1) DISTINCTION OF SHIPPING DOCUMENTS
The shipping documents are distinguished into basic and secondary documents:
- Commercial invoice
- Packing List
- Bill of lading (vessel-truck-plane, rail)
- Certificate of manufacture
- Certificate of circulation
- Consular invoice
- Health certificate
- Phytosanitary certificate
- Certificate of analysis
- Certificate of weight
USE OF SHIPPING DOCUMENTS
- Protection of importer-carrier-exporter.
- Satisfaction of State and special demands.
- They are basic tools to make payments and transfer titles and are necessary for the entry or exit of merchandise from the import and export customs.
2) MODES OF PAYMENT
When an arrangement is under negotiation and there is a bank which acts as mediator, the forwarder is called to pay the value of merchandise to the seller, depending on what the buyer and the seller have agreed. The payment of the value of goods is made in the following ways:
A) Cash Against Documents (CAD)
B) Days of Acceptance (D/A)
C) Documentary Letter of Credit (L/C)
D) Advance Payment
E) Mixed modes (combination of previous modes)
3) LETTER OF CREDIT
Letter of credit is called the commitment of a bank to pay the beneficiary of the credit, when the buyer presents the required documents and proves his identity as stipulated by the letter of credit. Precisely, the International Chamber of Commerce Uniform Rules and Habits (issue 400/1984) gives the following definition for credit:
CREDIT is defined as any agreement, howsoever named or identified, under which a bank (the issuing bank), acts at the request and on the instructions of their client (the originator of the credit).
The bank undertakes to cover the payment to a third party or on behalf of the shipper to pay the bills that are issued, or even authorize another bank to cover the respective payment, or cover the bills that are issued for the client. All of the above are valid under receipt of the agreed documents and provided that they comply with the terms of the letter of credit.
See detailed chart below: