Documentation in International Trade PDF

Documentation in international trade It is essential to facilitate international trade. They provide a comprehensive system that not only ensures security and trust between parties, but also improves financing, guarantees compliance with requirements, and helps in risk management. This allows compan...

Documentation in international trade It is essential to facilitate international trade. They provide a comprehensive system that not only ensures security and trust between parties, but also improves financing, guarantees compliance with requirements, and helps in risk management. This allows companies to expand their global operations more effectively and safely. Document Processing by a Bank The banking sector is based on two main products Documentary Collection or documentary credit. What Is A Documentary Collection? Security and support: The collection of documentation is essential to verify that the conditions agreed between the buyer and the seller have been met. It includes documents such as invoices, bills of lading, quality certificates, among others. These documents are essential to ensure that the goods were delivered as agreed and that payment or receipt of goods will be made correctly. Regulatory compliance: Customs authorities and other agencies require certain documents for the clearance of goods, ensuring that transactions comply with current legislation. Proof of ownership and transfer: Documents serve as legal proof of the ownership of the goods and the conditions under which the transfer is carried out. Documentary collection is a form of trade finance where an exporter is paid by an importer for his shipped goods & products after the evidential documents are exchanged by the banks of the two parties. it is a trade financing system where the bank of an exporter forwards documents to the bank of the importer to collect payments for shipped goods. It typically occurs at the place of the importer after the shipment of products. Document Processing by a Bank:involves the processing of documents by a bank with the purpose of obtaining acceptance and/or payment. involves a bank processing documents to obtain acceptance and/or payment Banks : ​ Banks are only authorized to act according to the instructions received and in accordance with the established rules, and Banks are not responsible for the good result of the collection management. Typology: ​ Simple: This is the most basic, where money is sent from one place to another without much documentation. ​ Documentary: In this case, money is sent accompanied by commercial documents such as invoices, bills of lading, etc. This provides more information and security to the transaction. ​ Collection (D/P): In this type of remittance, the documents are delivered to the recipient against payment. ​ Acceptance (D/A): Here, the documents are delivered to the recipient against acceptance of a bill of exchange or promissory note. ​ Acceptance with bank guarantee: This is similar to acceptance (D/A), but in this case, a bank guarantee is also required to ensure future payment. What happens if there is no payment or acceptance? Collection or approval management. Documentary Credit Payment guarantee: Documentary credit acts as a payment guarantee for the seller, and ensures that the buyer fulfills his payment commitment. This financial instrument is especially useful in situations where the parties do not know each other well or do not fully trust each other. Through documentary credit, the buyer's bank agrees to pay the seller once the seller presents the required documentation, which verifies that the conditions of the contract have been met. Risk minimization: It helps reduce the risks inherent in international trade, such as the risk of non-payment, fraud or dispute over the delivery of goods, since the bank acts as an intermediary and ensures that both parties fulfill their obligations. Facilitation of financing: In some cases, the seller can obtain short-term financing using documentary credit, which facilitates the commercial transaction. A documentary credit is an irrevocable commitment by the issuing bank to accept and pay for a presentation of documents that meets the established terms. This firm commitment guarantees that the credit is irrevocable. Final Presentation Date: 1. Expiry Date for Presentation ​ Must specify an expiry date for presentation. ​ The expiry date for presentation. 2. Time Limit for Presenting Original Transport Documents ​ Presentations including original transport documents must be made by the beneficiary no later than 21 calendar days after the shipment date. ​ Presentations cannot occur after the expiry date of the documentary credit.