Chapter 4 - Documents

Financial document / Bill of exchange is the most commonly used instruments for obtaining
payment from the buyer of the goods shipped.
BOE Act 1949 : an unconditional order in writing addressed by one person to another,
signed by the person giving it, requiring the person to whom it is addressed to pay on
demand or at a fixed or determinable future time a sum specified in money or to the order
of a specified person or to bearer.
It is a document prepared and signed by the exporter and addressed to the importer,
requiring the importer to pay on demand or at a future date a sum of money to the exporter
or his nominee.
Two types of BOE:
Sight bill the BOE is drafted which is not to be accepted by importer but to be paid at first
presentation.
Term bill the BOE will mature at a future date and the date has to be fixed and specified
after the presentation to the importer. Eg: 9- days.
3 parties involved:

Drawer the person who gives the order or who draws the bill.
Drawee the person to whom the order is given / addressed (acceptor).
Payee the person to whom the payment is to be made.
BOE is a form of a negotiable instrument. It is negotiated when it is transferred by one
person to another which makes the transferee entitled for a payment.
The bill continues to be negotiable until it has been restrictively endorsed or discharged by
the payment.
A dishonored bill is a bill which not accepted or paid after it has been presented for
acceptance or payment respectively is said to be dishonored. A bill is dishonored by non
acceptance when the drawee fails to accept and dishonored by nonpayment when the
drawee or acceptor fails to pay.
The holder of the bill must give notice to each party. Otherwise, they will be discharged from
liability.
The holder may find necessary to obtain formal proof that the bill has been duly presented
and dishonored. What the holder should do is to have the bill noted and protested. The bill
would be handed to a solicitor for payment and if acceptance or payment is still refused, the
bill then is noted.

A protest is a declaration by a solicitor in a formal document under seal. It must be signed

by the solicitor making it and that must specify the person at whose request the bill is
protested. It must also specify the place and the date of protest, the reason or cause for
protesting the bill, the demand made and the answer given, if any, or the fact that the
drawee or acceptor could not be found.
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Financial document / Bill of exchange is the most commonly used instruments for obtaining
payment from the buyer of the goods shipped.
BOE Act 1949 : an unconditional order in writing addressed by one person to another,
signed by the person giving it, requiring the person to whom it is addressed to pay on
demand or at a fixed or determinable future time a sum specified in money or to the order
of a specified person or to bearer.
It is a document prepared and signed by the exporter and addressed to the importer,
requiring the importer to pay on demand or at a future date a sum of money to the exporter
or his nominee.
Two types of BOE:
Sight bill the BOE is drafted which is not to be accepted by importer but to be paid at first
presentation.
Term bill the BOE will mature at a future date and the date has to be fixed and specified
after the presentation to the importer. Eg: 9- days.
3 parties involved:

Drawer the person who gives the order or who draws the bill.
Drawee the person to whom the order is given / addressed (acceptor).
Payee the person to whom the payment is to be made.
BOE is a form of a negotiable instrument. It is negotiated when it is transferred by one
person to another which makes the transferee entitled for a payment.
The bill continues to be negotiable until it has been restrictively endorsed or discharged by
the payment.
A dishonored bill is a bill which not accepted or paid after it has been presented for
acceptance or payment respectively is said to be dishonored. A bill is dishonored by non
acceptance when the drawee fails to accept and dishonored by nonpayment when the
drawee or acceptor fails to pay.
The holder of the bill must give notice to each party. Otherwise, they will be discharged from
liability.
The holder may find necessary to obtain formal proof that the bill has been duly presented
and dishonored. What the holder should do is to have the bill noted and protested. The bill
would be handed to a solicitor for payment and if acceptance or payment is still refused, the
bill then is noted.

A protest is a declaration by a solicitor in a formal document under seal. It must be signed

by the solicitor making it and that must specify the person at whose request the bill is
protested. It must also specify the place and the date of protest, the reason or cause for
protesting the bill, the demand made and the answer given, if any, or the fact that the
drawee or acceptor could not be found.

Financial Document : Promissory Notes

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As defined in the Bill of Exchange Act 1949, Section 88 (1):

A promissory notes is an unconditional promise in writing made by one person to another
signed by the maker, engaging to pay, on demand or at a fixed date or determinable future
time, a sum certain in money, to, or to the order of, a specified person or bearer.
Importer will be the one who makes the promissory note (obligation to pay) and send to the
exporter.

Exporter will then deliver the goods together with promissory note and some other
commercial documents to the importer to claim for payment.

Financial Document : Cheques

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Cheque is a form of financial document that is used by importer to pay the exporter.
A more direct and quicker way in settling payment.
It is only appropriate to use when the currency of settlement is in the importers home
currency or, when the importer owns a foreign currency account.
However, cheques have no guarantee on the payment by importer. It represents only a
method of payment.

Commercial Document : Transport Document

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Transport Document is a document that indicates loading whether on board or dispatch or

taking in charge.
Functions:
To provide evidence of a contract of carriage
Evidence of receipts of goods
Document of title to take possession of goods.
Types:
Marine bill of lading (BOL)
Is a transport document for goods shipped by sea and most commonly used in international
trade.
It is prepared by the exporter or freight forwarding agent and then will be given to the
shipping company for completion.
Functions:
It certifies that the goods have been received on board the shipping company in good order
for transportation and delivery as specified.
It acts as a document of title to the goods and the goods will only be released by the
shipping company at the port of destination against the surrender of the signed original of
the bill.

It is normally issued in several copies 2 , 3 sets.

A bill of lading is a negotiable document (supported by law) which means that a document
carries the title of the goods to be transferred from exporter to importer.
It must be a clean bill not bear any clause indicating that there is some defect in the
goods or their packaging. Otherwise, the bill will be treated as foul or dirty.
Bill of lading represents a document of title in which it is a transfer of ownership upon
endorsement.
Exporter can use BOLs to get financingfacilities from the bank where bank will purchase the
documents and collect the payment from importer.
Banks exposure: bank will face the risk of default by importers. To reduce the risk, bank will
need to possess the ownership of the goods by purchasing the BOLs from the exporters. In
the event of default, bank is still the legal owner of the goods.
Combined transport bill of lading
Issued by the shipping company to cover the transportation of goods in the same containers
but on different modes of transport.
Instead of having a different bill of lading for different modes of transport to the place of
delivery, they are shipped under a single contract of carriage.
The shipping company will be responsible for the goods over the entire route.
Sea Waybill
Is a transport document which gives details of a consignment of goods.
It acts as a receipt by the shipping company for the goods received and dispatched.
Unlike the bill of lading, a sea waybill is not a document of title and is not negotiable. The
shipping company will deliver the goods to the consignee named in the waybill without
having the consignee to provide the original copy of the waybill.
Upon delivery of goods to the importer, the goods will be released by the shipping company.
Waybills take the receipt of acknow;edgement of goods and represent a contract of carriage.
It is normally used to avoid delays at the port of destination in handing over the goods to
the consignee.
Air Waybill
It is for goods transported by air.
It is issued by the airlines or their agents in 3 original copies.
The bill is regarded as a receipt evidencing dispatched of goods by air freight but not a
document of title.
The airline will hand the goods to the consignee named in the document at the airport of
destination without the consignee having to present an original copy of the air waybill.
Sundry Transport Document
It is issued when goods are being transported through the road, rail or through post.
It is issued by shipping company in the exporting country.
Freight Forwarder Receipt
Exporter that engages in a person who possesses expertise and professionalism in an
exporting business.
It will be issued to such a person upon the taking of possession of the exporters goods.

Commercial Documents : Commercial Invoices

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Commercial invoices must specify the quality and quantity of the goods consigned and the
price that is being charged.
It indicates the terms of delivery and the terms of payment.
The basic contents are:
Name & address of exporter & importer
Date of contract
Description of goods (eg: unit price, quantity etc.)
Incoterms used
Amount of charges (eg: insurance & freight)

If the payment is to be obtained by means of documentary credit (L/C), it must be clearly

stated.

Commercial Documents : Pro-forma Invoices

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A pro forma invoice is a document that states a commitment from the seller to sell goods to
the buyer at specified prices and terms.
It is an official document issued by the exporter in order for the importer to obtain the
import license (if necessary) in the importers country.
Without this, no importerd goods shall be accepted in the importers/ country due to its rules
and regulations.
In some countries, some remittance of funds aroad is restricted till approval given by the
central bank.
It is used to declare the value of the trade. Simply, a 'Proforma Invoice' is a Confirmed
Purchase Order where the buyer and seller agree on the Product Detail and cost to be
shipped to the buyer.

Commercial Documents : Consular Invoices

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Some importing countries may require embassy or consulars approval in an international

trade for custom clearance purposes.
Importer requires the consular document which is to be issued by the consular office located
at the exporting country.
A document certifying a shipment of goods and shows information such as the consignor,
consignee and value of the shipment.
It is certifying that the exporter is not dumping goods at extremely low prices which may
impact the local importing market.

A consular invoice can be obtained through a consular representative of the country you're
shipping to.
The consular invoice is required by some countries to facilitate customs and collection of
taxes.

Commercial Documents : Legalized Invoices

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Legalized invoices is similar to consular invoices.

It will be issued by the exporter to the importers consular office or embassy which located
at the exporters country.
It is initiated the exporter and the document will be stamped as a proof of approval and a
means of legal document.
The purpose is to impose control on the quantity of goods being exported to the importing
country.

Commercial Documents : Insurance Documents

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Insurance Documents covers the risk of loss or damage to goods while being transported to
the point of destination.
The policy must be issued by an insurance company or its authorized agent or underwriters.
The policy cover must be effective from the date of shipment of goods

Other Documents
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Certificate of Origin
Certificate of Origin is required by some countries certifying that the goods shipped
are wholly manufactured / processed by the supplier and the goods are the products of a
specified country.
Generalised System of Preference
The goods exported must fulfill the description of the goods eligible for preference in
the country of destination.
They must comply with the consignment condition and the origin of goods specified
by the importing country.
This document must be signed by the exported and certified by the authority.
Certificate of Quality

Certificate of Quality is a document to ensure that the goods dispatched are of the
quality specified in the contract.
It would have to be signed by a reasonable person at the time and place of
shipment.
Postal Parcel has to be handed over the Post Office counter, Mini Post Office and at
the Postal Agencies for onward handling.
A receipt will be issued for each parcel posted.
To minimize damage or destruction, Postal Parcel should be well wrapped and
secured.
The recipient's name and complete address must be clearly written on the parcel. In
the event Postal Parcel cannot be delivered, it will be returned to the sender at the sender's
cost.
Postal Parcel can be wrapped using poly-wrapping and pasted with an envelope as
the label.
Box Postal Parcel is not required to be wrapped using brown paper but is advisable
for
A neater look and to allow the address to be read clearly.
Should any parcel get lost or damaged while in the postal custody, compensation
may be paid upon request.
Courier receipt
The courier's receipt is issued by a courier (or expedited delivery service).
The courier's receipt must indicate the name of the courier (or expedited delivery
service) and be stamped, signed or otherwise authenticated on its face and indicate a date
of pick-up or of receipt or wording to this effect, the date is deemed to be the date of
shipment or dispatch.
Unless the letter of credit (L/C) specifically calls for a document issued by a named
courier (or expedited delivery service), a document issued by any courier (or expedited
delivery service) is acceptable.
The delivery charge by courier is higher than by parcel post. However, the courier
shipment is faster and generally offers better security against theft and pilferage.
The nature of a courier shipment is similar to a parcel post shipment. Since the
goods are consigned directly to the importer, the exporter must not dispatch the goods
unless the cheque is cashed or the integrity of the importer is unquestionable.
Multimodal transport documents

Multimodal transportation means transporting goods from a pick up point, where the
operator receives the goods, all the way to the delivery location, using at least two different
means of transportation, covered under the same multimodal transport contract and by only
one document, regardless of the number or type of transportation vehicles used.