1. Chapter 11 Trade Documentation

2. The Role of Documentation Documentation requirements of international movements are a challenge. Documentation requirements of international movements are a challenge. One way shippers comply with regulations. One way shippers comply with regulations. Some required by the government, some by the organization’s national policy, some other by banks, customers. Some required by the government, some by the organization’s national policy, some other by banks, customers. The basic principles are control and liability. The basic principles are control and liability.

3. The Role of Documentation Main purposes of documentation: Fulfill regulations Fulfill regulations Manage risk Manage risk Common understanding Common understanding Record keeping Record keeping

4. The Role of Documentation Four types of documents: Transportation Transportation Banking Banking Commercial Commercial Government Government

5. The Role of Documentation Documentary sale refers to the sale of goods in which ownership on the paper documents. Documentary sale refers to the sale of goods in which ownership on the paper documents. Documentation is a major cost item. Documentation is a major cost item. Today, computers are helping to reduce facilitation costs. Today, computers are helping to reduce facilitation costs. Form of non-tariff trade barrier. Form of non-tariff trade barrier.

6. The legal status of documents Each country has multiple offices that have their own regulatory systems. Each country has multiple offices that have their own regulatory systems. The U.N. Convention on the International Sale of Goods ("CISG") is an international set of rules designed to provide clarity to most international sales transactions involving the sale of goods. The U.N. Convention on the International Sale of Goods ("CISG") is an international set of rules designed to provide clarity to most international sales transactions involving the sale of goods. The CISG went into effect on January 1, 1988, with the United States as a party. The CISG went into effect on January 1, 1988, with the United States as a party. Applies when there is a commercial sale of goods between two parties in different countries. Applies when there is a commercial sale of goods between two parties in different countries.

7. The legal status of documents U.N. Commission on International Trade Law (UNCITRAL): A non-permanent U.N. body, UNCITRAL was established by the U.N. General Assembly in 1966 to promote the progressive harmonization and unification of the law of international trade. U.N. Commission on International Trade Law (UNCITRAL): A non-permanent U.N. body, UNCITRAL was established by the U.N. General Assembly in 1966 to promote the progressive harmonization and unification of the law of international trade. The Convention's purpose is to simplify contracts for the international sale of goods by subjecting them to a single uniform law, and to eliminate wrangles over which particular national law should apply to an international contract. The Convention's purpose is to simplify contracts for the international sale of goods by subjecting them to a single uniform law, and to eliminate wrangles over which particular national law should apply to an international contract.

8. Contracts The first step in an international transaction is the creation of a contract. The first step in an international transaction is the creation of a contract. The four component parts of a contract are: The four component parts of a contract are: 1) Agreement, offer and acceptance, 2) Mutuality and consideration, 3) Competent parties, and; 4) A legal objective. Jurisdiction requires all any contract for the sale of goods over US$500 to be in writing to be enforceable. Jurisdiction requires all any contract for the sale of goods over US$500 to be in writing to be enforceable.

9. Contracts In the law of contracts, t the mirror image rule. In the law of contracts, the terms as stated in the acceptance must exactly ‘mirror’ the terms as stated in the offer, known as the mirror image rule. An attempt to accept the offer on different terms instead creates a counter-offer, and this constitutes a rejection of the original offer. An attempt to accept the offer on different terms instead creates a counter-offer, and this constitutes a rejection of the original offer. CISG accepts different forms of the same agreement if it is “sufficiently definite and indicates the intention of the offeror to be bound” CISG accepts different forms of the same agreement if it is “sufficiently definite and indicates the intention of the offeror to be bound”

10. Contracts Breach of contract: Failing to perform any term of a contract, written or oral, without a legitimate legal excuse. Breach of contract: Failing to perform any term of a contract, written or oral, without a legitimate legal excuse. This may include not completing a job, not paying in full or on time, failure to deliver all the goods, substituting inferior or significantly different goods, not providing a bond when required, being late without excuse, or any act which shows the party will not complete the work ("anticipatory breach"). This may include not completing a job, not paying in full or on time, failure to deliver all the goods, substituting inferior or significantly different goods, not providing a bond when required, being late without excuse, or any act which shows the party will not complete the work ("anticipatory breach"). Breach of contract is one of the most common causes of law suits for damages and/or court-ordered "specific performance" of the contract. Breach of contract is one of the most common causes of law suits for damages and/or court-ordered "specific performance" of the contract. Must be a fundamental breach which is a breach so fundamental that it permits the aggrieved party to terminate performance of the contract, in addition to entitling that party to sue for damages. Must be a fundamental breach which is a breach so fundamental that it permits the aggrieved party to terminate performance of the contract, in addition to entitling that party to sue for damages. The seller has the right to remedy, which is to fix the problem, and the right to additional time to perform. The seller has the right to remedy, which is to fix the problem, and the right to additional time to perform. The buyer cannot accept the shipment if there is a breach. The buyer cannot accept the shipment if there is a breach.

11. Contracts Three ways a party may be excused from fulfilling a contract: Three ways a party may be excused from fulfilling a contract: 1. If it is physically or legally impossible to fulfill, 2. If the underlying purpose of the contract no longer exists, 3. If a change makes it commercially or financially impossible.

12. The documentation flow Order processing and shipment Order processing and shipment Export clearance Export clearance Shipment Shipment Import clearance Import clearance Delivery Delivery

13. The documentation flow Order processing and shipment: the first step in logistics is when a The Purchase Order (PO) was made. Order processing and shipment: the first step in logistics is when a The Purchase Order (PO) was made. The Purchase Order is provided to the vendor as a record of the Purchase. The Purchase Order is provided to the vendor as a record of the Purchase. Issued by a buyer to a seller, indicating the type, quantities and agreed prices for products or services that the seller will provide to the buyer. Issued by a buyer to a seller, indicating the type, quantities and agreed prices for products or services that the seller will provide to the buyer. The selling terms should be determined at this point. The selling terms should be determined at this point.

14. The documentation flow Export clearance: An international freight forwarder is an agent for the exporter in moving cargo to an overseas destination. Export clearance: An international freight forwarder is an agent for the exporter in moving cargo to an overseas destination. These agents are familiar with the import rules and regulations of foreign countries, the export regulations of the U.S. government, the methods of shipping, and the documents related to foreign trade. These agents are familiar with the import rules and regulations of foreign countries, the export regulations of the U.S. government, the methods of shipping, and the documents related to foreign trade. The Shipper's Export Declaration (SED or Form 7525-V) is used by the U.S. Census Bureau to compile trade statistics and to help prevent illegal exports. The Shipper's Export Declaration (SED or Form 7525-V) is used by the U.S. Census Bureau to compile trade statistics and to help prevent illegal exports. Shows what is being exported. Shows what is being exported. Forwarders often prepare SEDs on behalf of their exporter clients. Forwarders often prepare SEDs on behalf of their exporter clients.

15. The documentation flow The invoice is an essential legal document given to the customer or client to serve as a record of goods or services sold to the customer or client. The invoice is an essential legal document given to the customer or client to serve as a record of goods or services sold to the customer or client. Commercial invoice is the basic statement of the seller to the buyer for payment of the goods shipped. Commercial invoice is the basic statement of the seller to the buyer for payment of the goods shipped. Consular invoice is prepared from the information on the Commercial Invoice by the buyer’s consulate or embassy in the shipper’s country. Consular invoice is prepared from the information on the Commercial Invoice by the buyer’s consulate or embassy in the shipper’s country.

16. The documentation flow A Certificate of Origin is a document, required by foreign governments, declaring that goods in a particular international shipment are of a certain origin. A Certificate of Origin is a document, required by foreign governments, declaring that goods in a particular international shipment are of a certain origin. Even though the commercial invoice usually includes a statement of origin, some countries require that a separate certificate be completed. Even though the commercial invoice usually includes a statement of origin, some countries require that a separate certificate be completed. Customs offices will use this document to determine whether or not a preferential duty rate applies on the products being imported and whether a shipment may be legally imported during a specific quota period. Customs offices will use this document to determine whether or not a preferential duty rate applies on the products being imported and whether a shipment may be legally imported during a specific quota period. The certificate of origin must be signed by the exporter and be certified by a local chamber of commerce. The certificate of origin must be signed by the exporter and be certified by a local chamber of commerce.

17. The documentation flow Carnet is an international trading document that is used for accompanying sample goods. Carnet is an international trading document that is used for accompanying sample goods. Functions like a passport/visa allows a person to carry a sample into a nation duty free, provided that it is carried out again, without alteration, usually within 12 months. Functions like a passport/visa allows a person to carry a sample into a nation duty free, provided that it is carried out again, without alteration, usually within 12 months.

18. The documentation flow Shipment: A bailment involves only a transfer of possession or custody, not of ownership. Shipment: A bailment involves only a transfer of possession or custody, not of ownership. Carriers are responsible for delivering the cargo in the same condition as was received and are liable for loss or damage. Carriers are responsible for delivering the cargo in the same condition as was received and are liable for loss or damage.

19. The documentation flow Import clearance: The documents should arrive before the cargo arrives. Import clearance: The documents should arrive before the cargo arrives. The customs clearance process is where documentation is most important. The customs clearance process is where documentation is most important. Inspections normally occur at the time cargo arrives in a port. Inspections normally occur at the time cargo arrives in a port. Certificate of inspection may be required by the importer. Certificate of inspection may be required by the importer. Cargo may have been lost or stolen in transit. Cargo may have been lost or stolen in transit. If the cargo is given to the wrong party by the carrier, it is called carrier’s misdelivery. If the cargo is given to the wrong party by the carrier, it is called carrier’s misdelivery.

20. The documentation flow Delivery: when the importer is notified that the cargo has arrived, he would send a truck to pick up the cargo. Delivery: when the importer is notified that the cargo has arrived, he would send a truck to pick up the cargo. After delivery, the importer in the US is still required to keep all records according to the standard of informed compliance. After delivery, the importer in the US is still required to keep all records according to the standard of informed compliance.

21. Bills of Lading and Waybills Bill of Lading (BL) is a receipt obtained by the shipper of goods from the carrier (trucking company, railroad, ship or air freighter) for shipment to a particular buyer. Bill of Lading (BL) is a receipt obtained by the shipper of goods from the carrier (trucking company, railroad, ship or air freighter) for shipment to a particular buyer. It is a contract protecting the shipper by guaranteeing payment and satisfies the carrier that the recipient has proof of the right to the goods. It is a contract protecting the shipper by guaranteeing payment and satisfies the carrier that the recipient has proof of the right to the goods. It can be legally defined as 1) a contract of carriage 2) documentary evidence of title 3) a receipt for goods. It can be legally defined as 1) a contract of carriage 2) documentary evidence of title 3) a receipt for goods. BL must state the true nature of the cargo. BL must state the true nature of the cargo.

22. The documentation flow Clean bill of lading: A clean bill of lading is a bill of lading that is issued by a carrier when a shipment is received in good order. Clean bill of lading: A clean bill of lading is a bill of lading that is issued by a carrier when a shipment is received in good order.

23. Electronic Bills of Lading UCP 500 are the ICC Uniform Customs and Practice that have been used for over 60 years to govern the operation of documentary credits. UCP 500 are the ICC Uniform Customs and Practice that have been used for over 60 years to govern the operation of documentary credits. Uniform Customs and Practice for Documentary Credits for Electronic Presentation or "eUCP” was prepared as a "supplement" to the UCP. Uniform Customs and Practice for Documentary Credits for Electronic Presentation or "eUCP” was prepared as a "supplement" to the UCP. The 12 Articles of the eUCP cover a range of issues - including the format of electronic records, presentation, examination and, most controversially, corruption of an electronic record. The 12 Articles of the eUCP cover a range of issues - including the format of electronic records, presentation, examination and, most controversially, corruption of an electronic record. The eUCP responds to the growing numbers of documents - including bills of lading, certificates of origin, insurance documents, etc. - that are being presented in electronic form. The eUCP responds to the growing numbers of documents - including bills of lading, certificates of origin, insurance documents, etc. - that are being presented in electronic form. Electronic transmission may only be used if all parties approve. Electronic transmission may only be used if all parties approve.

24. Waybills A waybill is a transport contract (contract of carriage) - the same as a bill of lading. A waybill is a transport contract (contract of carriage) - the same as a bill of lading. A waybill, however, is not needed for cargo delivery but only issued as a cargo receipt. A waybill, however, is not needed for cargo delivery but only issued as a cargo receipt. A waybill is not a document of title. A waybill is not a document of title. Waybill is usually for air cargo. Waybill is usually for air cargo. Air waybills are no negotiable. Air waybills are no negotiable.

25. Insurance and Liability The primary purpose of insurance is to redistribute the loss and so to eliminate risk. The primary purpose of insurance is to redistribute the loss and so to eliminate risk. Harter Act -- An 1893 Federal Statute regarding ocean bills of lading and limitation of some carrier liabilities. Harter Act -- An 1893 Federal Statute regarding ocean bills of lading and limitation of some carrier liabilities. Hague Rules of 1924 represented the first attempt by the international community to find a workable and uniform means of dealing with the problem of shipowners regularly excluding themselves from all liability for loss or damage of cargo. Hague Rules of 1924 represented the first attempt by the international community to find a workable and uniform means of dealing with the problem of shipowners regularly excluding themselves from all liability for loss or damage of cargo. The objective of the Hague Rules is to establish a minimum mandatory liability of carriers which could be derogated from. The objective of the Hague Rules is to establish a minimum mandatory liability of carriers which could be derogated from. Under the Hague Rules the shipper bears the cost of lost/damaged goods if they cannot prove that the vessel was unseaworthy, improperly manned or unable to safely transport and preserve the cargo. Under the Hague Rules the shipper bears the cost of lost/damaged goods if they cannot prove that the vessel was unseaworthy, improperly manned or unable to safely transport and preserve the cargo. CARRIAGE OF GOODS BY SEA ACT (COGSA) incorporated Hague Rules. CARRIAGE OF GOODS BY SEA ACT (COGSA) incorporated Hague Rules.

26. Insurance and Liability During the 1970s pressure mounted from developing countries and major shipper nations for a full re- examination of cargo liability regimes. During the 1970s pressure mounted from developing countries and major shipper nations for a full re- examination of cargo liability regimes. Many, especially developing countries, took the view that the Hague Rules had been developed by "colonial maritime nations" in 1924, largely for the benefit of their maritime interests, and that the imbalance between shipowners and shipper interests needed to be redressed. Many, especially developing countries, took the view that the Hague Rules had been developed by "colonial maritime nations" in 1924, largely for the benefit of their maritime interests, and that the imbalance between shipowners and shipper interests needed to be redressed. This led to the negotiation in 1978 of the United Nations Convention on the Carriage of Goods by Sea (Hamburg Rules). This led to the negotiation in 1978 of the United Nations Convention on the Carriage of Goods by Sea (Hamburg Rules).

27. Insurance and Liability The Visby Amendment added two main elements to the Hague Rules: increased limitation amounts and a specific provision of limitation relating to containers. The Visby Amendment added two main elements to the Hague Rules: increased limitation amounts and a specific provision of limitation relating to containers.