The maritime industry is known for its paperwork. Knowing all of this is already tedious - getting them right is a task in itself. Any seemingly innocuous error can cause problems and delays that can seriously disrupt your supply chain.
In general, many of these documents contain the same information - buyer, seller, item details, etc. But each document plays a different role, and it is important to not only ensure that the information written on each document is accurate, but that it is consistent across all documents.
Below are the top 5 shipping documents that all shippers should be familiar with, and the differences between them.
1. Bill of Lading
A bill of lading, also known as a bill of lading, is a contract of carriage between a shipping company and a cargo owner. This is a document issued by the carrier to confirm receipt of your cargo for shipment on their vessel.
Importer and exporter information needs to be listed clearly as the bill of lading is proof of ownership of the goods being carried on board. The information on the bill of lading should also correctly reflect the conditions of the Incoterm in which the transaction was made.
Once the goods arrive at their destination, the bill of lading needs to be presented to the carrier to release the goods, which then serve as a shipping receipt.
Type of bill of lading
If you have booked through a freight forwarder, you may encounter two different bills of lading: house B/L and master B/L. Read through our post on the difference between a house and a master bill of lading thoroughly to understand how they differ.
Depending on your working relationship with the importer, you may prefer to use Express Release or Telex Release, both of which are variants of the bill of lading.
2. Packing list
Just like a bill of lading, a packing list is a mandatory document for ocean shipments. It lists the tiniest details about the cargo. This includes not only the weight, volume and value of the overall shipment, but also the weight, volume and value of each individual box.
Packing slips inform your freight forwarders, importers, customs and carriers of the goods you are sending without actually verifying the contents. If Customs decides to inspect your shipment, a packing list helps to identify the box or item that is raising the alarm, facilitating the inspection process. This saves time and reduces the risk of damage to the shipment by avoiding opening every box in the shipment.
It is important that the packing slip is filled out correctly and the information listed is as accurate as possible as this may be used to generate the bill of lading. That is, the information on the packing list (number of pieces, weight, etc.) must match the information on the bill of lading, as both documents are required for customs clearance in most countries.
3. Commercial Invoice
Any international transaction involving import/export of goods must be accompanied by a proof of sale called a commercial invoice. To a large extent, it is similar to a standard invoice. But unlike a standard invoice, it contains details about the purpose of customs clearance of the goods and is one of the most important documents in ocean shipping. Details of all parties involved, including importers, exporters, freight forwarders, banks, shipping lines, etc., must be listed correctly on the commercial invoice.
A commercial invoice is a legal document that lists the goods sold and their selling price—that is, what the importer agrees to pay for those goods, and is sent to the party paying for the goods. As mentioned earlier, the packing list details the items in the shipment and serves as evidence in the event of disputes and claims, and is sent to the consignee of the shipment.
4. Certificate of Origin
According to the International Chamber of Commerce, Certificates of Origin (COO) are "important international trade documents that certify that the goods in a particular export are obtained, produced, manufactured or processed entirely in a particular country. They also serve as an exporter's declaration.
A Certificate of Origin is required for customs clearance, which determines the amount of duties and taxes that need to be paid. It also helps determine whether there is a tax exemption in the case of special trade agreements between exporting and importing countries.
5. Letter of Credit
A letter of credit is a formal, binding payment agreement between a buyer and a seller. The international sourcing process is a lengthy one considering the length of time it takes from the time the seller ships the goods to the safe hands of the buyer. This makes it difficult to determine when payment is due, especially if the importer cannot verify the authenticity of the purchase.
This is when letters of credit come into play. It is considered one of the safest payment methods. The importer first develops a list of terms and conditions that must be agreed upon by both parties.
Once the buyer and seller have finalized the terms, the seller begins preparing the goods according to the conditions. After the goods are shipped, the seller then goes to his bank with the proper documents as evidence that the goods have been prepared and dispatched according to the agreed terms and conditions. His bank will then verify and pay for the reimbursement before claiming it from the buyer's bank.
