A Reference Guide to Trade Finance Techniquesbe necessary for exchange control or
other import control purposes.Potential problems
Care needs to be taken over the preparation of
the invoice. A number of critical mistakes can
easily be made that can result in problems,
especially when a documentary collection
or a documentary credit is used. It is always
important to check the details on any invoice:
The invoice amount should agree with
any letter of credit or bill of exchange, if
used, and the currency used must be the
correct one.
The description and price of the goods
should also match those used in other
documentation.
The overall price, shipment terms and any
additional charges must be correct.
Any declarations, notarisations,
signatures or certifications required must
also be present.
Assessment
All transactions require an invoice at some
stage. The critical point from the exporter’s
perspective is to ensure that the details
on the invoice match both the shipped
consignment and, if terms other than open
account are used, any accompanying
or necessary documentation, otherwise
payment may not be made.
From the importer’s perspective it is
equally important to ensure the details on the
invoice are correct, especially that the details
match the content of the consignment and any
accompanying or necessary documentation.
Importers should not pay out if there are
discrepancies in the documentation, as to do
so could result in an additional demand to
pay. Instead, the importer should require the
exporter to prepare a new invoice with the
correct details listed.
Bill of lading
A bill of lading is a receipt issued by a
shipping company, stating that it has
accepted a consignment of goods from
a seller (typically, but not exclusively, an
exporter) for carriage to a named recipient
(typically an importer or an importer’s agent).
Bills of lading are usually required when
trading under all payment terms. Where a
letter of credit (L/C) is used, it will specify which
form of bill of lading (see below) is required.Core characteristics
All forms of bill of lading provide evidence that
the goods described on the bill have been
accepted by a shipping company for carriage
from one point to another. The shipping
company will prepare and sign two or more
bills of lading, which they will give to the seller
(or the seller’s agent) on receipt of the goods
to be shipped. The seller will send the original
bills to the importer (its bank, if presented
under a letter of credit, or importer’s agent),
usually under separate cover. The shipping
company will only release the goods to the
importer (or importer’s agent) on presentation
of the bill of lading.
A bill of lading is also recognised as a
document of title. This means the shipping
company can use the bill to assist them to
clear the goods through customs procedures
at the port of entry.
A bill of lading will contain details of the
company sending the shipment, the shipping
agent or carrier and the consignee or importer
of the goods. It will state how the goods are
to be transported (usually the name of the
ship and the ports of departure and arrival).
It will contain a brief description of the goods
and the number of packages, and will indicate
whether the freight cost has been paid.
There are different forms of bills of lading,
each with slightly different characteristics.
Non-negotiable bill of lading.
Also referred to as a straight bill of lading,
this consigns the goods to a named person
or company, and cannot be negotiated.
Negotiable bill of lading.
Also referred to as an order bill of lading,
this allows the original consignee to
endorse the bill for delivery to a different
consignee. To be accepted as a negotiable
bill of lading, the bill needs to include a
clear statement to that effect.
Bearer bill of lading.
This allows for delivery of the goods to the
bearer of the bill. If a negotiable bill has no
consignee, it is treated as a bearer bill.
Surrender bill of lading.
A surrender bill of lading is used