FOREIGN TRADE DOCUMENT AND MEANS OF PAYMENT

TYPES OF INTERNATIONAL TRADE DOCUMENTS

There are various documents which facilitate international trade. These documents are as follows:

Consular invoice.
Bill of lading.
Certificate of origin.
Shipping note.
Airway bills.
Indent.
Ship manifest.
Mate receipt.
Freight note.
Customs specification.
Dock warrant.
Dock landing account.
Bill of sight.
Bill of entry.
Calling forward note.
Licence.
Export invoice.
Ship report.
Insurance certificate.
Bill of exchange.

Consular Invoice

Consular invoice is the 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 not to attract less customs duties. It is a special form of invoice, legalised by a consul in an importing country.

The invoice will ensure correct payment of duties by showing the correct price of the goods.

The document must be produced in a number of copies, one of which is retained by the consul and sent by him to the custom authorities at the destination port.

Purpose of Consular Invoice

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

Bill of Lading

A bill of lading is a document of title giving the holder a right to take possession of the goods to which it refers. A bill of lading is a contract of carriage of goods between an exporter and the shipping company. It is issued out by a shipping company’s official as a receipt for the goods shipped and at the same time undertakes to carry the goods to the port of destination. A bill of lading is a document of title. It is made out in triplicates, one copy being retained by the exporter, the second by the ship master while the third is sent to the importer.

Contents of a Bill of Lading

A bill of lading drawn up contains the following information:

The name of the ship carrying the goods.
Description of the goods such as the quantity, type, weight etc.
The shippers name.
The names of the consignor and consignee.
Addresses of both consignor and consignee.
The port of embarkation/port of loading.
Conditions of carriage, e.g. who pays the freight charges.
The port of disembarkation/port of unloading.
Location of the goods in the ship.
The expected time of arrival.

Types of bill of Lading

There are two main types of bill of lading. These are clean bill and dirty (or foul bill of lading).

Clean bill of lading: A clean bill of lading is one signed by the transporter. It shows that the goods are in good order or condition or are free from irregularities or damage.
Dirty or Foul bill of lading: A foul bill of lading is one which indicates some deficiencies, irregularities or damage on the goods.

Purpose of Bill of Lading

Bill of lading conveys ownership on the holder.
It is a document of evidence that the goods has been shipped.
It is a contract between the exporter and the shipping company.

Certificate of Origin

Certificate of origin is a document signed by a 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.

The certificate of origin is prepared by the producer to accompany the goods in order to determine the place of origin. This is important when countries in the same economic union, e.g. ECOWAS want to charge preferential tariffs on goods from their members.

Purpose of Certificate of Origin

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

Shipping Note

Shipping note is a document sent to the shipping agent by the exporter. The document contains instructions for transporting the goods. It is a request to the shipping company to transport the goods to a named destination at a particular time. If the forwarding agent handles shipment, it has to obtain a shipping note to request a shipping company to transport the goods.

Airway Bill

Airway bill is a numbered document made out by or on behalf of the consignor of goods to be transported by air freight. It shows names of consignor, consignee, airport of loading and destination. It also shows the nature, weight and value of goods, the marks, numbers and dimensions of the packages, the route and the freight charged. It is used when goods are being transported by air.

Indent

Indent is a document used in international trade. It is an order to buy goods conveyed by an importer to a potential supplier. It can be placed with the seller or his agent. Indent gives details of the goods required, approximate price, date of delivery etc. Indent can be opened or closed.

An open indent is an order from abroad to a merchant with freedom to purchase goods from any manufacturer he pleases while in closed indent, the foreign buyer will specify the manufacturer from whom the goods are to be purchased.

Shipping Manifest

Shipping manifest is a document to be completed by the captain of a ship and lodged with the customs authorities before the ship can leave the port. It shows particulars of the ship, its cargo and destination. The shipping manifest must be left with the customs before the ship leaves port and copies are sent to the ship’s agents at the port of destination.

Mate Receipt

Mate receipt is a document used when goods are loaded on a ship by lighter. This is usually signed by an authorised officer of the ship stating that the goods are received in good condition. This document will be exchanged afterward for a bill of lading.

Export Invoice

An export invoice is a document sent by the exporter to the importer, giving full description or complete summary of the goods dispatched. It shows the list of goods, terms of sale, quantity, price, name of ship and the total amount to be paid etc. The exporter will sent this document to the importer.

Ship Report

Ship report is a document which must be supplied by the master of a ship to the custom authorities on arrival at a port. This report gives the particulars of the ship, crew, passengers, cargo and port of departure. Until this report is received, the goods cannot be offloaded.

Freight Note

Freight note is a document which shows the carriage charges for a particular cargo for a specified journey. It is issued by the shipping company to give details of charges for shipping a particular consignment of cargo for a specified journey.

Customs Specification

Customs specification is a document lodged with the customs authorities which shows the value of the goods exported and the country to which they have been consigned. The information in this document enables the Ministry of Trade to calculate the import and export so as to know the balance of trade.

Dock Warrant

Dock warrant is a receipt for goods delivered and stored in the warehouse. It entitles the holder to take possession of goods. It is also known as dock receipt. This document will state that goods have been kept in the warehouse by the owner awaiting clearing or loading.

Dock Landing Account

Dock landing account is a document issued to the master of the ship on its arrival at a port. The ship is given a reference number and information on cargo together with particulars of any damaged goods.

Bill of Sight

Bill of sight is a document used in import trade which is submitted to the customs authorities if a full description of the imported goods cannot be provided. This document enables the goods to be landed and their inspection is authorised by the customs while a full description of the goods will be provided later.

Bill of Entry

Bill of entry is a foreign document which contains detailed particulars of all imported goods into the country. It provides the customs with particulars of goods imported which must be presented at the port on arrival before they are allowed into the country.

Calling Forward Note

Calling forward note is a document sent by the shipping company to the forward agent, stating the date which goods must arrive at the dock for loading.

Licence

Licence allows the importer to bring a certain quantity of foreign goods into a country and to purchase foreign exchange. They are required to restrict import quota. Licence must be obtained by the importer before goods can be imported. This is used to control foreign trade so as to prevent dumping.

Insurance Certificate

Insurance certificate shows that the exporter has paid for insurance to protect him against risks. The marine insurance policy is entered into to cover the cargoes against the perils of the sea. It is compulsory that goods are insured before they are exported.

Bill of Exchange

Bill of exchange is an unconditional order in writing addressed by one person to another and signed by the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to the order of a specified person. Bill may be inland or foreign.

Foreign bill of exchange is a negotiable instrument which can be discounted by bank and is sent by the seller to the buyer. A foreign bill must be drawn up in triplicates. This is explained in chapter 36 in detail.

TERMS OF QUOTING PRICE IN INTERNATIONAL TRADE

Cost, Insurance and Freight (CIF): This price quotation means that the price quoted includes the cost of the goods, the freight and insurance up to the port of destination while the purchaser is responsible for other subsequent charges.
Free on Board (FOB): This means that the price covers all costs up to the ship, including charges payable for loading goods on the ship.
Free Alongside Ship (FAS): The price quotation includes all charges used to deliver the goods to the side of the ship but excludes charges for loading the ship which the buyer is responsible for.
Free on Rail (FOR): This price quotation means that the seller has paid all charges, including loading the goods on rail. The purchaser takes over other charges such as insurance from then on.
C F: This means that the price quoted covers all charges including freight payable to the point of destination while the buyer pays the insurance charge.
Franco: Franco means the price quoted includes the cost of insurance, freight and all delivery charges to the importer’s warehouse.
Free on Quay (FOQ): This is a term in which the price includes only delivery to the quay for shipment. The purchaser will take over all responsibilities for shipment and insurance from then on.

MEANS OF PAYMENT IN INTERNATIONAL TRADE

Mail Transfer: Mail transfer is a means of payment in which an order to pay a foreign creditor a sum of money is given by a bank to its foreign agent by means of letter or air mail. Mail transfer is similar to a cheque but cannot be transferred.
Telegraphic Transfer: Telegraphic transfer is an order for settlement of debt in international trade by means of telegraph or cable sent by a bank in one country to another. It can also be defined as the transfer by telegraph or cable of bank deposits from one country to another as a means of making payment in foreign trade. It is the quickest method of transferring money. A bank will, at its customer’s request and risk, send a cable with the necessary particulars to its foreign agent who will act on the instructions in order to make payment.
Guaranteed Mail Transfer: Guaranteed mail transfer is an order to pay sent by mail. This is similar to mail transfer but here the remitting bank will guarantee payment on the agreed date.
Travellers Cheques: Travellers cheques are orders drawn on commercial bank which travellers and businessmen to other countries can use to settle their bills. The beneficiary is thus enabled to obtain foreign currency when travelling abroad to settle their indebtedness. To prevent their misuse, they have to be signed in the presence of the bank clerk who issued them and countersigned when used as means of payment.
Documentary Credit: Documentary credit is a method of payment or financing foreign trade. The importer opens a credit in favour of the exporter at a bank in the exporter’s country. A documentary bill is then drawn by the importer in favour of the exporter.
Bank Draft: Bank draft is a cheque drawn on a bank by itself or its agent. It is used by a debtor when his creditor is not willing to accept a personal cheque. The debtor pays the bank for the draft at the time of issue. This can also be used in international trade.
Letter of Hypothecation: This is a form of authority given to a banker, often in connection with a documentary bill, authorising it to sell the goods that have been pledged to it if payment or acceptance of the bill is refused.
Factoring: A firm can purchase the trade debts of its client and then claim payment for them. This is also a means of financing export. A factoring company will take over the collection of trade debts after he had bought them.
Foreign Bill of Exchange: This is a bill of exchange which is used for making payment arising from international trade. It is drawn by a creditor and accepted by the debtor.

CUSTOMS AUTHORITY

Customs authority is a department in the Ministry of Internal Affairs charged with the responsibility of assessing and collecting customs duties on import, export and goods produced locally. It also computes trade statistics from import and export trade documents. The customs department regulates and controls import and export trade, collects import, export and excise duties.

Functions of Customs Authority

Collection of Tariffs: It assesses and collects revenue from tariffs and excise duties.
Supervision of Warehouse: The customs department supervises bonded warehouse.
Compilation of Statistical Records: The department compiles statistics on export and import trade which is supplied to the government.
Prevention of Smuggling: The customs authority prevents smuggling and seize contraband goods.
Supervision of Foreign Trade: It supervises foreign trade by ensuring that only licensed goods are imported or exported.
Enforcement of Ban: The customs authority ensures that ban on prohibited goods are enforced.
Provision of Quarantine Facility: It provides appropriate quarantine facilities for the importation of livestock.
Completion of Documents: The customs will ensure that customs declaration forms and other documents are completed.

NIGERIAN EXPORT PROMOTION COUNCIL

Nigerian Export Promotion Council (NEPC) was set up to assist exporters in the course of exporting goods and to set out procedures for export trade. The council also assists in assessing the performance of Nigeria’s export commodities in foreign markets.

Functions of the Nigerian Export Promotion Council

Trade Enhancement Activities: NEPC reviews and liberalises export procedures and documentation to enhance clearance at the ports.
Export Financing and Incentives: NEPC assists in financing export by evolving measures designed to make available export financing facilities, investment etc.
Organise Training Activities: NEPC organises training programmes, seminars and workshops in export management and international marketing.
Preparation of Export Documents: The council works hand in hand with other government agencies to assist in the preparation of export documents.
Trade Information Services: NEPC establishes and operates international trade information centres to provide prompt information services.
Creation of Awareness: The council produces publicity materials to publicise the export potentials of the country and by so doing create awareness for them and the council’s activities.
Setting out Procedures for Export Trade: NEPC approves export, provides export licence and set out procedures for exporting goods abroad.
Export Development Activities: The council adopts measures necessary to increase the volume of production from agriculture and industry for export. It gives advice on quality control, packaging and product design to ensure acceptable standard of exportable goods.
Export Marketing Activities: The council assists in assessing the performance of Nigerian export goods in international market as well as identifying barriers against them, and explore ways of penetrating new markets.

NIGERIAN AIRPORTS AUTHORITY (NAA)

Nigerian Airports Authority is a statutory body charged with the responsibility of controlling and managing the airports as well as providing adequate airport facilities. There are local and international airports in Nigeria, e.g. Murtala Mohammed International Airport, Aminu Kano International Airport while Calabar Airport and Enugu Airport are examples of local airports.

Functions of Airports Authority

Control of Airlines: It controls domestic and international airlines.
Provision of Parking Space: It provides parking space for vehicles.
Provision of Facilities: The ports authority provides facilities for landing, refuelling and taking off of aeroplanes.
Maintenance of Facilities: It provides repair and maintenance facilities to damaged aircrafts.
Provision of Warehouse: The airports authority provides warehouse for storage of goods before loading and off loading.
Ensures Cleanliness of Airport: The airports authority sees to the environmental sanitation of the airport.
Housing of Security Agents: The airports authority provides office accommodation for customs, immigration, police and other agents working at the airport.
Administration: It sees to the general administration, management and control of the airport.
Revenue Collection: The airport authority takes charge of collecting airport taxes from airlines, shop operators in the airport etc.
Maintenance of Loading and off Loading Facilities: The airport authority maintains all the facilities used in the airports for loading and off loading.
Promotion of Foreign Trade: The Nigerian Airports Authority promotes foreign trade through the movement of goods and services.
Ensures Passengers’ Security: The airports authority ensures passengers’ safety by providing security.

NIGERIAN PORTS AUTHORITY (NPA)

The management, control and general operations of the seaports in Nigeria are handled by the Nigerian Ports Authority. The port authority provides facilities at the port to ensure effective and efficient sea transportation, e.g. Lagos port and Port Harcourt port. The facilities provided at the seaports by the Nigerian Ports Authority include: berth, boats, cranes, fork-lifts, trailers, quay, wharf, harbours.

Functions of Ports Authority

Provision of Facilities: The ports authority provides facilities like berth, cranes, fork-lifts and navigational aids.
Maintenance and Improvement of Ports: The authority is responsible for the improvement of ports including dredging for easy passage of ships.
Revenue Collection: The ports authority collects harbour and dock dues.
Provision of Warehouse: The authority provides warehouse facilities at the dockyard.
Supervision of Loading and Off Loading of Goods: The ports authority takes care of loading and off loading of vessels.
Housing of Security Personnel: The ports authority provides office accommodation for immigration, customs, shipping companies and the police operating at the ports.
Maintenance Facilities: The ports authority provides re-fuelling and maintenance facilities.
Provision of Security: The ports authority provides security to monitor movement of ships, cargoes and people within and around the nations ports.

TERMINOLOGIES USED IN INTERNATIONAL TRADE AND DOCUMENTATION

Del Credere Commission: Del credere commission is an extra commission received by the del credere agent for indemnifying the goods against loss or guarantee that the buyer will pay for the goods.
Bonded Warehouse: Bonded warehouse is a place where goods whose customs duties have not been paid are stored until they are settled. It is usually located at the port.
Customs Drawback: Customs drawback is a repayment of the customs duties paid on imported materials which are to be re-exported. The material may be re-exported if they are part of an entrepot trade.
Documentary Bill: Documentary bill is a bill of exchange to which are attached such documents as a bill of lading, invoice, insurance policy, dock warrant etc. It is a document of assurance.
Free Port: Free port allows goods that are to be re-exported to enter free without the payment of customs duties.
Demurrage: Demurrage is a term used in connection with charter party in which the charterer pays an extra charge for retaining a ship beyond the permitted time for loading and offloading in a port.
Advalorem Duty: Advalorem duty is a form of tax or duty which is calculated or paid based on the value of the goods and not on their quantity.
Letter of Credit: Letter of credit is a document authorising a bank abroad to pay the bearer a specified sum of money for an international trade transaction. Letters of credits are useful in international trade as means of payment. The buyer will apply to his bank to open a credit in favour of his creditor. Most payments in foreign trade are made by means of letter of credit.

Types of Letter of Credit

Confirmed irrevocable letter of credit: Confirmed irrevocable letter of credit is opened in a bank by an importer in favour of a foreign seller and which has been confirmed by the bank. This is one in which the negotiating bank guarantees payment to the beneficiary should the issuing bank fails to honour it.
Unconfirmed credit or revocable letter of credit: Unconfirmed letter of credit is a revocable letter of credit which can be cancelled at any time.
Irrevocable letter of credit: Irrevocable letter of credit is a credit that cannot be cancelled by the issuing bank before the expiry date without the knowledge of the beneficiary.