If you take care of your shipment documentation online, select the packing list option to
download and, check with all parties involved in the international sale to determine if your
packing list needs to be signed.
Beware: Any mistake on the packing list may cause a delay in clearance at the port of
destination. So make sure you prepare it right the first time.
The type of package (such as pallet, box, crate, drum, carton, etc.)
The package markings, if any, as well as shipper's and buyer's reference numbers
.2 What is the procedure to export goods? What are the various documents to be filed in the
Manual system of Processing Shipping Bills?
A. A. Any exporter before exporting goods should obtain Exporters Code Number from
the Reserve Bank of India known as RBI code number. In addition, an exporter is
required to obtain an Importer-exporter code (IEC) number from the Office of the
Director General of Foreign Trade or his regional Offices. These two numbers have to be
furnished in the export documents. From April2001 the IEC will be replaced with the
PAN number issued by the Income Tax authorities. This will be the uniform identification
number for transaction with any Government agencies like Customs, Central Excise etc.
The exporter should also procure an export order/consent from the foreign buyers. The
exporter intending to export any goods should file a document called Shipping Bill with the
Customs Department. All the columns in the Shipping Bill should be filled in properly,
which includes the name and address of the exporter., name and address of the foreign
buyers. Quantity and description of the goods., FOB value, etc. The documents to be
enclosed to the Shipping Bill are:
a) Invoice
b) Purchase order/contract
The Shipping bill so filed with the Customs is assigned with a serial number with date by
the noting clerk and then the Shipping Bill is scrutinized by the Appraiser/Superintendent
and after assessment it is countersigned by the Assistant/Deputy Commissioner. The
original copy of the Shipping Bill is detached by the noting clerk when no export duty is
payable. If any export; duty is payable original copy of shipping bill is detached by cash
department after collecting duty and making suitable endorsement on all the copies of
shipping bill. The other copies are then returned to the Exporter/CHA. Thereafter the
Exporter/CHA presents the duplicate and triplicate copies of shipping bill with other
documents and the goods to the Appraiser/Superintendent in charge of examination. The
Appraiser/Superintendent examines a percentage of the consignment with reference to the
documents and gives an order called LET EXPORT order on duplicate and triplicate
copies of Shipping Bill. The goods thereafter remain in the Customs area till they are
loaded into the conveyance (Ship/Aircraft/Container) under Customs supervision.
Triplicate, Quadruplicate, Export Promotion copy of the Shipping bill and duplicate copy
of G.R. form are returned to the Exporter/CHA. The Preventive Officer/Inspector
supervises the loading of export goods into the conveyance and makes an endorsement to
that effect on the Shipping Bill and G.R. form. Original G.R.form is detached by the
Preventive Officer/Inspector for onward transmission to the Reserve Bank of India
(R.B.I.)
Now the procedure of filing Documents for Export has been brought under the EDI
system introduced in all Major Custom Houses to facilitate speedier clearance of
documents.