Foreign trade needs the support of export documents. Operations with foreign countries become very complex, sellers must explain what they are selling and buyers must know what they are buying. For that reason, we use the following export documents:
Some of the export documents are used for business purposes, such as invoices, tickets, and weight packaging. There are also documents to guarantee the quality of what is exported. The insurance documents certify what the insurance covers. Bills of lading are examples of transportation documents.
There are different export documents that do not offer the same benefits to every user.
Letters of credit are an instrument that guarantees the seller that he will be paid for the merchandise shipped when it meets the criteria established in the contract by the importer.
Most are irrevocable and confirmed, which means that they cannot be modified except with the consent of the parties involved. Furthermore, these documents relieve the exporter of any concern about non-payment.
Export documents can be revocable or irrevocable, confirmed or notified.
Revocable documents give the holder the possibility to modify them without the consent of the other parties. Banks can also reserve the right to give or refuse payment.
Irrevocable: the bank cannot revoke its commitment, whatever the changing circumstances of its client, unless agreed by all interested parties.
The notified documents provide protection to the exporter, but only up to a point. They will not cover natural, political or transfer-related problems.
Confirmed, where the importer’s banker’s commitment is endorsed by a banker in the exporter’s country. The exporter must fully respect his obligations and is guaranteed that he will be paid.
Exporters run a number of risks when venturing into new lands. First, they run the risk that the importer will not pay them in the foreign country. Second, if they do not know the political and economic situation of the country they are exporting to, they run the risk of losing their money. Another risk they take is related to exchange rates. Export documents exist to alleviate these risks.