Trade Documents and Transportation

Documentation in Export-Import Trade

❖ Air waybill ❖ Commercial invoice
❖ Bill of exchange ❖ Dock receipt
❖ Bill of lading ❖ Destination control
❖ Through bill of lading statement
❖ Consular invoice ❖ Shipper’s export

❖ Certificate of origin declaration

❖ Inspection certificate ❖ Pro-forma invoice

❖ Insurance certificate ❖ Export packing list

❖ Manifest
 Trade Documents
❖ Air waybill: Contract of carriage between the shipper and
air carrier
❖ Bill of exchange: An unconditional written order by one
party (the drawer) that orders a second party (the debtor or
drawee) to pay a certain sum of money to the drawer
(creditor) or designated third party
❖ Bill of lading: A contract of carriage between the shipper
and the steamship company (carrier). It certifies ownership
and receipt of goods by the carrier for shipment. It is issued
by the carrier to the shipper.
❖ Through bill of lading: Used when different modes of
transportation are used. The first carrier will issue a through
bill of lading and is generally responsible for the delivery of
the cargo to the final destination.
 Trade Documents (cont.)
❖ Consular invoice: Must be obtained from the consulate of
the country to which the goods are being shipped
❖ Certificate of origin: A statement of the origin of the export
product that is usually obtained from local chambers of
commerce
❖ Inspection certificate: Some purchasers and countries may
require a certificate attesting to the specifications of the
goods shipped, usually performed by a third party.
❖ Insurance certificate: The certificates are negotiable and
must be endorsed before presentation to the bank. The
certificate provides the type, terms, and amount of insurance
coverage.
 Trade Documents (cont.)
❖ Dock receipt: Used to transfer accountability when the
export item is moved by the domestic carrier to the port of
embarkation and left with the international carrier for export
❖ Destination control statement: Intended to notify the
carrier and other parties that the item may be exported to
only certain destinations
❖ Shipper’s export declaration: Issued to control certain
exports and to compile trade data. It is required for
shipments valued at more than $2,500
 Trade Documents (cont.)
❖ Pro-forma invoice: A provisional invoice sent to
the prospective buyer, usually in response to the
latter’s request for a price quotation
❖ Manifest: A detailed summary of the total cargo of
a vessel (by each loading port) for customs
purposes
 International Rules Governing
Inland Carriage
❖ Convention on the Contract for the International
Carriage of Goods by Road (CMR), 1956

❖ Convention Concerning International Carriage by

Rail (COTIF), 1980

 Both conventions generally apply to contracts for the

carriage of goods by road or rail between two
countries, of which at least one is a contracting party.
The convention also applies to carriage by states or
public institutions.
 International Rules Governing
Inland Carriage (cont.)
 In both cases, a carrier is required to issue a
consignment note (nonnegotiable) as evidence of
contract of carriage and condition of the goods.
 Carriers are liable for loss, damage, or delays up to a
liability limit insofar as the contract is governed by
the CMR or COTIF (some exceptions apply).
 In the United States, the Carmack Amendment
applies to domestic transportation. Under the
Carmack Amendment, rail and motor common
carriers are liable for the full value of the goods lost,
damaged, or delayed in transit.
 Road Transportation: Major means of
transport for trade between neighboring
countries (US-Canada-Mexico).
 Rules affect trucking: domestic rules on
weight, temperature; state of infrastructure,
and taxes
 Rail Transportation: Accounts for 40% US
freight moves by ton-miles; mainly used for
transportation of commodities.
 Continued growth in world seaborne trade
(growth of 4% and 8.7 billion tons in 2011)

 Growth in world shipping fleet (increase of 37

% in four years)
 Increasing role of developing nations in the
maritime sector: One third of the world fleet
is owned by ship owners from developing
nations.

 Decline in freight rates and transportation

costs mainly due to vessel oversupply.
 Ocean Freight
Types of ocean carriers:

 Private fleets: Large fleets of specialized ships owned

and managed by merchants and manufacturers to carry
their own goods
 Tramps: Vessels leased to transport, usually, large
quantities of bulk cargo (oil, coal, grain, sugar, etc.) that
fill the entire ship
 Conference lines: Voluntary association of ocean carriers
operating on a particular trade route between two or more
countries
 Ocean Freight (cont.)
Types of ocean cargo:

 Containerized: Cargo loaded at a facility away from the

pier, or at a warehouse into a metal container usually 20
to 40 feet long, 8 feet high and 8 feet wide
 Bulk: Cargo that is loaded and carried in bulk, without
mark or count, in a loose, unpackaged form, having
homogenous characteristics
 Break-bulk: Packaged cargo that is loaded and unloaded
on a piece-by-piece basis, that is, by number or count
 Ocean Freight (cont.)
Types of ocean vessels:

 Tankers: Vessels designed to carry liquid cargo such

as oil in large tanks. They can be modified to carry
other types of cargo such as grain or coffee
 Bulk carriers: Vessels that carry a variety of bulk
cargo
 General cargo vessels: Include containerships,
Ro/Ro vessels, and LASH vessels
 Barges: Unmanned vessels
 Combination carriers: Carry passengers and cargo
 Carriage of Goods by Sea
Major international rules:
 The Hague Rules (1924): Scope of application,
carrier’s duty, liability and exemptions, limitation of
action, limits of liability
 The Hague-Visby Rules (1968)
 The Hamburg Rules (1978)
 The Hague Rules, 1924
 Scope of application: The rules apply to all bills of
lading issued in any of the contracting states.

 Carrier’s duty: (1) Making the ship seaworthy; (2)

properly manning, equipping, and supplying the ship;
(3) making the ship (holds, refrigerating chambers,
etc.) fit and safe for reception, carriage, and
preservation of the goods; and (4) properly and
carefully loading, handling, stowing, carrying, and
discharging the goods.
 The Hague Rules, 1924 (cont.)
 Carrier’s liability and exemptions: The carrier’s
liability applies to loss of or damage to the goods. It
does not extend to delays in the delivery of the
merchandise.
 Limitation of action: All claims against the carrier
must be brought within one year after the actual or
supposed date of delivery of the goods.
 Limits of liability: The maximum limitation of
liability is $500 per package.
 Proposed Rotterdam Rules: A new treaty
(Rotterdam Rules) that replaces the Hague
Rules was adopted in 2008 and awaiting
ratification. Establishes a modern, uniform
legal regime.
 Container Security: CBP’s 24-hour rule,
Automated targeting system, the 10+ rule,
Cargo-security initiative, Customs-Trade
Partnership against terrorism.
 Carriage of Goods by Air
Factors contributing to the growth in airfreight:
❖ Global economic growth, infrastructure investments in
many developing countries, faster delivery, technological
changes

Major international rules:

❖ The Warsaw Convention (1929): Scope of application, air
waybill, liability of carrier, limitation of liability,
limitation of action

❖ The Warsaw Convention (amended) (1955); Montreal

Convention (1999)
 Faster delivery of perishable commodities, production parts,
etc. Well suited for commodities that have a high value-to-
weight ratio, required on short notice or can be quickly
obsolete.
 Ideal for products when demand is unpredictable, infrequent
or seasonal.
 Shipments do not require heavy packing (standard domestic
packing is sufficient).
 Reduces inventory and storage costs.
 Reduces insurance cost and documentation.
 Achieves savings in total transportation cost and provides
reliability of service.
 Generally expensive for high–bulk freight. Value must be high
enough to justify higher freight cost.
 Inefficient for shorter distances, which are handled faster by
trucks. Only the express air services, such as UPS or DHL,
have equally competitive services.
 Shipping containers must be small enough to fit into an air
carrier.
 Not suitable for products that are sensitive to low pressures
and variations in temperature.
 The Montreal Convention, 1999
 Scope of application: Convention governs liability of
carrier while goods are in its charge, whether at or outside
the airport. Departure and destination countries to
subscribe to the convention. Also applies to passengers
ticketed for international travel.
 Air waybill: The carrier requires the consignor to make
out and hand over the air waybill with the goods.
 Liability of carrier: The carrier is liable for loss or
damage to cargo and for damage arising from delay.
The Montreal Convention, 1999 (cont.)
 Limitation of liability: The liability of the carrier
with respect to loss or damage to the goods or delay
in delivery is limited to a sum specified under the
convention unless the consignor has declared a higher
value and paid a supplementary charge.

 Limitation of action: The right to damages will be

extinguished if an action is not brought within two
years after the actual or supposed delivery of cargo.
 Customs-Trade Partnership Against terrorism
(C-TPAT)

➢ Air cargo advance screening (ACAS)

➢ Certified cargo screening program (CCSP)

➢ Indirect air carrier program

 What is MMT? Carriage by 2 or more modes
of transport, under one contract/one
document and one responsible party

 The Multimodal transportation convention

(1980) failed to attract the necessary
ratifications
 Freight Forwarders (FF)
 What is the role of FF in transportation? To facilitate the
movement of cargo to the overseas destination on behalf of
shippers and process the documentation or perform activities
related to those shipments. They advise shippers on the most
economical choice of transportation, book space, and arrange
for pickup, transportation, and delivery of goods.

 Licensing requirements: To be eligible for a license as a

freight forwarder, the applicant must demonstrate to the FMC
that he or she has a minimum of three years’ experience in
ocean freight forwarding duties in the United States, has the
necessary character to render such services, and has a valid
surety bond filed with the FMC.
 Freight Forwarders (FF) (cont.)
 FFs versus NVOCCs: NVOCCs fulfill the role of
the shipper with respect to carriers and that of a
carrier with respect to shippers. Unlike freight
forwarders, NVOCCs publish their own tariffs and
receive and consolidate cargo of different shippers for
transportation to the same port. NVOCCs issue bills
of lading to acknowledge receipt of cargoes for
shipment. Forwarders use the services of NVOCCs
and facilitate the movement of cargo without
operating as carriers. NVOCCs are often owned by
freight forwarders or large transportation companies.