MONDAY EXPORT CLASS

 With

GODWIN OYEFESO (SUCCESSEDGE EXPORTERS NETWORK)

 Topic: ALIGNED DOCUMENTATION SYSTEM (ADS)

 

  HISTORY

International trade developed, over the centuries, in an unstructured and adhoc manner as countries exchanged goods and products they excelled in for those, which they lacked.

 

Documents accompanying these transactions also followed a similarly haphazard path. Numerous documents were required in a variety of formats for  each  export  shipment.  An order number might appear on the right or the left side of a form; addresses could be shown as lines or blocks.

The situation has started to improve in the  mid-1960s  with  the  document  alignment work initiated by Sweden, standards developed  by  the  Trade  Facilitation  Working  Party  of the UN/ECE (WP.4) and the 1965 publication  of  the  United  Kingdom  Board  of  Trade’s Simpler Export Documents.

 

  ALIGNED DOCUMENTATION SYSTEM (ADS)

 

The standardisation of the pre-shipment export documents is done on the basis of the system, popularly known as Aligned Documentation System (ADS).

Objective

The primary objective has been  to  ensure  benefits  to  everyone  in  the  international trade chain from easier documentation.  To  enter  information  on  an  easy  basis  and  access the information with greater convenience, Aligned Documentation System (ADS) is adopted. Documents related to exports are printed on uniform length and standard A-4 size of paper. Initially, information is entered in Master Document 1 and Master Document 2. From these documents, Common information, required to be incorporated in all the relative documents, is entered in the slots at the same locations. An exporter can develop 14 out of 16 Commercial Documents with the help of  Master  Document  1.  Shipping  order  and  Bill  of  Exchange  are the only two Commercial Documents that can not be developed as these have not been standardised. In a similar manner, with the help of Master  Document  2,  three  of  the Regulatory Documents-GR form, Shipping Bill/ Bill of Export and Port trust copy of Shipping Bill can be developed.

Main advantage of this system is to enter the data quickly and read them with greater ease and speed. Document alignment is a major trade facilitation activity. Aligned Documentation System is based on the U.N. layout key. Deriving national document subsets from the UN Layout Key rules simplifies trade documentation on an international scale, bringing considerable benefits to traders.

Advantages of Aligned Documentation System

1. Dispenses Conventional Documentation preparation:  Once  information  is entered into Master Documents, it becomes possible to  prepare  many  Commerical and Regulatory Documents with the help of masking reproduction The documents are aligned to one another. All documents are printed in the same size of paper. Common  items  of  information  are  given  the  same  relative  slots  in  each of the documents included in the system. The common items of information occupy the same relative position on each form.  For  example,  shipper  top  left,  references top right, signatory details bottom right and so on.

 

2. Easier to Complete and Access: This makes forms both easier to  complete  and easier to Since common positions are used for data items, it is possible to use a ‘Master Document.’ This master document can be used to produce a range of documents using a photocopier and overlays (to provide the form outlines and hide unwanted data).
3. Benefit to All Parties: All parties in the international trade chain benefit from easier document Using documents that comply with UN alignment standards speed up form preparation, cut costs and reduce errors. Exporters may actually get paid quicker than otherwise!
4. Better Image: Aligned documents simplify document checking and training new They even enhance an organization’s professional image.

Paper Size and Specifications

 

Paper: Size:	A4 Length	297 mm
Margins:	Width Top Left	210 mm 10 mm 20 mm
	Right Bottom	6   mm 7   mm

Situation Today

By the mid-1980s, the use of aligned documents has been widespread in a number of countries. Its true potential has begun to materialize as master/photocopier systems started yeilding to  computerized  export  documentation  systems.  Success  stories  include  banking and transport (apart from rail).

For the purpose of Documents Aligned System, documents have been classified into two categories as under:

1. Commercial Documents
2. Regulatory Documents

 

  COMMERCIAL DOCUMENTS

 

Objectives

The objectives  of  Commercial  documents  are:

1. To effect physical transfer of goods from the exporter’s place to the  importer’s
2. To transfer property and title of goods from the exporter to the importer and
3. Realization of export  proceeds  from  the  exporter  to  the

Out of the  16  commercial  documents  in  the  Export  Documentation  Framework,  as many as 14 documents have been standardized and aligned one to another. Commercial documents may be classified as Principal Export Documents and Auxiliary Documents.

Principal Export Documents: These are the eight documents, which are required to be sent by the exporter to the importer.

These are known as Principal Export Documents. They are:

• Commercial invoice
• Packing list
• Certification of inspection/quality control (where required)
• Bill of lading/Combined Transportation Documentation
• Shipping Advice
• Certificate of origin
• Insurance Certificate/Policy (In  case  of  CIF  export  sales  contract)
• Bill of

Auxiliary Export Documents: The remaining eight documents, other than principal export documents, are known as auxiliary export documents. They are:

• Proforma invoice
• Intimation for Inspection
• Shipping Instructions
• Insurance Declaration
• Shipping Orders
• Mate’s Receipt
• Application for Certificate of Origin and
• Letter to the  Bank  for  Collection/Negotiation  of

 

  REGULATORY DOCUMENTS

 

Regulatory pre-shipment export documents are those which have been prescribed by different government departments and bodies in the context of export trade. These documents are meant to comply with the various rules and regulations under relevant laws governing export trade such as export  inspection,  foreign  exchange  regulations,  export  trade  control and customs etc.

There are 9 regulatory documents associated with the pre-shipment stage of an export transaction. Out of them, only 4 have been standardized. The regulatory documents are as follows:

• Gate Pass-I/Gate Pass II: The Central Excise Authorities prescribe
• ARE-1: These are Central Excise Earlier, AR4 and AR5 Forms have been used. In their place, ARE 1 form , now, is used.
• Shipping Bill/Bill of Export: They are standardized and prescribed by the Central Excise
  • For export of
  • For export of duty free
  • For export of  dutiable
  • For export of  goods  under  claim  for  duty
• Export Application/Dock Challan: Standardized and prescribed by the Port Trust
• Receipt for Payment of Port Charges:
• Vehicle
• Exchange Control Declaration Forms: GR/PP forms are standardized and prescribed by
• Freight Payment
• Insurance Premium Payment

Classification of Commercial and Regulatory Documents

The different commercial and regulatory documents may be classified into documents related to goods, documents related to shipment, documents related to payment, documents related to inspection, documents related to excisable goods and documents related to foreign exchange regulations.

 

  DOCUMENTS RELATED TO GOODS

• Proforma Invoice

Proforma invoice is the starting point of an export contract. As and when the exporter receives the trade inquiry from the importer, exporter submits the Proforma invoice to the importer.

The Proforma invoice contains details such as name and address of the exporter, name and address of the intending importer, nature of goods, mode of transportation, unit price in terms of internationally accepted quotation, name of the country of origin of goods, name of the country of final destination, period required for executing contract after receipt of confirmed order and finally signature of the exporter.

Importance and Significance of Proforma Invoice are Two Fold

• It forms basis of all trade transactions and further negotiation or contract is made on this
• It helps the importer to obtain the import licence, where required, and obtain foreign exchange for completion of the

 

(ii)     Commercial Invoice

A commercial invoice is the seller’s bill for merchandise or goods sold by him. Invoice contains all the particulars and details in respect of name and address of seller (exporter), name and address of buyer (importer), date, exporter’s reference number, importer’s reference number, description of goods, price per unit at particular  location,  quantity,  total  value, packing specifications, terms  of  sale  (FOB,  CIF  etc),  identification  marks  of  the  package, total number of packages, name and number of the vessel  or  flight,  bill  of  lading  number, place and country of destination, country of origin of goods, reference to letter of credit, if opened, terms of payment, and finally signature of the exporter etc.

From the details, it is clear that invoice is an important and basic export document. It is also known as ‘DOCUMENT OF CONTENTS’ as it contains all the important information necessary for the preparation of other export documents.

For many countries, there are no prescribed special invoice forms. Exporters can use their normal invoices used for indigenous trade for exports made outside the country too and show the particulars required by the importer in terms of the contract. However, there are special invoicing procedures in respect of exports to certain countries like Canada, U.S.A. and Australia. Some countries like Uganda, Mexico, Sudan and Tanzania require special customs invoices.

Information about the special invoice forms required can be gathered from the respective Export Promotion Councils apart from the procedures of trade to be followed in respect of the importer’s country. Any recognized Chamber of Commerce too can provide the information in this respect.

Significance of Commercial Invoice

• It is prima facie evidence of the contract of sale and purchase of On the basis of the invoice, all the other documents, in the context of export, are prepared as it is the basic document.
• Invoice constitutes the main document for various export formalities such as pre- shipment inspection, quality, excise and customs
• It is useful  for  accounting  purposes,  both  by  the  exporter  and
• This document is required in collection/negotiation of documents through the
• For claiming incentives, this document is

(iii)     Consular Invoice

Some of the importing countries insist that the invoice is to be signed by the importing county’s consular located in the exporter’s country. Such invoices are known as consular invoice. The exporter has to pay a certain fee to obtain the certificate/invoice. Such charges/ fees vary from country to country. The main purpose to obtain consular invoice is to secure authentication of information contained in the invoice. Once the invoice is signed by  the consular of the country, the importer gets comfort and confidence in respect of accuracy of information in respect of quality, source of goods, volume and grade.

 

Normally, on  arrival  of  the  goods,  it  is  necessary  to  convince  the  customs  authorities of the importing country that the  goods  stated  in  the  invoice  and  the  actually  imported goods are one and the same. If the customs authorities get suspicious or not convinced, they open the packages of the imported  goods.  If  this  happens,  considerable  delay  takes  place. The importer is put to hardship by delayed receipt of goods. To avoid all these problems, importer insists on the exporter to obtain the consular invoice from the consulate stationed in the exporter’s country. The consulate invoice is, generally, prepared in three copies. One copy is retained by the consulate office, the second copy is sent  to  the  customs  of  the importing country and the third copy is given to the exporter to forward the same along with other documents through the banker for collection/negotiation.

This information also facilitates in assessing import duties and also would be useful for statistical purposes.

Significance of Consular Invoice can be Summarized Importance to the Exporter

1. Once the invoice is signed by the consulate of the importing country, the exporter

is reasonably assured that there are no import restrictions in the importer’s country for the goods and that there would be no problem in realization of export proceeds or foreign exchange.

2. It enables prompt clearance from the customs of exporter’s country for shipping the

Importance to the Importer

1. In the importer’s country, the customs do not normally open the It helps the importer to get speedy delivery of goods.
2. Lot of unnecessary hardship which importer faces once the packages are opened is

Importance to the Customs

1. The customs of  the  exporting  country  can  easily  clear  the
2. The customs of the importing country need not open the packages for checking and can easily calculate the import

(iv)    Legalized Invoice

Certain Latin American countries like Mexico require this. It is just like  consular invoice, which requires certification from consulate or authorized mission, stationed in the exporter’s country.

(v)    Customs Invoice

When the commercial invoice is prepared on the format prescribed by the customs authorities of the importing country, it is called “Customs Invoice”. This is the requirement of U.S.A., Canada and Australia.

(vi)    Packing Note and Packing List

There is a difference between packing note and packing list. Packing note refers to the particulars of contents of  an  individual  pack  while  packing  list  is  a  consolidated  statement of the contents of the total number of cases or packs.

A packing note contains the following details:

• Date of packing,
• Number of packing  note,
• Number of case  to  which  it  relates  to,
• Contents of case in terms of quantity and weight,
• Marking numbers,
• Name of exporter,
• Name of importer,
• Importer’s order number,
• Number and date of bill of lading and
• Name of vessel/flight.

Packing note is kept in  each  concerned  case/pack.  Packing  note  and  packing  list  are sent to the importer along with other documents. If any case contains any shortfall, importer can communicate to the exporter in which case there is shortage of goods for making good.

No particular form has been prescribed for both packing note/list. Normally, ten copies are prepared. Two copies are sent, in advance, to the buyer, one copy  along  with  the documents, one to the shipping agent and the remaining are retained by the exporter.

Precaution is to be exercised that the details of the quantity  in  the  packing  note/list should conform to the quantity as stated in the Invoice and Bill of Lading/Airway Bill.

(vii)       Certificate of Origin

As the very name indicates, certificate of origin is a certificate that specifies the name of the country where goods are produced. This is absolutely necessary where the importing country has banned the entry of goods of certain countries to  ensure  that  the  goods  from those countries are not allowed to enter in. At the time of  arrival  of  the  goods  in  the importer’s country, this certificate is necessary for the customs to permit preferential tariff. Certain countries offer preferential tariff  to  goods  produced  and  imported  from  India.  In such a case, this is a must to the importer to claim preferential tariff and importer insists on this document from the exporter. This enables the importer’s country to regulate the concessional tariff only to select countries and deny to the rest of the countries.

A certificate of origin can be obtained from Chamber of Commerce, Export Promotion Council and various trade associations which have been authorized by Government of India to issue. The agency from which certificate of origin is obtained should conform to the terms of letter of credit.

Significance of Certificate of Origin

• Certificate of origin is required for availing concession under Commonwealth Preferences (CWP) as well as Generalized System of Preferences (GSP).
• It facilitates the importer to adhere to the rules and regulations of his
• Customs in the importer’s country allow the concessional tariff only on production of this
• When goods from some countries are banned, importing country requires this certificate to ensure that goods from banned countries are not entering into the
• Exporting country may insist on this certificate to ensure that the goods imported are not reshipped

 

  DOCUMENTS RELATED TO SHIPMENT

 

• Shipping Bill

The shipping bill is the main document on the basis of which the customs permission is given. Under manual processing of export documents, the exporter is required to file the appropriate type of shipping bill to seek the order for customs clearance  of  the  export shipment. Under computerized processing, the exporter does not prepare the shipping bill; instead it is computer  generated.  The  customs  order  is  called  “LET  EXPORT  Order”.  After the shipping bill is stamped by the customs, then only the goods are allowed to be carted to the docks.

The shipping bill contains the following particulars:

• Nature of goods  exported,
• Name of vessel, master or agents,
• Flag,
• Country of destination, the port at which the goods are to be discharged,
• Exporter’s address,
• Importer’s address,
• Details of the packages, such as numbers and marks,
• Quantity details of each case, total number of cases and aggregate weight,
• O.B. prices and real value as defined in the Sea Customs Act and
• Whether the merchandise is Indian or foreign origin  which  is  re-exported. The shipping bill is prepared in five copies:

1. Customs copy
2. Drawback copy
3. Export Promotion copy
4. Port Trust copy and
5. Exporters copy

Importance of Shipping Bill

• It is an important document required by the customs authorities for clearance of The customs authorities endorses the duplicate copy of the shipping bill with “Let Export Order” and “Let Ship Order”.
• After the clearance  of  customs,  exporter  can  load  the  goods  on
• Shipping bill endorsed by the customs authorities facilitates the exporter to claim incentives such as excise duty refund and duty

Types of Shipping Bills

• Free Shipping Bill: It is used in case of goods which neither attract any export duty nor entitled for duty It is printed on simple white paper.
• Dutiable Shipping Bill: It is used in case  of  goods,  which  attract  export    It may or may not be entitled to duty drawback. It is printed on yellow  paper.
• Drawback Shipping Bill: It is used in case when refund of duties is allowed on the goods exported. Generally, it is printed on green paper, but when the drawback claim is paid to a bank, then it is printed on yellow
• Shipping bill for Shipment Ex-Bond: It is used in case of imported goods for re- export and which are kept in It is printed on yellow paper.
• Coastal Shipping Bill: It is used in case of shipment that is moved from one port to another port, by sea, within It is not an export document.

When goods are sent by sea, it is called Shipping Bill and it is Airway bill when goods are sent by Air.

(ii)   Mate’s Receipt

A mate’s receipt is issued by the mate (assistant to  the  captain  of  the  ship)  after  the cargo is loaded into the ship. It is an acknowledgment that the goods have been received on board the ship.

Contents of Mate’s Receipt

Mate’ receipt contains the details about

1. Name of the vessel,
2. Date of shipment,
3. Berth,
4. Marks,
5. Numbers,

 

 

6. Description and condition  of  goods  at  the  time  they  are  shipped,  port  of  loading,
7. Name and address of the shipper,
8. Name and address  of  the  importer(consignee)  and
9. Other required

Types of Mate’s Receipts

Mate’s receipt can be clean or qualified.

• Clean Mate’s Receipt: Mate of the ship issues a clean mate’s receipt if the condition, quality of the goods and their packing are proper and free from
• Qualified Mate’s Receipt:  If  the  mate’s  receipt  contains  any  adverse  remarks  as to the quality or condition of the goods/packing, it is known as ‘Qualified Mate’s Receipt’. If the goods are not packed properly and the mate’s receipt contains any adverse remarks about the packing such as “Poor Packing’,  the  shipping  company does not assume any responsibility in respect of the goods during It is necessary for the exporter to secure the mate’s receipt without any adverse remarks. On the basis of the mate’s receipt, the Bill of Lading  is  prepared  by  the  shipping agent. If there are adverse remarks in the mate’s receipt, the same  will  be incorporated in the Bill of Lading, which may turn  to  become  a  claused  Bill  of Lading, and this may not be acceptable for negotiation.

Mate’s receipt is first handed to the Port Trust Authorities  who  hands  over  to  the exporter soon after he clears their dues. This procedure is adopted to facilitate for collection of port dues from the exporter.

Significance of Mate’s Receipt

• Mate’s receipt is  an  acknowledgment  of    It  is  not  a  document  of  title.
• It is issued to enable the exporter or his agent to secure bill of lading from the shipping
• Bill of Lading, which is the title to the goods, is prepared on the basis  of  Mate’s receipt so it should be obtained without any adverse
• Port Trust Authorities are enabled to collect their dues as it is routed through

(iii)   Cart Ticket

A cart ticket is also known as cart chit. This is prepared by the exporter, which contains the details of the vehicle number, description of  goods,  quantity,  name  of  the  shipper, shipping bill number and port of destination. The driver of the vehicle carries the cart ticket. At the time of entry into Port,  the  cart  ticket  is  verified  by  the  Port  Authorities  to  satisfy that the vehicle is carrying only those goods, which are mentioned in the cart ticket. After being satisfied, the gatekeeper/warden/inspector issues the  gate  pass  to  the  driver  and allows entry of the vehicle into the premises of the port.

 

(iv)    Certificate of Measurement

Freight is charged either on the basis of weight or measurement. When weight is the basis of measurement, the shipping company for the purpose of calculation of freight may accept the weight declared by the exporter. However, when measurement is the basis for calculation of freight, the shipping company may insist on a certificate issued by Chamber of Commerce or other approved organization in respect of goods. The certificate of measurement contains the details in respect of description of goods, quantity, length, breadth and depth of the packages, name of the vessel and port of destination of the cargo etc.,

(v)    Bill of Lading

Bill of Lading is a document issued by the shipping company or his agent acknowledging the receipt of cargo on board. This is an undertaking to deliver the goods in the same order and condition as received to the consignee or his agent on receipt of freight, the shipping company is entitled to. It is a very important document to the exporter as it constitutes document of title to the goods.

Each shipping company has its own bill of  lading.  The  exporter  prepares  the  bill  of lading in the form obtained from the shipping company or agents of shipping company.

The goods can be consigned to order of the exporter, which means the exporter can authorize someone else to receive the goods on his behalf. In such a case, the exporter would discharge the bill of lading on its reverse. When the bill of lading is negotiated through the bank, it would be endorsed in favour of the bank that would endorse further to the importer, on receipt of payment.

Bill of Lading is made  in  signed  set  of  2  originals,  any  one  of  which  can  give  title  to the goods. The shipping company also issues non-negotiable copies (unsigned) which are not documents of title to goods but serves the purpose of record only.

The reverse side of Bill of Lading contains the terms and conditions of the contract of carriage. The clauses on most of the bills of lading are common. A Bill of lading should be clean to facilitate the exporter to obtain the proceeds of export without difficulty.

Main Purposes

It serves  three  main  purposes.

• As a document of title to the goods
• As a receipt from the shipping company and
• As a contract  of  affreightment  (transportation)  of

Types of Bill of Lading

• Received for Shipment B/L: A shipping company issues it when goods have been given to the custody of the shipping company, but they have not been placed on
• On Board Shipped B/L: The shipping company certifies that the cargo has been received on board the

 

 

• Clean B/L: It indicates a clean receipt. In other words, it implies that there has been no defect in the apparent order or condition of goods at the time of receipt or shipment of goods by the shipping
• Claused or Dirty B/L: It shows that the B/L is qualified which expressly declares a defective condition of The clause may state “bale number 5 hook-damaged” or “package number 10 broken”. By superimposing this type of clause, the shipping company is limiting its responsibility at the time of delivery of goods, at the destination. It is very important to note that bank accepts only a clean B/L at the time of negotiation.

(5)) Transshipment or Through B/L: When the journey covers several modes of transport from the place of starting to the place of destination, this type of B/L is taken. It indicates that transshipment would be en route. For example, part of the journey is by ship and the rest of journey may be by road, rail and air.

• Stale B/L: According to international commercial practice, B/L along with other documents must be presented to the bank not later than twenty one days of the date of shipment as given in the B/L. In some cases, the importer may indicate the number of days within which the documents are to be presented from the date of Exporter has to comply with the stipulation indicated. Otherwise, the B/L becomes stale and is not accepted by the bank for payment. A stale bill is one which is tendered to the presenting bank so late a date that it is impossible for the bank to dispatch to the consignee’s place, in time, before the goods arrive at the destination port. In other words, bank finds it impossible to see the documents reach before the ship reaches the destination.
• To Order B/L: In  this  case,  the  B/L  is  issued  to  the  order  of  a  specified
• Charter Party B/L: It covers shipment on a chartered
• Freight paid B/L: When the shipper pays the freight, then this type of B/L is issued with the words “Freight paid”.
• Freight Collect B/L: When the freight on the B/L is not paid and to be collected at the point of destination, it is marked “Freight Collect” and this B/L is known as “Freight Collect B/L”.

Generally, the importer insists on the “clean on-board shipped” bill of lading with the prohibition of transshipment of goods as goods can suffer damage during transshipment. If transshipment is allowed, even period of journey may take longer.

B/L is a non-negotiable document: A bill of lading is not a negotiable document while it is a transferable document. Transferability enables the exporter to claim payment from the bank even before the goods reach the destination. Similarly, it enables the importer to sell the goods even before they reach the destination.

Parties mentioned in B/L: There are three main columns in B/L. These are shipper (consignor), consignee or order of and notifying party. Notifying party is party to whom

 

 

notice is to be sent on the arrival of goods at the place of destination. When the B/L is made to the order of, the person, in whose name it is made to the order of, has the right to endorse further. To illustrate:

Consignor: Cherry & Co, Bhopal

Consignee or to the order of: Dimpy & Co, Newjersey, U.S.A. Notifying Bank: Bank of America, Newjersey

In this case, Dimpy & co has the total right for the cargo as the consignee. So, Cherry & Co can not transfer title to the goods to the third party. If payment of the goods is not received, consignor loses title to the goods and so B/L is not to be made in this way. However, where advance payment has been received or goods are shipped under irrevocable letter of credit, bill of lading can be made in the name of the consignee. In the normal circumstances, exporter takes the bill of lading to his order and endorses to the bank at the time of negotiation and in this way his interests are fully protected.

Who can lodge claim: B/L is the only evidence to  file  claim  against  the  shipping company in the event of non-delivery, defective delivery or short delivery. If  the  importer makes payment, he can lodge the claim,  as  he  will  be  in  possession  of  negotiable  copy  of B/L. Otherwise, exporter can lodge the claim and receive the value of goods.

TO BE CONTINUED……

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