Thursday, September 2, 2021

IGNOU : M.COM : IBO 4 : UNIT 3 : Q - 2. What are the major commercial documents? Write major characteristics of Bill of lading and Bills of exchange.

 Ans. Commercial Documents

Commercial  documents, also known as shipping documents, enable the exporter and the importer to discharge their obligations under an export contract. In specific terms, these documents ensure that the exporter makes shipment of the goods according to requirements of the contract and the importer makes payment for goods shipped in the manner as given in the contract. When goods are shipped by the exporter, he has a set of documents which entitles him or its legal holder (e.g. agent, importer, bank ) to the goods at the destination or in the event of damage or loss to compensation by insurance.

Bill of lading : Bill of lading is issued by the shipping company or its agents stating that goods are either being shipped or have been shipped. Essentially a transport document, it serves many purposes in international commerce. Bill of lading serves the following three distinct functions.

Characteristics

i) This document evidences the contract of affreightment (transport) between the shipping company and the shipper (exporter or importer).

ii) It is a receipt given by the shipping company for cargo received by it.

 iii) It is a document of title (This is the most significant function of the bill of lading).

Bill of Exchange : Bill of exchange or draft is "an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to or to the order of a person or to the bearer of the instrument. Further, the person to whom it is addressed is to pay either on demand or at fixed or determinable future.

Characteristics

Bill of exchange (BIE) is an important commercial document, which bridges the time gap between shipment of goods and receipt of sale amount. This document is prepared by the exporter and given to the bank along with other shipping documents for securing the sale amount. In this sense, BIE is attached to other documents, which will be given to the importer only after he has honoured the B/E either by actual payment or by undertaking to make payment at a future date.

Simply stated, the maker of B/E is the exporter (drawer) and the person who is directed to pay is the importer (drawee), while the person who is entitled to receive payment is the exporter (payee) or anyone directed by him. The sum of money to be paid by the drawee is the amount billed in the commercial invoice and recorded in B/E.

 B/E is to be honoured either on demand or on presentation to the drawee or at a determinable future. Where BIE is to be honoured on demand, a 'Sight bill' is drawn while in the second case 'Usance bill' is drawn. In the first case, the exporter does not give a credit facility to the importer. In the second case, he extends this facility for an agreed time period. Sight bill is drawn under DP (Documents against payment) terms of payment. For one shipment, two sets of shipping documents including B/L are mailed to the foreign correspondent (bank) through a bank in the exporting country for presentation to the drawee (importer). Each one bears a reference to the other. When anyone of the B/E is paid for by the drawee, the second BIE becomes null and void.


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