HSBC Report

TRADE
The word trade has always been used in a generic fashion and the attempts
of deciphering the meaning of this word has only been done by economists
and business people. We have been hearing this word since the time we
started to understand the world.
So what exactly is trade? It is nothing but a simple activity that
involves exchange of goods and services. Goods can be defined as finished
products, as intermediate goods used in producing other goods, or as
agricultural products and foodstuffs. International trade enables a nation to
specialize in those goods it can produce most cheaply and efficiently. Trade
also enables a country to consume more than it would be able to produce if it
depended only on its own resources. Finally, trade enlarges the potential
market for the goods of a particular economy. Trade has always been the
major force behind the economic relations among nations.
In past trade was actually in the form of barter system where commodities
were exchanged, not currency. The commodities to be exchanged had equal
values and were equally desirable to both parties. In modern world, money is
used as medium of exchange and barter system is no longer in existence.
The term trade has acquired significant importance in today’s world.
Imagine a life without the concept of trade! Sure, it would not be as

fascinating as it is now. The need and importance of trade can only be
understood from the fact that trading is in existence since centuries. Trade as
a whole is not only complex but exciting as well. One thing is pretty sure;
trade is going to be in existence as long as humans are there on the planet.
INTERNATIONAL TRADE AND
The concept of Trade is centered around the simple activity of

the exchange of good and/or services. These exchanges may be the ones that
simply take place between two parties. This is a two way process. For one it
would be EXPORT and for another it would be IMPORT
EXPORT: The definition of Export is when you trade something out of the
country. In economics, an export is any good or commodity, transported
from one country to another country in a legitimate fashion, typically for use
in trade.
IMPORT: The term "import" is derived from the conceptual meaning as to

bring in the goods and services into the port of a country. Import is any good
(e.g. a commodity) or service brought in from one country to another
country in a legitimate fashion, typically for use in trade. It is a good that is
brought in from another country for sale.
INTERNATIONAL TRADE
'International trade' is the exchange of goods and services across
international boundaries or territories”.
International trade can be defined as either the buying (importing) or selling

(exporting) of goods or services on a global basis. In most countries, it
represents a significant share of GDP. While international trade has been
present throughout much of history its economic, social, and political
importance have been on the rise in recent centuries, mainly because of
Industrialization, advanced transportation, Globalization, Multinational
corporations, and outsourcing. In fact, it is probably the increasing
prevalence of international trade that is usually meant by the term
"globalization".
International trade is more complex than domestic trade for two reasons.
Firstly, the number of parties involved is greater. These include Customs
and other government authorities, banks and financial services, insurers,
export services providers and international carriers as well as you and your
customer. Secondly, the distances involved, differences in business
practices, culture, language and currency complicate the process and require
you to provide accurate and complete information at the right time to the
right person. Getting both the information flows and export administration
process right the first time has four benefits:
speedy delivery of goods
quicker payment
reduced costs
satisfied customers
Getting Started in International Trade

Who is this briefing for?
You should read this briefing if you are a company, especially an SME
(small to medium sized enterprise) that is:-
looking to expand your business
searching for new markets
What does this briefing tell me?

We aim to help you take the first steps in the export process and exploit the
opportunities of international trading. In a simple checklist format, we will
give you important information about developing an export strategy, the
business issues you need to consider and where to go for help.
International trade contracts and Incoterms

Different countries have different business cultures and even languages. It's
a good idea to make sure you have a clear written contract to minimise the
risk of misunderstandings.
The contract should set out where the goods are being delivered. It should
cover who is responsible for every stage of the journey, including customs
clearance, and what insurance is required. It should also make it clear who
pays for each different cost.
To avoid confusion, internationally agreed Incoterms should be used to spell

out exactly what delivery terms are being agreed, such as:
• where the goods will be delivered
• who arranges transport
• who is responsible for insuring the goods, and who pays for
insurance
• who handles customs procedures, and who pays any duties and taxes
For example, an exporter might agree to deliver goods, at the exporter's

expense, to a port in the customer's country. The customer might then take
over responsibility, arranging and paying for customs clearance and delivery
to their premises. The exporter might also be responsible for arranging
insurance for the goods until they reach the port, but pass this cost on to the
customer. See our guide on International Commercial Contracts - Incoterms.
As well as including delivery details, the contract should cover payment.
This should include what currency payment will be made in, how much will
be paid, when payment is due and what payment method will be used. See
the page in this guide on international trade documentation and payments.
Trade in services
With no physical delivery of the product, contracts in services cannot use
Incoterms. Instead, the key issue tends to be defining exactly what services
are being provided and to what standards. You should also be aware that you
may be required to supply extra information to customers when providing
services internationally. You are required to tell customers about how your
services work, how you handle complaints, and how you apply principles of
non-discrimination.
PROS AND CONS OF INTERNATIONAL TRADE
PROS to consider:
➢ Enhance your domestic competitiveness
➢ Increase sales and profits
➢ Gain your global market share
➢ Reduce dependence on existing markets
➢ Exploit international trade technology
➢ Extend sales potential of existing products
➢ Stabilize seasonal market fluctuations
➢ Enhance potential for expansion of your business
➢ Sell excess production capacity
➢ Maintain cost competitiveness in your domestic market
CONS to keep in mind:
➢ You may need to wait for long-term gains
➢ Hire staff to launch international trading
➢ Modify your product or packaging
➢ Develop new promotional material
➢ Incur added administrative costs
➢ Dedicate personnel for traveling
➢ Wait long for payments
➢ Apply for additional financing

➢ Deal with special licenses and regulations
RESEARCH METHODOLOGY
Every project is started with the objective of getting results either positive or
negative. And each and every project reaches to the stage of completion
through the way of some research either with the help of primary data or
secondary data. And getting of any project and getting genuine results from
that depends on the research method used by researcher.
“Research is a common parlance refers to a search for knowledge”.

According to REDMEN, “Research is a systematized effort to gain
knowledge.”
TYPE OF RESEARCH STUDY

The report has been based on primary as well as secondary data analysis.
The study has been exploratory as it aims at examining the secondary data
for analyzing the various aspects of international trade. The knowledge thus
gained from this preliminary study forms the basis for the further detailed
Descriptive research. In the exploratory study, the various documents
necessary were identified and important ones short listed.
OBJECTIVES OF THE STUDY

Primary Objective:
To know about the International trade procedure and the role of bank in
trade.
Secondary Objectives:
1. To know that what are the complexities in international trade

2. Get acquainted with types of finance in international trade and
methods of payments.
3. To have a purview of documents that are useful for importer and
exporter for trade.
4. Understand implications of ICC & UCP 600 rules for international
trade.
SAMPLE DESIGN
Data collection methods include the various methods used by the researcher
in his project. The application of method for collecting the data mainly
depends upon the type of project researcher is going to undertake.
In case the survey project questionnaire is the best tool for collecting data.
But in case of projects other than surveys like this project all the data is
collected already prepared or published.
SOURCES OF DATA
Data can be classified into:
Secondary source
– Various sites.
– Trade Documents
– Internal Process Notes, etc.
THE Company’s History:

The HSBC Group is named after its founding member, The Hong Kong and
Shanghai Banking Corporation Limited, which was established in 1865 to
finance the growing trade between Europe, India and China. The inspiration
behind the founding of the bank was Thomas Sutherland, a Scot who was
then working for the Peninsular and Oriental Steam Navigation Company.
He realized that there was considerable demand for local banking facilities
in Hong Kong and on the China coast and he helped to establish the bank,
which opened in Hong Kong in March 1865 and in Shanghai a month later.
Soon after its formation the bank opened agencies and branches around the
world. Although that network reached as far as Europe and North America,
the emphasis was on building up representation in China and the rest of the
Asia-Pacific region. HSBC was a pioneer of modern banking practices in a
number of countries. In Japan, where a branch was established in 1866, the
bank acted as adviser to the government on banking and currency. In 1888, it
was the first bank to be established in Thailand, where it printed the
country’s first banknotes.
From the outset trade finance was a strong feature of the local and
international business of the bank, an expertise that has been recognized
throughout its history. Bullion, exchange, merchant banking and note issuing
also played an important part. By the 1880s, the bank was acting as banker
to the Hong Kong government and also participated in the management of
British government accounts in China, Japan, Penang and Singapore. In
1874 the bank handled China’s first public loan and thereafter issued most of
China’s public loans.
WHAT IS HSBC?
We are the world’s local bank.
Headquarters in London, HSBC is one of the largest banking & financial

services organization in the world.
HSBC’s international network comprises over 9500 offices in 76 countries

& territories in Europe, the Asia-Pacific region, the Americas, the Middle
East & Africa.
With listings on the London, Hong kong, New York, Paris & Bermuda stock
exchange shares in HSBC holdings places are held by nearly 200,000
shareholders in some 100 countries & territories. The shares are traded on
the New York stock exchange in the form of American Depository Receipts.
Through an international network linked by advertisement techniques,

including a rapidly growing e-commerce capability, HSBC provides a
comprehensive range of financial services like-
1. Personal financial services

2. Commercial Banking
3. Corporate Banking
4. Investment Banking
THE HSBC GROUP IN INDIA

• The Hongkong and Shanghai Banking Corporation Limited (HSBC)
• HSBC Asset Management (India) Private Limited
• HSBC Global Resourcing / HSBC Electronic Data Processing (India)

Private Limited
• HSBC Insurance Brokers (India) Private Limited
• HSBC Operations and Processing Enterprise (India) Private Limited
• HSBC Private Equity Management (Mauritius) Limited
• HSBC Professional Services (India) Private Limited
• HSBC Securities and Capital Markets (India) Private Limited
• HSBC Software Development (India) Private Limited
The HSBC Group commenced operations in India in 1867 with a branch in

Calcutta. They claim an earlier commencement, as the Mercantile Bank of
India, China & London, which the group acquired in 1959, was established
in 1853, with a branch in Bombay.
The Bank has relocated some branches in Mumbai, New Delhi, Chennai,
Banglore, Kolkata & Visakhapatnam from what were once important trade
centers to more appropriate present day locations that hold our target
customer base.
INTERNATIONAL TRADE SERVICES BY HSBC

It is impossible to be in international trade without involving your bank for
all the services they provide such as advice on financial issues and the
potential risks involved. It is true that one critical hurdle for SMEs (Small
Medium Enterprises) is the lack of information on international trade
processes, documentation and banking procedures necessary to carry on with
business abroad. For result oriented and cost effective international trade,
you will very definitely need access to accurate and timely information and a
sound knowledge of banking.
HSBC plays a catalytic role in international trade by providing expert
advices & secure option backed by global distribution network in every part
of this world. HSBC has played a key role in international trade since 1865,
when Hongkong Bank, the founding member of the HSBC Group, was
established to finance and facilitate the growing trade between United States
of America, Europe and China.
Fig. 1 HSBC Global Locations
With our extensive experience in international trade, HSBC is ideally placed

to support the long-term growth of your business. We combine local service
excellence with global reach, supplemented by advanced technology. HSBC

has an extensive network of over 10,000 offices in 82 countries and
territories. Thus, wherever in the world you may be, you can rely on our
teams of specialists to help you achieve your business objectives. Financing
the International Trade has been one of the HSBC’s key strength.
Leveraging on our global network we ensure that we offer the widest gamut
of trade products and services ranging from traditional methods of
facilitating imports and exports to innovative structured solutions.
Today HSBC has an experience of almost 140 years in International Trade

and have the ability to combine the global reach and local knowledge. “We
are the ideally placed to partner your Business”
All of which we put at your disposal- no matter what your size or where
you do business- so that when you trade, you trade on our experience.
So it makes sense to find out how your business can benefit from the
strength of our highly experienced Trade Services Team, backed by
advanced technology, global distribution network and a comprehensive
range of import/export and services.
Import Services
Issuance of documentary credits (DCs) and standby letter of credits

(SBLCs)
When issuing DCs or SBLCs through HSBC, you enjoy the following
benefits:
➢ Detailed advice on structuring the instruments to meet your

import requirements
➢ Comprehensive guidance on the DC terms and conditions
➢ Access to HSBC's vast global expertise and resources
➢ Ability to turnaround transaction processing expeditiously
Import Collections services
This is a cost-effective solution for trading internationally. Under this

arrangement, the importer gets the shipping documents, after making
payment or providing an acceptance to pay at a future date. We have
established strict service standards, which ensure that you are promptly
informed of any documentary collections drawn on you.
Import Financing
We can address funding gaps in your trade cycle and support your business,
by providing you import financing options in foreign currency (at LIBOR
linked rates) or in Indian Rupees. We can arrange import buyers' credit
financing through HSBC branches / group entities overseas, at

internationally competitive LIBOR linked rates.
Advance Remittances / Direct Remittances
For your import payments to be made to overseas beneficiaries, we provide a

quick turn around for payments by way of Telegraphic Transfer / Demand
Drafts etc.
Issuance of shipping guarantees/delivery order or any other guarantee
In case the goods you import arrive before the transport documents, we
could issue you a shipping guarantee / delivery order to facilitate taking
delivery of the goods. You then have immediate access to your goods and
avoid expensive storage fees and demurrage charges.
Advisory services on any Import transactions
Whatever your sourcing requirements, we are well positioned to provide you

expert advice for structuring your import transactions. Leveraging on our
global presence, we can offer solutions where HSBC group entities can
handle the transaction on both sides thereby ensuring a smoother, safer and a
more cost-effective execution of transactions.
Export Services
Export Collections
Trade between counterparties on collection basis is carried out where there is
an inherent comfort level between the buyer and the seller but each party
desires to safeguard itself to some extent. However, the buyer is at relatively
lower risk than the seller. He can inspect the documents before paying for
them.
The collection cycle starts when the seller, having shipped the goods and
obtained the necessary documents, presents the documents together with his
instructions to his bank (remitting bank). The Bank will send these to its
branch/ correspondent bank (collecting bank) in the buyer's country for
payment. Collection can be on D/P (Documents against Payment) or D/A
(Documents against Acceptance) basis. Under D/P, the buyer gets the title to
the goods only after he pays for them. In a D/A scenario, the buyer gets title
to the goods against accepting to pay on a future date (i.e. due date) by
accepting a Bill of Exchange drawn by the seller on the buyer; hence a credit
period is extended by the seller to the buyer.
The risk to the exporter is much greater because he does not have a bank's
undertaking as in the case of a documentary credit; but he may retain control
over the goods through the collecting bank. This system is usually used
when dealing with parties that have an established track record or where the
exporter is sure that the importer will not refuse the goods.
Advance Payment
This trade payment method is prevalent for transactions where the seller has
a much higher bargaining power than the buyer. Such payment method may
also be employed where the buyer may not have the ability to open letters of
credit (formally called Documentary Credits) through their bank/s. It is also
possible that the buyer is a cash rich company and therefore wants to avail a
cash discount from the seller.
Obviously, the inherent risk in the transaction is borne by the buyer which
involves performance risk on the exporter as well as country risk where
cross-border trade in involved. Risk mitigates for the buyer could be an
established relationship with the seller, or any mutual dependence between

the buyer & the seller. Bank Guarantee from the seller covering the
performance risk could also provide comfort to the buyer.
DC Advising
A Documentary Credit ("DC") opened by the overseas importer's bank, will
be checked for authenticity and couriered across to your doorstep. With a
presence in over 83 countries and over 10,000 group offices, and global
correspondent banking relationships with over 2,500 banks, we have Swift
key arrangements with most of the major banks, to facilitate straight through
processing of DC advising. We also offer a real time electronic DC advising
functionality wherein the DC is sent through an automated email to a
designated person in your office.
DC Confirmation
Reduce bank and country risk effectively by enjoying the security of
payment commitments from both the issuing bank and the confirming bank.
HSBC is one of the largest institutional banks with global correspondent
banking relationships with over 2,500 banks. If HSBC confirms the DC, and
your documents are presented in compliance with the DC terms, payment
from HSBC will be final.
DC Transfer
Ideal for buyers working with sourcing agents who require credit cover. If
you are a sourcing agent or the first beneficiary, we can provide guidance on
the terms and conditions of your DC and assist in either fully or partially
transferring your DC to the ultimate supplier.
Trade Solutions
We have designed a special program for exporters, supplying to certain large
reputed buyers in the US and Europe. As an established supplier to such
large reputed overseas buyers, you are entitled to enjoy a range of extra
benefits when you present documents to HSBC for negotiation under
Documentary Credits (DCs) issued by other HSBC group offices. These
extra benefits include:
Lower overseas bank charges viz. handling charge, courier, cable charges,
discrepancy fee, reimbursement fee; which are to the account of
beneficiaries:
➢ Faster communication and quicker turnaround times. As both the import
and export legs of the transactions are handled by one bank you should
receive funds 6 days earlier on average, saving you interest charges
➢ Peace of mind that documents are only checked once and held by the
local HSBC office until acceptance; and
➢ Opportunities for Pre and Post shipment finance.

Parties Involved
➢ Applicant
The party who applies to the opening (issuing) bank for the issuance
of a letter of credit.
➢ Beneficiary
The party in whose favor the letter of credit has been established. The
beneficiary is the party who demands payment under the letter of
credit.
➢ Advising Bank
Denotes the bank giving notification of the terms and conditions of a

letter of credit to the beneficiary (seller). The advising bank also takes
reasonable care to check the apparent authenticity of the letter of
credit which it advises.
➢ Confirming Bank
A bank, that at the request of the issuing bank, assures that drawings
under the credit will be honored (provided the terms and conditions of
the credit have been met).
➢ Drawee Bank
The bank on which the drafts specified in the credit are drawn and
from which payment is expected.
➢ Issuing Bank (Opening Bank)
The bank which issues the letter of credit on behalf of the applicant.
➢ Negotiating Bank
Bank, other than the issuing bank, which elects to "negotiate"

(advance funds or give value to the beneficiary) against presentation
of complying documents.
➢ Paying Bank
The bank authorized in the letter of credit by the issuing bank to honor
sight or deferred payments under the terms specified in the credit. (If
this bank is the advising bank, it has no obligation to honor
documents; however, if this is a confirming bank, it is obligated to pay
against complying documents.)
➢ Presenting Bank
The bank that forwards the documents directly to the issuing bank to
obtain settlement.
➢ Reimbursing Bank
The bank authorized by the issuing bank to reimburse the drawee

bank or other banks submitting claims under the terms of the credit.
➢ Transferring Bank
A bank authorized by the issuing bank as specified in the credit that

can transfer the issuing bank's documentary credit from one
beneficiary to another at the request of the first beneficiary.
Methods of Payment
There are four methods of payments in the international trade which are as
under.
1. ADVANCE PAYMENT:
In this case importer pays the exporter in advance & gets goods &
services later. (No obligation on Bank)
The buyer agrees a price for goods from an overseas exporter and sends his
payment with the firm order i.e. before the goods are shipped:
The importer must be confident of:
• the reliability of the exporter
• the stability of the exporter’s country
The risk is borne by the importer.
In return the importer may be allowed a discount which is a deduction from
the price of goods in consideration of its being paid in advance.
This method would be used when:

• an importer is unable or unwilling to open a documentary credit
• an importer has a good cash position and can negotiate a cash discount
• an individual is buying from a mail order company
Importers can arrange to make advance payment through a bank.
Applicability
Recommended for use in high-risk trade relationships or export markets, and
ideal for Internet-based businesses.
Risk
Exporter is exposed to virtually no risk as the burden of risk is placed nearly
completely on
the importer.
Pros
• Payment before shipment
• Eliminates risk of nonpayment
Cons
• May lose customers to competitors over
payment terms
• No additional earnings through financing

operations
1. DOCUMENTARY CREDIT (LETTER OF CREDIT)
It constitutes a definite undertaking of the bank to pay the exporter

provided that the exporter presents the documents which comply with
the terms & conditions of the LC.
As mentioned in the previous two methods, there are problems of trust and
risk for both the buyer and the seller. In fact, trade will be difficult between
companies who do not know each other well.
Banks act as a trustworthy third party or intermediary between the buyer

and the seller. The reasons are:
A bank is acceptable to both the buyer and the seller. By issuing a
documentary credit, the buyer’s bank guarantees payment to the seller if he
presents the correct documents. The buyer has to pay for the documents, but
not until his bank receives them.
• A bank is a financial institution and therefore has the necessary
expertise in handling international trade transactions.
• A bank is able to supply trade and credit information, which is very
important to both buyer and seller.
• A bank is ready to provide finance to help the buyer and the seller
fulfil their commercial obligations.
Documentary credits are covered in detail later.
Applicability
Recommended for use in new or less-established trade relationships when
you are satisfied with the creditworthiness of the buyer’s bank.
Risk
Risk is evenly spread between seller and buyer provided all terms and
conditions are adhered to.
Pros
• Payment after shipment
• A variety of payment, financing and risk mitigation options
Cons
• Process is complex and labor intensive
• Relatively expensive in terms of transaction costs
COLLECTION
The exporter (Principal) present documents to his bank (Remitting Bank),

who send the documents to an importing country’s bank (Colleting Bank) to
deliver documents against payment or acceptance to Importer (Drawee). In
the case of a collection, no documentary credit is issued and the bank is not
involved in any undertaking to pay the seller. The bank acts as an agent.
The collection cycle starts when the seller, having shipped the goods and
obtained the necessary documents, presents the documents together with his
instructions to his bank (remitting bank). The bank will send these to its
branch/correspondent bank (collecting bank) in the buyer’s country for
payment.
The risk to the importer is little more than in documentary credits: he can
inspect the documents before paying for them.
The risk to the exporter is much greater because he does not have a bank’s
guarantee as in the case of a documentary credit; but he may have control
over the goods through the collecting bank.
Applicability
Recommended for use in established trade
relationships and in stable export markets.
Risk
Exporter is exposed to more risk as D/C terms are more convenient and
cheaper than an LC to
the importer.
Pros
• Bank assistance in obtaining payment
• The process is simple, fast, and less costly than LCs
Cons
• Banks’ role is limited and they do not
guarantee payment
• Banks do not verify the accuracy of the documents

OPEN ACCOUNT
This is basically payment in arrears, the opposite of advance payment and

usually covers a regular flow of shipments. The importer usually agrees with
the exporter to pay at the end of each month or, say, one month after each
shipment. There is usually a long-standing or regular business relationship
between the two parties:
The exporter must be confident of:

• the reliability of the importer
• the stability of the importer’s country
The risk is borne by the exporter.
Governments sometimes support their exporters to protect them against
these risks.
In this case exporter trusts the importer and sends the goods / services in
advance & get paid later (no obligation on bank).
LOW HIGH
RISK ADVANCE RISK
EXPORTER PAYMENT IMPORTER
LETTER OF CREDIT
COLLECTION
OPEN ACCOUNT
HIGH LOW
Applicability
Recommended for use (1) in secure trading relationships or markets or (2) in
competitive markets to win customers with the use of one or more
appropriate trade finance techniques.
Risk
Exporter faces significant risk as the buyer could default on payment

obligation after shipment of the goods.
Pros
• Boost competitiveness in the global market
• Establish and maintain a successful trade

relationship
Cons
• Exposed significantly to the risk of nonpayment
• Additional costs associated with risk

mitigation measures
CASE STUDY
Here we are going to see how an international trade is done.
We got a manufacturer(seller) and a buyer(importer).
GLITTER international MR. E
Importer Exporter
Importers Bank Exporter Bank
GLITTER international is a dealer of Decorative papers in INDIA .

They want to import decorative papers from “Mr. E” (exporter) In china . So
they negotiate with each other. And on demand of GLITTER international
Mr.E issues Performa invoice & forward to importer which contains the
following details.
✔ Price
✔ Quantity
✔ Description of goods / services
✔ Insurance
✔ Transport Details
GLITTER international checked all the details mentioned in the Performa

invoice .Total material to be sent and its amount and after checking all the
terms and conditions GLITTER international (importer) agrees for the
contract and he issues a purchase order to exporter and both parties entered
in a sale agreement.
Now from the four methods of trade they selected the method of
documentary letter of credit for there contract.
Step 1:-
GLITTER international requested its bank (Hsbc Bank ltd) to issue a letter
of credit for this contract. The issuing bank checks that the application is
complete, precise and satisfies internal credit approval .The issuing bank
demanded request for opening letter , promissory note and Performa invoice
and also insurance cover note.
GLITTER International prepared all the documents and also filled the Ib-8
from which is necessary for issuance of letter of credit.
Request For Letter of Credit :-
Request for Lc letter Is the request from GLITTER International to its bank
for the issuance of Letter of credit. It includes Following details;
Performa Invoice # YX10010702 of amount US $ 29775/-

Dated 07-01-2010
Cover Note # 8601272 (EFU General Insurance Company Ltd.)
Promissory Note :-
You are authorized to debit our A/C NO. 1382-4 with all dues of L/c
Kindly do the needful at your earliest under the intimation to this office.
Pro forma Invoice :-
“An invoice forwarded by the seller of goods prior to shipment to advise the
buyer of the weight and value of the goods.”
In pro forma invoice mentioned
Performa Invoice # YX10010702

Date 07-01-2010
Buyer M/s GLITTER International Ltd.

JAIPUR/ INDIA
Sellers
M/s Exporter
China
Import Conditions:
• Loading port Shanghai, China

• Receiving port CHENNAI , INDIA
• Product Decorative Paper 70-80 GSM

• Amount of product $ 29775.00
• Payment Term
Irrevocable Lc at sight
(A letter of credit that is payable once it is presented along with the
necessary documents.)
• Shipment
Within 10 working days after receipt of buyers L/C
This invoice is confirmed by both Buyer and the seller. Both parties
signatures are there with stamps.
Insurance Cover note :-
“A document issued by an insurance company, usually to order of shipper,

under a marine policy and in cover of a particular shipment of
merchandise”.
The good are insured By EfU General insurance Ltd on behalf of GLITTER
International. Insurance covering note includes following information.
On account of premium received on cover note

Cover note # 8601272
Assured M/s Hsbc Bank ltd

M/s GLITTER ltd JAIPUR
Interest Decorative Paper 70-80 GSM

Warehouse to Warehouse Covered
Conveyance Any approved vessel
Sum insured :
Us $ 29775 + 10 % = $32753 @ 85.500 Rs
Rupees 2,800,381
Conditions :
Subject to following clauses and conditions overleaf.
➢ Institute cargo clauses (A)

➢ Institute War clauses (cargo)
➢ Institute strike clauses (cargo)
➢ Road/rail cargo clauses (A)
➢ Road/ rail strikes clauses (cargo)
Validity of this insurance cover is Until 12 jan 2011
Net Premium is Rs. 15626
IB-8 Form :-
Along with all these documents GLITTER international also submitted the
Ib-8 form which is the issuance of letter of credit form that include
information about what conditions should be mentioned in Letter of credit.
• Adds particulars to Documentary Credit.
• It is a legal document and mandatory for the opening of documentary
credit.
• It is an application and agreement for issuance of Documentary
Credit.
• It contains Detail information
➢ Importer Bank name

➢ Exporter Bank name
➢ 100 Rs Stamp
➢ Applicant & Beneficiary
➢ Expiry Date
➢ Shipment method
• Partial shipment
• Trans shipment
➢ Port of landing
➢ Port of discharge
➢ Lc at sight
➢ Insurance details
➢ HS code
I-Form:-
• Used to report the State Bank of INDIA that what commodity

customer is imported.
• Reporting made to SBP is in special coding form named HS code
(harmonized code).
Purpose is to also checks that how much currency is exchanged
Step 2:-
Importer`s Bank HSBC bank JAIPUR, Checked all the documents and sent
these all documents to its TSC ( trade service center) For opening of letter
of credit.
Trade service center (TSC) is center where all the swift messages are made.
L/c rquests from all the branches of Hsbc are sent to TSC. In Trade Service
Center they check all the documents and then make a swift message to
advising Bank . That swift message is actually letter of credit . It includes
following conditions.
Letter of Credit
 Lc is Irrevocable
 UCP latest version (ucp 600)
 Importer name and its bank name
 Exporter name and its bank name
 Partial shipment and Transshipment Allowed
 Credit available with advising bank
 Last date of shipment 10.5.2010
 Draft at sight
 3 copies of invoice
 Product Description
 Decorative paper 70-80 GSM

 Total value USD 29775 CFR CHENNAI port
 Performa invoice NO. YX 10010702 Dated 07.01.2010
 Invoice to certify that goods shipped are in accordance with above
mentioned pro forma invoice
 Certifying merchandise to be of Chinese origin

 And indicating H.S. code no 4805.9190
 Full set of ‘ shipped on board’ marine bill of lading made out or
endorsed to the order of Hsbc Bank ltd JAIPUR INDIA.
 Freight paid by issuing bank , Hsbc Bank
 Insurance cover # 8601272
 By Efu General insurance ltd.
 Carrying vessel should be bearing flag other then Israel
 Copy of Declaration detailing all shipment to be send by airmail /fax
directly to applicant
 A certificate from the beneficiary that one set of invoice and packing
list has been placed on the inner side the door of each container in
case of Fcl cargo or attached to goods or packages at an obvious place
in case of lcl cargo.
FCL ----- full container load

LCL ----- less than container load
 The documents must indicate the LC # and date of issuance of credit

 Document handling fee is payable by beneficiary
 Any discrepancy fee is payable by beneficiary
 All forign bank charges are on Beneficiary
 Documents must be presented within 15-days after issuance of

Transport
 This Lc is confirmed by HSBC INDIA
Step 3
After receiving the Lc Swift message the exporter bank advice to his client
Mr .E . so that he can check the terms and conditions mentioned in the swift
message and decide weather to act according to that or else cancel the
agreement .
Exporter`s Documents
Export Documents
INVOICE CERTIFICA CUSTOMS TRANSPO EXCHANG PAYMENT MISCELLANE

TE DOCUME RT E DOCUME OUS
NTS DOCUME CONTROL NTS DOCUMENTS
NTS DOCUME
NTS
1.Proforma 4.Certificate 6.Shipping 7.Mate 10.GR 12.Bill of 13.Marine

Invoice of Origin Bill Receipt Form Exchange Insurance Policy
2.Commer 5.Combined 8.Bill Of 11.PP Form 14.Insurance
cial certificate of Lading Certificate
Invoice Origin and 9.Airway 15.Health
Value
3.Consular Bill Certificate
Invoice
Step 4
Exporter checked all the terms and conditions mentioned in the documentary
credit. And agreed with the terms and conditions mentioned then he
prepared the shipment & complete the documents required in the Lc. These
documents includes:
Covering schedule:-
It is a document which shows all the required documents from the exporter.
Eg. Commercial invoice, bill of lading , packing list, carrier`s cert, s/a,
certificate of analysis and product detail.
It includes an instruction to the issuing bank that the documents constitutes a
complying presentation.
Commercial Invoice:-
It is a trade invoice. Showing details of all the goods total packages to be

sent and there costs.
Bill of lading :
A document which provides the terms of the contract between the shipper
and the transportation company to move freight between stated points at a
specified charge.
Shipping details:-
A document which shows all the details like port of loading, port of
discharge, date of shipment, insurance policy no, product name.
Once copy is sent to client and once copy is sent to insurance company.
Packing list:-
“A list which shows number and kinds of packages being shipped, totals
of gross, legal, and net weights of the packages, and marks and numbers
on the packages. The list may be requested by an importer or may be
required by an importing country to facilitate the clearance of goods
through customs.”
Airway bill :-
“The carrying agreement between shipper and air carrier which is obtained
from the airline used to ship the goods”.
Also some certificates required in LC etc. and Submitted his documents to

its bank.
Certificate of Inspection:-
A document in which certification is made as to the good condition of

the merchandise immediately prior to shipment. The buyer usually
designates the inspecting organization, usually an independent inspection
firm or government body.
Certificate of Manufacture:-
A statement by a producer, sometimes notarized, which certifies that

manufacture has been completed and that the goods are at the disposal of
the buyer.
Certificate of Origin:-
A document in which certification is made as to the country of origin of

the merchandise.
Step 5
The Nominating bank then scrutinize all the documentation carefully. And
all the documents matched and the settlement is made. This is called
complying presentation n. Complying presentation means both the
importer`s and exporters documents match and all the terms and conditions
are fulfilled.
Step 6
Exporter Bank then send documents to issuing bank. First the TSC
department of Hsbc Bank received these documents then transferred to
HSBC Ksb branch. Issuing bank then scrutinize all the documents weather
they are according to the terms and condition or not and after checking all
the documents carefully the documents were complete and were exactly
according to demand of importer.
Step 7
The documents comply the issuing bank reimburses the nominated bank
within 05 working days as per UCP 600 rules. Nominated bank makes
settlement to beneficiary if not done so.
Step 8
All the documents were complete and then Hsbc advised GLITTER
international that they shipment has arrived . The issuing bank (Hsbc bank)
releases the documents against payment to the applicant. GLITTER
International can now collect the goods.
Here end the case study , but there is always two side of a coin, we have
already seen one, the left unseen part (second side of coin) is IMPORT part.
so here is the documentation part of import.
IMPORT DOCUMENTS
1. BILL OF ENTRY:
A bill of entry is a formal declaration describing goods which are being
imported or exported. The bill of entry is examined by customs officials to
confirm that the contents of a shipment conform to the law, and to determine
which taxes, tariffs, and restrictions may apply to the shipment. This
document must be prepared by the importer or exporter, with many
companies hiring a clerk specifically to handle the process of preparing bills
of entry.
A typical bill of entry includes a description of the goods in the shipment,

including details and the quantity of the goods, along with an estimate of
their value. Customs officials reserve the right to inspect the shipment to
determine whether or not it is consistent with the bill of entry, and
discrepancies can be grounds for legal proceedings.
Once a bill of entry has been reviewed and the shipment has been inspected,
it can be cleared for sale or transfer. If there is a problem, customs may opt
to confiscate the goods.
Many nations have specific laws about how bills of entry should be
formatted and presented. It is important to have accurate documentation, or
goods can be held up in customs. This can cause an inconvenience in some
cases, and spoilage or destruction of the goods in others; a shipment of fruit,
for example, will not hold up through a lengthy retention by customs while
details of the shipment are worked out.
In addition to a bill of entry, goods may also need additional supporting
paperwork. Works of art, for example, may need to be accompanied by
certificates of provenance. Archaeological artifacts also need to be
accompanied by paperwork indicating that their release has been approved
by the government, and describing the purpose for which the artifacts are
being moved across international borders. This is designed to prevent the
illegal sale and trade in priceless cultural artifacts.
Companies keep copies of their bills of entry on record as part of their
financial paperwork; they need to be able to track the movement of
shipments. These forms are also used by customs officials to track the type
of goods being moved over their borders, and in the case of objects with
import and export quotas, to make sure that these quotas are not exceeded.
This paperwork is also used in the preparation of statistics which are
designed to shed light on a nation's economic health and trade balance with
other nations.
2. CERTIFICATE OF INSPECTION:
Inspection report or report of findings is required by some importers and/or
importing countries. Please see the sample Inspection Report. The export-
trader uses such a report in the inspection of goods purchased from a
manufacturer. The export-manufacturer also uses such a report in the
inspection of its own productions.
In case an inspection certificate is required, the importer may stipulate in the

letter of credit (L/C) to use a specific independent surveyor.
In the case of a foreign government required pre-shipment inspection, which
is stipulated in the L/C, the report of findings can be in the form of a security
label attached on the invoice. The label bears the number and date of the
corresponding report of findings issued by the foreign government engaged
surveyor.
3. CERTIFICATE OF MEASUREMENT:
There are two ways how freight can be charged i.e. on the basis of weight or
measurement. When freight is charged on the basis of weight, the weight
declared by the exporter is accepted. However, the exporter can obtain
certificate of measurement either from the Indian chamber of commerce or
any other approved organization and submitted to the shipping company for
calculation of applicable freight. The certificate contains detail like name of
the vessel, port of destination, description of goods, length, breadth,
quantity, depth, etc. of the packages.
4. FREIGHT DECLARATION:
When the importer agrees to pay the freight or the overseas supplier pays the
freight; in both the cases freight declaration is needed from the overseas
supplier.
5. FUMIGATION CERTIFICATE:
In order to ensure safety against spread of harmful virus importer insist on
fumigation certificate where the cargo includes plants & weeds. Unless his
certificate is provided the cargo will not be allowed to enter into their
countries. The exporter is responsible to carry out fumigation & also obtain a
certificate from the prescribed agency. Serious complications will arise in
the certificate from the exporter. The certificate will enable importers easy
clearance of goods.
Importance of Documentation
Documentation provides tangible evidence that the goods ordered that have
been produced and dispatched in accordance with the buyer’s requirements.
Consignment details need to be communicated to the various parties so both

importers and exporters need to be familiar with the principal documents
used. Documentation is also used to satisfy government regulations in the
UK and overseas and has become an increasingly important factor in
obtaining finance for international trade.
It is normally the responsibility of the exporter to make sure that documents

for the transportation of goods are complete, accurate and properly and
promptly processed .failure to do so may result in additional costs being
incurred.
The importer has the responsibility for completing accurately the necessary
forms for the goods to be licensed for import and cleared through customs.
Incorrect documentation can cause delay in the clearance of the goods at
their destination. Goods can be impounded, warehoused or left on the
quayside, with the risk of damage or loss and consequent expense. The use
of a forwarding agent can help reduce administrative and pressures on
importers and exporters.
Classification of Documents: (Used in International

Trade)
The international Trade documents may be classified as under
a. Commercial documents
b. Official documents
c. Insurance documents
d. Transport documents
e. Financial and financing documents
Commercial documents:
Commercial Invoice
1. Exporter\name 8. Country of origin 15. Quantity

2. Consignee name 9. Date of export 16. Net weight/gross weight
Proforma Invoice: It is a memorandum of the terms of a contract of sale
17. Description of merchandise
3. Intermediate consignee name 10. Terms of payment
wherein the seller gives the quotation to the potential buyer. If18.the buyer
Unit price/total value
4. Forwarding agent name 11. Export references
5. Commercial invoice no. 19. Package marks
12. Air/ocean port of embarkation
6. Customer purchase order no. 20. Misc. Charges
13. Exporting carrier/route
7. B/l, airway bill no. 21. Certifications
14. Packages
1) Proforma Invoice:
A proforma invoice is a quote in an invoice format that may be required by
the buyer to apply for an import license, contract for pre-shipment
inspection, open a letter of credit or arrange for transfer of hard currency.
A proforma may not be a required shipping document, but it can provide
detailed information that buyers need in order to legally import the product.
Proforma invoices basically contain much of the same information as the
formal quotation, and in many cases can be used in place of one. It should
give the buyer as much information about the order as possible so
arrangements can be made efficiently. The invoices inform the buyer and the
appropriate import government authorities details of the future shipment;
changes should not be made without the buyer’s consent.
As mentioned for the quotation, the points to be included in the proforma

are:
1. Seller’s name and address
2. Buyer’s name and address
3. Buyer’s reference
4. Items quoted
5. Prices of items: per unit and extended totals
6. Weights and dimensions of quoted products
7. Discounts, if applicable
8. Terms of sale or Incoterm used (include delivery point)
9. Terms of payment
10. Estimated shipping date
11. Validity date
For example, country A does not require person X to have a visa before
entering the country but person X is in country B which requires a visa from
country A in order to allow X to depart. In that case country A may issue a
pro-forma visa to X, meaning the only object of the visa is to satisfy the
formal requirement for X to have a visa and not any real requirement by
country A.
Commercial Invoice: A commercial invoice is a bill for the goods from the
seller to the buyer. Commercial invoice are utilized by customs officials to
determine the value of the goods in order to assess customs duties and
taxes. A commercial invoice is a claim for payment for the goods under the
terms of the commercial contract.
It is addressed to the importer by the exporter. An invoice will normally
include a detailed description of the goods together with unit prices, totals,
weights and terms of payment, as well as packing details and shipping
marks. It serves as a checklist so that a particular consignment can be
identified and is the main evidence in any assessment for customs duty.
A commercial invoice is document used in foreign trade. It is used as a
customs declaration provided by the person or corporation that is exporting
an item across international borders. Although there is no standard format,
the document must include a few specific pieces of information such as the
parties involved in the shipping transaction, the goods being transported, the
country of manufacture, and the Harmonized System codes for those goods.
A commercial invoice must also include a statement certifying that the
invoice is true, and a signature. A commercial invoice is primarily used to
calculate tariffs.
A document that generally contains the name and address of the seller and
buyer, date of the sale, a description of the goods, quantity, unit price, terms
of sale, amount due under the Letter of Credit and type of currency
Certified Invoice: An invoice bearing a signed statement by someone in the

importer’s country who has inspected the goods and found that the goods are
in accordance with the specific contract of the proforma and that the goods
are of a specific country of origin.
Certificate of origin: It is a specified document certifying the country of

origin of the merchandise required by certain foreign countries for tariff
purposes. This certificate is issued by Chamber of Commerce, Trade
Association or any other authorized body of the exporting country and it
sometimes requires the signature of the consul of the country to which it is
destined. A Certificate of Origin (often abbreviated to CO or COO) is a
document used in international trade. It traditionally states from what
country the shipped goods originate, but "originate" in a CO does not mean
the country the goods are shipped from, but the country where their goods
are actually made. This raises a definition problem in cases where less than
100% of the raw materials and processes and added value are not all from
one country.
An often used practice is that if more than 50% of the sales price of the
goods originate from one country, that country is acceptable as the country
of origin (then the "national content" is more than 50%). In various
international agreements, other percentages of national content are
acceptable.
Combined Certificate of Origin And Value:

This Document is applicable to commonwealth countries only. This
document certifies not only the origin of goods but also the value of goods.
Weight notes or certificates: This certificate indicates the weight of the

goods issued by a public agency. It can be evidenced by means of a separate
document, or by a weight stamp/declaration of weight superimposed on the
transport document by the carrier or his agent.
Packing List: The exporter must prepare a packing list showing description
of items, number of containers/boxes with specification of net weight &
gross weight etc. to enable the importer of the goods to check the shipment.
Quality or Inspection certificate :This is a certificate declaring that the

goods have been examined and found to be in accordance with the contract
of sale. It is signed by the manufacturer or supplier or any recognized
independent inspection body as required by the importer.
Official documents:
• Consular Invoice: It is an invoice made out in a specially printed

form of the exporter and is shown before the consul of importing
country stationed in the exporter’s country as being correct in all
respect. The consular of the importing country then certifies the
invoice. A consular invoice enables the importer country to have
all accurate record of the merchandise shipped.
• Legalized Invoice: Some Middle East countries require that the
commercial invoice should be countersigned and stamped by the
authorized officer in their Embassy or the consulate in the
exporter’s country instead of consular invoice.
• Black-listed Certificate: Under this certificate, the exporter has to

provide a Black-listed certificate evidencing that all parties
involved including the bank and shipping line are not black-listed.
Due to strained political relation or any other reasons some
countries do not allow transactions with some particular countries.
These countries and the exporters are treated as Black-listed.
• Health, Veterinary and Sanitary Certificate/Photo Sanitary

Certificate,
Certificate of Analysis: This certificate is generally needed in
purchase of foodstuff, hides and livestock and in the use of
packing materials. It is issued by the recognized health
authorities in the exporting countries. The certificate confirms
that the shipment meets the required health, veterinary and
sanitary standards.
Insurance documents
There are some risks of damage, loss or destruction of goods during the time
of transit. Marine Insurance plays a very vital role in this respect. The scope
of Marine Insurance extends to Sea, Land and Air conveyances only in
respect of good from one country to another country or one place to another
place with short distance through the vessel, craft which the goods are
carried or conveyed. Marine insurance comprises of the following:
• Marine Cargo Insurance
• Marine Hull Insurance
• Freight
There are various types of marine insurance policies, which differ in respect
of the cover provided to the insured. The main types are as follows:
i) Floating policy: A floating policy is a contract of insurance

means to cover a number of shipments, the details of which are
not finalized when the insurance contract is concluded. Under
the floating policy, insurance cover is given in general terms
and details of shipments are declared subsequently and
endorsed in the policy.
ii) Time policy: It covers the subject matter of insurance for a
period of time.
iii) Voyage policy: It insures the subject matter from one place to
another irrespective of the length of time taken.
iv) Mixed policy: It covers both a voyage and a period of time
exceeding 30 days.
v) Open cover or Blank policy: This policy is automatically covers
all the shipments of the exporter up to an estimated amount
during a given period.
vi) Specific policy: A specific policy is a contract of insurance,
which covers a specific shipment.
vii) Valued policy: A valued policy is one, which specifies the
agreed value of merchandise insured.
viii) Unvalued policy: In this type of policy, the value of the
merchandise insured is not specified. The insurable value of the
goods is ascertained later on subject to the limit of the sum
insured.
Transport Documents:
This document indicates that the goods, which are delivered to the named
shippers, airlines or transporters, must be carried to a named port, airport or
place of delivery. Following transport documents are being used at present
in the international trade:
Shipping Bill:
It is the main custom document. It is required by the custom authorities for
granting permission for the shipment of goods.
Shipping Bill/ Bill of Export is the main document required by the Customs
Authority for allowing shipment. Usually the Shipping Bill is of four types
and the major distinction lies with regard to the goods being subject to
certain conditions which are mentioned below:
• Export duty/ cess
• Free of duty/ cess
• Entitlement of duty drawback
• Entitlement of credit of duty under DEPB Scheme
• Re-export of imported goods
The following are the documents required for the processing of the
Shipping Bill:
• GR forms (in duplicate) for shipment to all the countries.
• 4 copies of the packing list mentioning the contents, quantity, gross
and net weight of each package.
• 4 copies of invoices which contains all relevant particulars like
number of packages, quantity, unit rate, total f.o.b./ c.i.f. value,
correct & full description of goods etc.
• Contract, L/C, Purchase Order of the overseas buyer.
• AR4 (both original and duplicate) and invoice.
• Inspection/ Examination Certificate.
The formats presented for the Shipping Bill are as given below:
• White Shipping Bill in triplicate for export of duty free of goods.
• Green Shipping Bill in quadruplicate for the export of goods which
are under claim for duty drawback.
• Yellow Shipping Bill in triplicate for the export of dutiable goods.
• Blue Shipping Bill in 7 copies for exports under the DEPB scheme.
Note: - For the goods which are cleared by Land Customs, Bill of Export
(also of 4 types - white, green, yellow & pink) is required instead of
Shipping Bill.
1) Airway Bill/Air consignment Note: This document confirms

the delivery of goods to an airline or its agent for transportation
by air to a named consignee according to the defined and agreed
terms.
Air way bill

Carbon copies attached:

Air Waybill (AWB)
• 1.Blue or 1air- for
- original consignment
shipper note refers to -aoriginal
5. Pink receipt2 issued
- for by an
international courier company for goods and an evidence of the contract of
consignee
carriage, but it is not a document of title to the goods. Hence, the AWB is
non-negotiable.
• 2.Green The AWB
- original hasissuing
1 - for a tracking
carrier number which - can
6. Goldenrod be receipt
delivery used to
check the status of delivery, and current position of the shipment. The
number• consists
3.White of
– invoice
a three digits airline prefix issued7. White
by -IATA
for destination
and an agent's
8 digit
number. copy
The first three copies are classified as originals. The first copy is retained by
the issuing carrier or their appointed agent. The 2nd copy by the receiving
carrier or their appointed agent. The 3rd copy is used as Proof Of Delivery
(POD). The goods in the air consignment are consigned directly to the party
(the consignee) named in the letter of credit (L/C). Unless the goods are
consigned to a third party like the issuing bank, the importer can obtain the
goods from the carrier at destination without paying the issuing bank or the
consignor. Therefore, unless a cash payment has been received by the
exporter or the buyer's integrity is unquestionable; consigning goods directly
to the importer is risky.
For air consignment to certain destinations, it is possible to arrange payment

on a COD (cash on delivery) basis and consign the goods directly to the
importer. The goods are released to the importer only after the importer
makes the payment and complies with the instructions in the AWB. The
AWB must indicate that the goods have been accepted for carriage, and it
must be signed or authenticated by the carrier or the named agent for or on
behalf of the carrier.
Mate’s Receipt: It is a prima facie evidence of the quantity and condition of

the goods received. When the goods are delivered to the shipping company
for transportation, at first a temporary receipt is issued by the ship’s Chief
Officer acknowledging the delivery of the goods alongside the carrying
vessel which is known as Mate’s Receipt. On the basis of Mate’s receipt, the
shipper has to pay the port dues and other charges.A declaration issued by an
officer of a vessel stating that certain goods have been received on board his
vessel. An archaic practice. An acknowledgement of cargo receipt signed by
a mate of the vessel. The possessor of the mate's receipt is entitled to the
bill of lading, in exchange for that receipt.
Bill of Lading: A bill of lading is a document which is issued y the

transportation carrier to the shipper acknowledging that they have received
the shipment of goods and that they have been placed on board a particular
vessel which is bound for a particular destination and states the terms in
which these goods received are to be carried.Normally a bill of lading
contains the port of shipment and of destination, the name of consignee, the
number, contents and identification marks of the goods shipped and the
amount of freight “paid” or “to pay”.
Short Form Straight Bill of Lading

Bill of Lading
1. Shipper (from) name

10. Route
11. Delivering carrier
12. Vehicle/car no.
13. No. Packages
19. Prepayments received
20. Charges advanced
21. C.O.D. shipment
22. Shipment declared value
14. Description of
shipment 23. Shipper
15. Weight 24. Shipper's agent
16. Class or rate 25. Carrier's agent
2. Point of origin (at) na

17. With out recourse
18. Prepaid shipments
26. Permanent address
27. Certification
and state of the actual sh

The bill of lading serves three main purposes,
• as a document of title of the goods

• as a receipt from the shipping company and
• as a contract for transportation of the goods.
Classification of Bill of lading:
• Clear and clause of dirty or foul Bills of lading:

• On board or shipper and Received for shipment Bill of lading
• ‘Through’ or ‘Port to Port’ Bill of lading
• ‘Stale’ Bill of lading
• Charter Party Bill of lading
• Negotiable or Non negotiable and ‘straight’ or ‘order’ Bill of
lading
• Liner Bill of lading
• House bill of lading
• Short form or Blank Back Bill of Lading
• Third Party Bill of lading
• Combined Transport Bill of Lading
Types of Bill of Lading:
Straight bill of lading: This bill states that the goods are consigned to a
specified person and it is not negotiable free from existing equities, i.e. any
endorsee acquires no better rights than those held by the endorser. So, for
example, if the carrier or another holds a lien over the goods as security for
unpaid debts, the endorsee is bound by the lien. Although, if the endorser
wrongfully failed to disclose the charge, the endorsee will have a right to
claim damages for failing to transfer an unencumbered title. Also known as a
non-negotiable bill of lading; and from the banker's point of view this type
of bill of lading is not safe.
Order bill of lading: This bill uses express words to make the bill
negotiable, e.g. it states that delivery is to be made to the further order of the
consignee using words such as "delivery to A Ltd. or to order or assigns".
Consequently, it can be endorsed by A Ltd. or the right to take delivery can
be transferred by physical delivery of the bill accompanied by adequate
evidence of A Limited’s intention to transfer.
Bearer bill of lading: This bill states that delivery shall be made to
whosoever holds the bill. Such bill may be created explicitly or it is an order
bill that fails to nominate the consignee whether in its original form or
through an endorsement in blank. A bearer bill can be negotiated by physical
delivery.
Surrender bill of lading: Under a term import documentary credit the bank
releases the documents on receipt from the negotiating bank but the importer
does not pay the bank until the maturity of the draft under the relative credit.
This direct liability is called Surrender Bill of Lading (SBL), i.e. when we
hand over the bill of lading we surrender title to the goods and our power of
sale over the goods.
Railway consignment Note/Railway Receipt: When the exporter or his

agent delivers a consignment to the railway authorities for its onward
carriage to a named destination, they issued a receipt, indicating the details
of the consignment and destination to which they would carry it. This
document is called the Rail Consignment Note or Railway Receipt.
Roadway Bill: It is an internationally approved document of transaction

when goods are being sent by road through the countries that had ratified the
CMR (Convention Merchandise Routers).
Post Parcel Documents: It is a receipt issued by Post Office for the parcel.
The post office has received for direct delivery to the addressee. It is not a
document of title of goods and generally contains the post office stamp.
GR FORM:
It is an exchange control document which is to be submitted to the RBI after

clearance from the customs authorities. It is designed mainly to furnished
guarantee to the RBI to remit the foreign exchange earned from the export
shipment within 180 days from the date of export.
Financial and financing documents
There are some documents used for payment in international trade

transaction such as:
• Bill of Exchange
• Promissory Note
• Trust Receipt
• Bill of Exchange: Bill of Exchange is one of the key financial

instruments in International Trade. It is an instrument by which sellers
can obtain the payment from their buyers for the invoiced value of
goods.
As per section 5 of the Negotiable Instrument Act. 1881, A bill of

Exchange is an instrument in writing containing an unconditional
order, signed by the market, directing a certain person to pay on
demand or at a fixed or determinable future time a certain sum of
money only to, or to the order of, a certain person or the bearer of the
instrument.
Features of a Bill of exchange:

a. It must be unconditional order.
b. It must be written order.
c. Addressed by one person to another. The term person
includes corporations, partnerships as well as natural
persons.
d. Dully signed by the person giving the order.
e. Bill must be payable on demand or on a determinable
date.
f. The Bill of Exchange must be make payable ‘to order’
or ‘to bearer’.
g. It must indicate the payment of a certain sum
Parties of a Bill of exchange:

There are six parties involved in a bill of exchange. They are:

a. The Drawer:
b. The drawee:
c. The Payee:
d. The endorser:
e. The endorsee:
f. The acceptor:
• Promissory Note: It is a negotiable instrument. As per section 4 of the

Negotiable Instrument Act. 1881, ‘A promissory note is an instrument in
writing (not being a bank-note or a currency note) containing an
unconditional undertaking signed by the maker, to pay on demand or at a
fixed or determinable future time a certain sum of money only to, or to
the order of a certain person, or to the bearer of the instrument.’
Features of a promissory note:
a) It must be unconditional promise

b) Must be written by one person to another
c) Must be signed by the maker
d) Promise to pay a sum of certain money to, or to the order a
specific person or the bearer.
e) Promissory note payable to the maker’s order must be endorsed
by the maker.
• Trust Receipt: The trust Receipt is a receipt for goods, documents of

title to goods, securities, etc. executed by a person, signifying that he has
received the specified goods, title etc and will be holding them in trust for
the person or institution from whom her has received them. The person
who executes the receipt is called the trustee. The trustee undertakes to
keep the goods fully insured against all risks and ensure overall safety of
the goods entrusted to him.
MISCELLANEOUS DOCUMENTS
Certificate of Insurance:
A document issued by an insurance company/broker that is used to verify

the existence of insurance coverage under specific conditions granted to
listed individuals. More specifically, the document lists the effective date of
the policy, the type of insurance coverage purchased, and the types and
dollar amount of applicable liability.
A certificate of insurance is often demanded in situations where liability and

large losses are a concern. For example, a company wishes to hire a driver
from a temp agency. The company will most likely ask the agency to show
them a certificate of insurance that proves that certain liabilities will be
covered by insurance in the event the driver causes problems, such as
incurring damages from driving the company’s vehicles.
International trade documentation - special cases

In some cases international trade requires special documentation.
• If you are importing goods, you may need proof of which country the
goods come from. For example, some imports into the UK are entitled
to preferential rates of duty but require a form EUR1.
• Similarly, if you are exporting, your customer may require a

certificate of origin from you. Your Chamber of Commerce can issue
these.
• There are special UK requirements for some controlled goods, such as
firearms, medicines, plants and animal products. For example, a
licence may be required.
• If you are exporting, you should check whether any special
documentation is required overseas to satisfy local regulations. For
example, you might need documentary proof that your goods meet
local product standards.
• Dangerous goods must be accompanied by appropriate special
paperwork.
• There are simplified processes for temporary exports, eg if you are
taking samples to an overseas exhibition
Letter Of Credit:
Letters of credit (LCs) are among the most secure instruments available to
international traders. An LC is a commitment by a bank on behalf of the
buyer that payment will be made to the beneficiary (exporter) provided that
the terms and conditions have been met, as verified through the presentation
of all required documents. The buyer pays its bank to render this service. An
LC is useful when reliable credit information about a foreign buyer is
difficult to obtain, but you are satisfied with the creditworthiness of your
buyer’s foreign bank. This method also protects the buyer, since no payment
obligation arises until the documents proving that the goods have been
shipped or delivered as promised are presented. However, since LCs have
many opportunities for discrepancies, they should be prepared by well-

trained documenters or the function may need to be outsourced. Discrepant
documents, literally not having an “I-dotted and T-crossed,” can negate
payment.
A letter of credit is a banking mechanism which allows importers to offer

secure terms to exporters.
All letters of credit contain these elements:
• on presentation of specified
documents representing the supply
• a payment undertaking
of goods
given by the bank (issuing bank)
• within specific time limits
• on behalf of the buyer
• these documents conforming
(applicant)
to terms and conditions set out in
• to pay a seller (beneficiary)
the letter of credit
• a given amount of money
• documents to be presented
at a specified place.
IMPORT L/C PROCESSING

DOCUMENT FLOW
FGN
NBP’s
BANK
CUSTOMER
CUSTOMER
IMPORTER
CONTRACT EXPORTER
(Buyer)
(Seller) D
O
C
U
M
E
FOREIGN BANK
NBP L/C
N
T
S
(ISSUING BANK) (ADVISING BANK)
PAYS documents
Export Letter of Credit Process

NATIONALBANK
located in the Pakistan
Letter of Credit (Sight/ Time)
Documents
Advising /
Issuing / Opening Bank Confirming Bank
located overseas
n
to
a A
p
lic
Beneficiary
Seller
Goods Exporter
Applicant/ Buyer
Importer Contract
IMPORTANCE OF L/C FOR EXPORTER
• Dependence on Credit worthiness of a bank instead of importer

• If the credit is confirmed by a bank in the exporter’s country, the
exporter is neither subject to commercial not to country risk
• If the credit is irrevocable, it can’t be cancelled without the exporter’s
consent and notice of revocation can be rejected by the exporter if
received after shipment
• The documents and therefore the goods will not be released until
payment or commitment to payment is made (In terms of L/C)
• Where credit has been allowed the accepted bill of exchange can be
used to obtain the finances
IMPORTANCE OF L/C FOR IMPORTER
• The importer can negotiate better terms as the exporter is assured of

payment
• Importer is assured that no funds will be released unless title

documents and received correct and in order
• Protection is provided under UCP for documentary Credit
Issuance of documentary credits (DCs) and standby letter of credits

(SBLCs) - When issuing DCs or SBLCs through HSBC, you enjoy the
following benefits:
• Detailed advice on structuring the instruments to meet your import
requirements
• Comprehensive guidance on the DC terms and conditions
• Access to HSBC's vast global expertise and resources
• Ability to turnaround transaction processing expeditiously
How to issue a documentary credit:
There are different types of documentary credits. The exporter and importer
should consider and agree on the type to be used, and on its terms.
They would be well advised to seek the advice of their bankers when they
draw up the sales contract.
1. The exporter and the importer conclude the sales contract with payment to
be arranged by documentary credit
2. The importer instructs his bank (the issuing bank) to issue a documentary
credit in favour of the exporter (the beneficiary) to be advised through the
exporter’s bank (the advising bank)
3. The importer’s bank sends the documentary credit to the exporter’s bank
4. The exporter’s bank advises the exporter of the issue of the documentary
credit
Common Errors in Documentation of letters of Credit
Bills of Lading Invoices

1. Unclean (when there are 1. Invoice name and address do
conditions which are not not agree with letter of credit.
properly noted or reflected). 2. Quantity does not agree with
2. Ports different from those in other supporting documents.
the letter of credit terms. 3. Unit price or extensions of
3. Does not indicate whether unit price are incorrect.
freight is 4. Certification required by
prepaid. letter of credit terms is missing.
4. A later date of shipment than 5. Excessshipment, short
that allowed by terms of the shipment,or partial shipment,
letter of credit. which may be prohibited by
5. Description of merchandise is letter’s terms.
inconsistent with other 6. Adjustments on previous
documents. shipments or charges that are
not allowed under the letter’s
terms are shown.
7. Sale’s terms omitted or
incorrect.
Insurance Documents Drafts and Other Documents
1. Coverage differs from that 1. Draft is drawn to purchaser
required by letter of credit instead of issuing bank.
terms. 2. Drawer’s name does not
2. Claims are payable in correspond to name on invoice
currency other than stipulated in 3. Tenor of draft differs from
letter of credit. that of the letter of credit.
3. Policy does not cover transfer 4. Credit amount is
between shippers, although bills disproportionate to quantity

of lading show the transfer will invoiced.
take place. 5. Certificates of origin do not
4. Insurance certificate is comply with importing country
presented instead of policy, requirements.
when policy is required.
5. Merchandise description is
inconsistent with other
documents
Key Points
• An LC, also referred to as a documentary credit, is a contractual
agreement whereby a bank in the buyer’s country, known as the issuing
bank, acting on behalf of its customer (the buyer or importer),
authorizes a bank in the seller’s country, known as the advising bank,
to make payment to the beneficiary (the seller or exporter) against the
receipt of stipulated documents.
• The LC is a separate contract from the sales contract on which it is
based and, therefore, the bank is not concerned whether each party
fulfills the terms of the sales contract.
• The bank’s obligation to pay is solely conditional upon the
seller’s compliance with the terms and
conditions of the LC. In LC transactions, banks deal in documents only,
not goods
TYPES OF LETTER OF CREDIT
Irrevocable Letter of Credit

LCs can be issued as revocable or irrevocable. Most LCs are irrevocable,
which means they may not be changed or cancelled unless both the buyer
and seller agree. If the LC does not mention whether it is revocable or
irrevocable, it automatically defaults to irrevocable. Revocable LCs are
occasionally used between parent companies and their subsidiaries
conducting business across borders.
Confirmed Letter of Credit

A greater degree of protection is afforded to the exporter when a LC issued
by a foreign bank (the importer’s issuing bank) is confirmed by a U.S. bank
(the exporter’s advising bank). This confirmation means that the U.S. bank
adds its guarantee to pay the exporter to that of the foreign bank. If an LC is
not confirmed, the exporter is subject to the payment risk of the foreign bank
and the political risk of the importing country.
Exporters should consider confirming LCs if they are concerned about the
credit standing of the foreign bank or when they are operating in a high-risk
market, where political upheaval, economic collapse, devaluation or
exchange controls could put the payment at risk.
Special Letters of Credit

LCs can take many forms. When an LC is issued as transferable, the
payment obligation under the original LC can be transferred to one or more
“second beneficiaries.” With a revolving LC, the issuing bank restores the
credit to its original amount once it has been drawn down. Standby LCs can
be used in lieu of security or cash deposits as a secondary payment
mechanism.
Revocable Letter of Credit L/c
A revocable letter of credit may be revoked or modified for any reason, at

any time by the issuing bank without notification. It is rarely used in
international trade and not considered satisfactory for the exporters but has
an advantage over that of the importers and the issuing bank.
There is no provision for confirming revocable credits as per terms of

UCPDC, Hence they cannot be confirmed. It should be indicated in LC that
the credit is revocable. if there is no such indication the credit will be
deemed as irrevocable.
4. Sight Credit and Usance Credit L/c
Sight credit states that the payments would be made by the issuing bank at
sight, on demand or on presentation. In case of usance credit, draft is drawn
on the issuing bank or the correspondent bank at specified usance period.
The credit will indicate whether the usance draft is to be drawn on the
issuing bank or in the case of confirmed credit on the confirming bank.
5. Back to Back Letter of Credit L/c
Back to Back Letter of Credit is also termed as Countervailing Credit. A

credit is known as back to back credit when a L/c is opened with security of
another L/c.
A back to back credit which can also be referred as credit and counter credit
is actually a method of financing both sides of a transaction in which a
middleman buys goods from one customer and sells them to another.
The parties to a Back to Back Letter of Credit are:
• The buyer and his bank as the issuer of the original Letter of Credit.
• The seller/manufacturer and his bank,
• The manufacturer's subcontractor and his bank.
• The practical use of this Credit is seen when L/c is opened by the
ultimate buyer in favour of a particular beneficiary, who may not be the
actual supplier/ manufacturer offering the main credit with near identical
terms in favour as security and will be able to obtain reimbursement by
presenting the documents received under back to back credit under the
main L/c.
The need for such credits arises mainly when:
• The ultimate buyer not ready for a transferable credit

• The Beneficiary do not want to disclose the source of supply to the
openers.
• The manufacturer demands on payment against documents for goods
but the beneficiary of credit is short of the funds.
6. Transferable Letter of Credit L/c
A transferable documentary credit is a type of credit under which the first

beneficiary which is usually a middleman may request the nominated bank
to transfer credit in whole or in part to the second beneficiary.
The L/c does state clearly mentions the margins of the first beneficiary and
unless it is specified the L/c cannot be treated as transferable. It can only be
used when the company is selling the product of a third party and the proper
care has to be taken about the exit policy for the money transactions that
take place.
This type of L/c is used in the companies that act as a middle man during the
transaction but don’t have large limit. In the transferable L/c there is a right
to substitute the invoice and the whole value can be transferred to a second
beneficiary.
The first beneficiary or middleman has rights to change the following terms
and conditions of the letter of credit:
• Reduce the amount of the credit.
• Reduce unit price if it is stated
• Make shorter the expiry date of the letter of credit.
• Make shorter the last date for presentation of documents.
• Make shorter the period for shipment of goods.
• Increase the amount of the cover or percentage for which insurance
cover must be effected.
• Substitute the name of the applicant (the middleman) for that of the
first beneficiary (the buyer).
WHEN DOCUMENTARY CREDIT USED
✔ There is doubt about importer solvency / ability to pay for goods

or services delivered
✔ There is concern about the stability of the political, economic or
legal system of the country of import
✔ There is possibility of foreign exchange restriction may account
in the country of import. (IRAN)
✔ Govt. regulations may require the use of letter of credit to settle
certain / all international transaction.
✔ The importer is concerned about the exporters ability to perform
under sales agreement.
ADVANTAGES / DISADVATAGES OF DOCUMENTARY CREDIT
ADVANTAGES FOR EXPORTER:

✔ Has an undertaking of settlement from a bank (not dependent on
importer)
✔ Settlement upon shipment rather than delivery
✔ Possible to control over goods (Transport document not in the name
of importer)
✔ Possible access to bank finance
DISADVANTAGES FOR EXPORTER:
✔ Expensive compared to other method of settlement.

✔ Require greater effort & accuracy in documents preparation.
✔ Require detailed knowledge of UCP 600 ( the rules govern the
operation of documentary credit)
✔ Often subject to specific detailed conditions.
ADVANTAGES FOR IMPORTER:
✔ Can set conditions in credit that may be adhered to before settlement

is made.
✔ Ability to specify when, how & where the goods are shipped by
incorporating the date of shipment, mode of transportation & port of
discharge in LC conditions.
✔ Banks will not make settlement unless correct documents are
presented.
✔ Possible access to bank finance.
DISADVANTAGES FOR IMPORTER:
✔ Expensive compared to other method of settlement.

✔ Require detailed knowledge of UCP 600 ( the rules govern the
operation of documentary credit)
✔ Utilization of bank credit loan

✔ Delay in receipt of documents compared to open account.
DOCUMENTARY CREDIT CYCLE 10 BASIC STEPS
Before issuance of letter of credit exporter issues Pro-forma invoice &

forward to importer which contains the following details.
✔ Price
✔ Quantity
✔ Description of goods / services
✔ Insurance
✔ Transport Details
If importer happy with the terms of pro forma invoice he issues a purchase
order & the two parties enter into a sales agreement. Now we move towards
the 10 basic steps involved in normal DC transaction.
Step 1:
Importer applies to the issuing bank to issue a LC.
Step 2:
The issuing bank checks that the application is complete, precise and
satisfies internal credit approval
Step 3:
The issuing bank issues documentary credit subject to UCP 600

(Universal Customs Practices)
Step 4:
The advising bank advices the LC to the exporter.

Step 5:
The beneficiary examines the terms & conditions of the documentary

credit.
Step 6:
The beneficiary ships the goods & complete the documents required
under LC.
Step 7:
The nominated bank checks that the documents comply with the terms
in the credit. If they comply settlement may be made. Documents than sent
to the issuing bank.
Step 8:
The issuing bank examines the documents that the documents comply
with the terms of credit.
Step 9:
The documents comply the issuing bank reimburses the nominated

bank within 05 working days as per UCP 600 rules. Nominated bank makes
settlement to beneficiary if not done so.
Step 10:
The issuing bank releases the documents against payment to the

applicant. The applicant now collect the goods.
Important Terms
&
INCOTERMS
CONFIRMATION:-
Means a definite undertaking of the confirming bank in addition

to that of the issuing bank to honor or negotiate a complying presentation.
PRESENTATION:-
Means either the delivery of documents under a credit to

issuing bank or nominated bank or the documents so delivered.
COMPLYING PRESENTATION:-
When the documents presented as per the terms and conditions

led down in LC called complying presentation.
Swift :-
Stands for Society for Worldwide Interbank Financial Transactions.

Swift is a software program used in all over the world for financial
transactions. It is a Highly secured program and hacking is not possible in it.
HS Code (Harmonized Code)
Hs Code is used for standardization. It is a unique code for every

commodity. To differentiate each commodity. 1 code cannot be used on
different product.
It is used to impose the custom duties by the government.
UCP 600 :-
The primary function of a letter of credit is to provide payment security for

an international trade transaction coupled with the opportunity for banks to
provide financing there under.
UCP 600 has specific rules as to how credits can be made available with
banks to facilitate payment and permit financing.
INCOTERM
Incoterms or International Commercial Terms are a series of international
sales terms, published by International Chamber of Commerce (ICC) and
widely used in international commercial transactions. They are used to
divide transaction costs and responsibilities between buyer and seller and
reflect state-of-the-art transportation practices. When ICC first introduced
the Incoterms® standard commercial terms in 1936 they caused a sensation
in the international business world.
Representing a radically new concept in an industry regulated by local rules

of law, the new terms were the first real attempt to bring coherence to a
commercial and judicial system that diverged widely from one country to
another. Since they were first introduced, the Incoterms rules have been
revised about once a decade to keep up with the rapid expansion of world
trade and globalization.
The INCOTERMS is a universally recognized set of definitions of

international trade terms, such as FOB, CFR and CIF, developed by the
International Chamber of Commerce (ICC) in Paris, France. It defines the
trade contract responsibilities and liabilities between buyer and seller. It is
invaluable and a cost-saving tool. The exporter and the importer need not
undergo a lengthy negotiation about the conditions of each transaction. Once
they have agreed on a commercial term like FOB, they can sell and buy at
FOB without discussing who will be responsible for the freight, cargo
insurance, and other costs and risks.
Incoterms are used to make international trade easier by helping traders in

different countries understand one another.”
--Investopedia.com
“The Incoterms rules are a perfect example of an efficient standardization of an

international business tool. Their day-to-day use in international sales contracts
brings legal certainty to business transaction while simplifying the drafting of
international contracts.”
By:- Emmanuel Jolivet
General Counsel of the International Court of Arbitration
• Ex Works (EXW + the named place)
EX means from. WORKS means factory, mill or warehouse, which is the

seller’s premise. EXW applies to goods available only at the seller's
premises. Buyer is responsible for loading the goods on truck or container at
the seller's premises, and for the subsequent costs and risks.
In practice, it is not uncommon that the seller loads the goods on truck
or container at the seller's premises without charging loading fee.
• Free Carrier (FCA + the named point of departure)
The delivery of goods on truck, rail car or container at the specified point
(depot) of departure, which is usually the seller's premises, or a named
railroad station or a named cargo terminal or into the custody of the
carrier, at seller's expense. The point (depot) at origin may or may not be
a customs clearance center. Buyer is responsible for the main
carriage/freight, cargo insurance and other costs and risks.
In the air shipment, technically speaking, goods placed in the custody of

an air carrier are considered as delivery on board the plane. In
practice, many importers and exporters still use the term FOB in the air
shipment.
• Free Alongside Ship (FAS + the named port of origin)
Goods are placed in the dock shed or at the side of the ship, on the dock
or lighter, within reach of its loading equipment so that they can be
loaded aboard the ship, at seller's expense. Buyer is responsible for the
loading fee, main carriage/freight, cargo insurance, and other costs and
risks.
The FAS term is popular in the break-bulk shipments and with the
importing countries using their own vessels
• Free on Board (FOB + the named port of origin)

The delivery of goods on board the vessel at the named port of origin
(loading), at seller's expense. Buyer is responsible for the main
carriage/freight, cargo insurance and other costs and risks.
In short, FOB price can be summed up as follows:

✔ He has to load the goods on board the ship named by the buyer.
✔ He has to obtain bill of lading from the shipping company and forward it
to the buyer to enable him to take delivery of goods.
✔ He must inform the buyer certain details like the name of the ship and the
possible date of delivery.
✔ He has to arrange for the necessary space in the vessel.
FOB Price = Cost of Production + Profit margin + Expenses up

to on board the ship – Export Incentives
✔ He must inform the buyer without delay that the goods have been
delivered on board the vessel of aircraft.
In short, FOB price can be summed up as follows:
• Cost and Freight (CFR + the named port of destination)
CFR means cost plus freight. The price quoted includes total cost of
goods, packing, carriage, loading charges and the payment of freight up
to the port of destination. The other expenses like cartage, unloading
charges and expenses of carrying the goods from the port of delivery to
the warehouse are to be borne by the importer. Insurance charges are also
to be borne by the importer.
In short, C
C & F Price = F.O.B. Price + Freight & F price
can be
summed up as:
• Cost, Insurance and Freight (CIF + the named port of destination)
The cargo insurance and delivery of goods to the named port of

destination (discharge) at the seller's expense. Buyer is responsible for
the import customs clearance and other costs and risks.
In short, CIF price can be determined up as:
C.I.F. Price = F.O.B. Price + Freight + Insurance

• Carriage Paid To (CPT + the named place of destination)

The delivery of goods to the named place of destination
(discharge) at seller's expense. Buyer assumes the cargo insurance,
import customs clearance, payment of customs duties and taxes, and
other costs and risks.
• Carriage and Insurance Paid To (CIP + the named place of

destination)
The delivery of goods and the cargo insurance to the named place of
destination (discharge) at seller's expense. Buyer assumes the import
customs clearance, payment of customs duties and taxes, and other costs
and risks.
In the export quotation, indicate the place of destination (discharge) after

the acronym CIP, for example CIP Paris
• Delivered At Frontier (DAF + the named point at frontier)
The delivery of goods to the specified point at the frontier at seller's

expense. Buyer is responsible for the import customs clearance, payment
of customs duties and taxes, and other costs and risks.
• Delivered Ex Ship (DES + the named port of destination)

The delivery of goods on board the vessel at the named port of
destination (discharge), at seller's expense. Buyer assumes the unloading
fee, import customs clearance, payment of customs duties and taxes,

cargo insurance, and other costs and risks.
• Delivered Ex Quay (DEQ + the named port of destination)
The delivery of goods to the quay (the port) at destination at seller's
expense. Seller is responsible for the import customs clearance and
payment of customs duties and taxes at the buyer's end. Buyer assumes
the cargo insurance and other costs and risks.
• Delivered Duty Unpaid (DDU + the named point of destination)
The delivery of goods and the cargo insurance to the final point at
destination, which is often the project site or buyer's premises, at seller's
expense. Buyer assumes the import customs clearance and payment of
customs duties and taxes. The seller may opt not to insure the goods at
his/her own risks.
• Delivered Duty Paid (DDP + the named point of destination)
The seller is responsible for most of the expenses, which include the
cargo insurance, import customs clearance, and payment of customs
duties and taxes at the buyer's end, and the delivery of goods to the final
point at destination, which is often the project site or buyer's premises.
The seller may opt not to insure the goods at his/her own risks.
Summary of Terms:-
For a given term, "Yes" indicates that the seller has the responsibility to
provide the service included in the price. "No" indicates it is
the buyer's responsibility. If insurance is not included in the term (for
example, CFR) then insurance for transport is the responsibility of the buyer
or the seller depending on who owns the cargo at time of transport. In the
case of CFR terms, it would be the buyer while in the case of DDU or DDP
terms, it would be the seller.
Unload
Landing
Transport from Landing Transport Unload onto Entry - Entry
Load Export- charges
Incoter to truck at charges to trucks from Transport to Insuran Custom Duties
to duty at
ms exporter's the at origin's importer's the importers' destination ce clearanc and
truck payment importer'
port origin's port port port e Taxes
s port
port
EXW No No No No No No No No No No No No
FCA Yes Yes Yes No No No No No No No No No
FAS Yes Yes Yes Yes No No No No No No No No
FOB Yes Yes Yes Yes Yes No No No No No No No
CFR Yes Yes Yes Yes Yes Yes Yes No No No No No
CIF Yes Yes Yes Yes Yes Yes No No No Yes No No
CPT Yes Yes Yes Yes Yes Yes No No No No No No
CIP Yes Yes Yes Yes Yes Yes No No No Yes No No
DAF Yes Yes Yes Yes Yes Yes No No No No No No
DES Yes Yes Yes Yes Yes Yes No No No No No No
DEQ Yes Yes Yes Yes Yes Yes Yes No No No No No
DDU Yes Yes Yes Yes Yes Yes Yes Yes Yes No No No
DDP Yes Yes Yes Yes Yes Yes Yes Yes Yes No Yes Yes
COMMON DEFECTS IN DOCUMENTATION
About half of all drawings presented contain discrepancies. A discrepancy is

an irregularity in the documents that causes them to be in non-compliance to
the letter of credit. Requirements set forth in the letter of credit cannot be
waived or altered by the issuing bank without the express consent of the
customer. The beneficiary should prepare and examine all documents
carefully before presentation to the paying bank to avoid any delay in receipt
of payment. Commonly found discrepancies between the letter of credit and
supporting documents include:
• Letter of Credit has expired prior to presentation of draft.
• Bill of Lading evidences delivery prior or after the date range stated in
the credit.
• Stale dated documents.
• Changes included in the invoice not authorized in the credit.
• Inconsistent description of goods.
• Insurance document errors.
• Invoice amount not equal to draft amount.
• Ports of loading and destination not as specified in the credit.
• Description of merchandise is not as stated in credit.
• A document required by the credit is not presented.
• Documents are inconsistent as to general information such as volume,

quality, etc.
• Names of documents not exact as described in the credit. Beneficiary

information must be exact.
• Invoice or statement is not signed as stipulated in the letter of credit.
When a discrepancy is detected by the negotiating bank, a correction to the

document may be allowed if it can be done quickly while remaining in the
control of the bank. If time is not a factor, the exporter should request that
the negotiating bank return the documents for corrections.
If there is not enough time to make corrections, the exporter should request
that the negotiating bank send the documents to the issuing bank on an
approval basis or notify the issuing bank by wire, outline the discrepancies,
and request authority to pay. Payment cannot be made until all parties have
agreed to jointly waive the discrepancy.
References
• www.hsbc.co.in
• www.rbi.org.in
• www.indianindustry.com
• www.infodriveindia.com
• www.unzco.com
• www.firsttradenet.com
• International trade and finance :-icfai university

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TRADE

Imagine a life without the concept of trade! Sure, it would not be as

The concept of Trade is centered around the simple activity of

IMPORT: The term "import" is derived from the conceptual meaning as to

International trade can be defined as either the buying (importing) or selling

Getting Started in International Trade

What does this briefing tell me?

International trade contracts and Incoterms

To avoid confusion, internationally agreed Incoterms should be used to spell

For example, an exporter might agree to deliver goods, at the exporter's

PROS AND CONS OF INTERNATIONAL TRADE

➢ Enhance your domestic competitiveness

➢ Increase sales and profits

➢ Gain your global market share

➢ Reduce dependence on existing markets

➢ Exploit international trade technology

➢ Extend sales potential of existing products

➢ Stabilize seasonal market fluctuations

➢ Enhance potential for expansion of your business

➢ Sell excess production capacity

➢ Maintain cost competitiveness in your domestic market

CONS to keep in mind:

➢ You may need to wait for long-term gains

➢ Hire staff to launch international trading

➢ Modify your product or packaging

➢ Develop new promotional material

➢ Incur added administrative costs

➢ Dedicate personnel for traveling

➢ Wait long for payments

➢ Apply for additional financing

➢ Deal with special licenses and regulations

“Research is a common parlance refers to a search for knowledge”.

TYPE OF RESEARCH STUDY

OBJECTIVES OF THE STUDY

1. To know that what are the complexities in international trade

THE Company’s History:

Headquarters in London, HSBC is one of the largest banking & financial

HSBC’s international network comprises over 9500 offices in 76 countries

Through an international network linked by advertisement techniques,

1. Personal financial services

THE HSBC GROUP IN INDIA

• HSBC Asset Management (India) Private Limited

• HSBC Global Resourcing / HSBC Electronic Data Processing (India)

• HSBC Insurance Brokers (India) Private Limited

• HSBC Operations and Processing Enterprise (India) Private Limited

• HSBC Private Equity Management (Mauritius) Limited

• HSBC Professional Services (India) Private Limited

• HSBC Securities and Capital Markets (India) Private Limited

• HSBC Software Development (India) Private Limited

The HSBC Group commenced operations in India in 1867 with a branch in

INTERNATIONAL TRADE SERVICES BY HSBC

Fig. 1 HSBC Global Locations

With our extensive experience in international trade, HSBC is ideally placed

excellence with global reach, supplemented by advanced technology. HSBC

Today HSBC has an experience of almost 140 years in International Trade

Issuance of documentary credits (DCs) and standby letter of credits

➢ Detailed advice on structuring the instruments to meet your

Import Collections services

This is a cost-effective solution for trading internationally. Under this

financing through HSBC branches / group entities overseas, at

Advance Remittances / Direct Remittances

For your import payments to be made to overseas beneficiaries, we provide a