Throughout history, international trade has driven dramatic cultural, economic, and technological change – from engineering feats on trade routes to new monetary systems and national border opening. Yet global trade itself is ripe for its own revolution.
International trade is older than written history. As trade routes expanded, so too did the need to efficiently manage the movement of goods. This led to a variety of trade documents, including bills of lading, invoices, and certificates of origin. Amazingly, these same documents, and the processes behind them, are still in use today.
As our industry embraces digitalization digital documents are now an indispensable tool to manage international trade. They continue to provide critical information about the shipment as their paper predecessors, such as its origin, contents, and destination, and they're used to manage payment, taxes, and customs clearance. But their digitization has revolutionized international trade, making it faster, more efficient, and more transparent.
Let's look at the documents most used in international trade:
Bill of Lading (BL)
A Bill of Lading is a crucial legal document used in international trade that serves as a receipt for the goods being shipped. It provides a detailed account of the goods being transported, including their quantity, weight, and dimensions, as well as information about the parties involved in the transaction, such as the buyer, seller, and carrier.
The Bill of Lading also outlines the terms and conditions of the shipment, such as the mode of transportation, the delivery date, and the cost of shipping. This document is critical for tracking goods during transit and provides a record of their journey from the point of origin to the destination. Without a Bill of Lading, it can be difficult to prove ownership of the goods, and it may be challenging to settle any disputes that arise during the shipment process.
House Bill of Lading (HBL)
This legal document is a receipt issued by a carrier that confirms receipt of goods for shipment. It provides a detailed description of the goods, the names of the buyer and seller, and the terms of the transaction. The House Bill of Lading is critical for tracking goods and provides a record of their journey from the point of origin to the destination.
Master Bill of Lading (MBL)
This is a summary of all the individual House Bills of Lading issued for a particular shipment. It provides an overview of the cargo being transported, including the number of containers and the details of the carrier. The Master Bill of Lading is essential for coordinating the movement of goods across multiple carriers and ensuring that they're delivered to the correct destination.
Certificate of Origin
This document certifies the country of origin of the goods being shipped. It provides important information for customs officials, as it helps to determine the amount of duty to be paid on the goods. The Certificate of Origin is crucial for ensuring compliance with trade regulations and avoiding customs delays.
Letters of Credit
This financial document provides a secure payment method for international transactions. It guarantees that the seller will receive payment once the goods have been shipped and all the required documents have been provided. The Letter of Credit is essential for managing payment risk and ensuring that all parties involved in a transaction are protected.
These documents are used to declare the value, quantity, and nature of the goods being shipped. They provide essential information for customs officials, as they help to ensure that the correct duties and taxes are applied to the goods. Examples of customs documents include the Commercial Invoice, Packing List, and Bill of Entry.
Import and export licenses and permits are examples of compliance documents, and they're essential for ensuring that goods are being traded legally and in compliance with relevant laws and regulations. Compliance documents are required for a range of goods, including chemicals, pharmaceuticals, and weapons.
Phytosanitary Certificates and Permits
These documents certify that goods being shipped are free from pests and diseases. They're essential for ensuring that the goods don't pose a threat to the importing country's agricultural industry. Phytosanitary certificates and permits are required for a range of goods, including plants, seeds, and timber.
While international trade has driven many of the world’s great advances, as an industry we are still slow to adopt the full potential of our own technological revolution by going digital. Yet today, managing the complexities of global supply chains has never been more critical.
From tracking goods to managing payment and ensuring compliance with trade regulations, digital documents provide a vital layer of transparency and accountability that allows businesses to operate more efficiently and reduce costs. COVID-19 did necessitate the introduction of many digital processes. However, we need industry-wide collaboration and acceptance to achieve widespread adoption, and address the interoperability challenges.
Implementing digital documents is not always a straightforward process, and many businesses cite challenges such as data privacy and security, cross-border compatibility, and resistance from key stakeholders.
In the next installment of this new blog series: “Transforming Trade: The Impact of Digital Documents on Global Logistics”, we'll explore these challenges in more detail and discuss strategies to help businesses overcome them.