Foreign commerce trade

Question

State three basic documents which are essential in order to conduct the typical foreign commerce trade?  Discuss briefly the purpose of each.

Answer 1

Three basic documents which are essential in order to conduct typical foreign commerce trade are: time draft, letter of credit, and a bill of lading. Letter of credit (L/C) is a guarantee from the importer’s bank which it will act on behalf of the importer and pay exporter for the merchandise in case all the relevant documents specified within the L/C are presented in accordance with the terms of L/C.  Time draft is a written order instructing the importer or his agent, the importer’s bank, to pay amount which is specified on its face on the particular date.   Bill of lading (B/L) is the document which is issued by the common carrier specifying that it has received goods for shipment; it can also serve as title to the goods.