Documents Used in International Trade
Invoice, draft, air waybill and the rest: what each one proves and what a bank checks on it.
A trade finance officer reads the same handful of documents every day: the commercial invoice, the bill of exchange, a transport document, an insurance document, and supporting papers such as the packing list and certificate of origin. Each proves something different, and UCP 600 sets a short list of things each must show when an LC calls for it.
The underlying principle is that documents are read together. Data in one document need not be identical to another, but it must not conflict with it, with the credit, or with standard practice (UCP 600 Article 14(d)). Only the invoice must describe the goods exactly as the credit does; other documents may use general terms (Article 14(e)).
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The Core Documents and What Each Proves
Commercial invoice
Issued by
The beneficiary (seller)
What it proves
What was sold, at what price, on what trade term
UCP 600 / ISBP
Art. 18; ISBP section C
Bill of exchange (draft)
Issued by
Drawn by the beneficiary on the bank named in the credit
What it proves
The demand for payment, at sight or a usance date
UCP 600 / ISBP
Art. 6(c); ISBP section B
Air transport document (air waybill)
Issued by
Carrier, or a named agent for the carrier
What it proves
Goods accepted for carriage between two airports
UCP 600 / ISBP
Art. 23; ISBP section H
Bill of lading
Issued by
Carrier, master, or a named agent
What it proves
Goods shipped on board a named vessel
UCP 600 / ISBP
Art. 20; ISBP section E
Insurance document
Issued by
Insurance company, underwriter or their agents
What it proves
Cover for the goods in transit
UCP 600 / ISBP
Art. 28; ISBP section K
Packing list
Issued by
The issuer named in the credit, or anyone if none is named
What it proves
How the goods are packed, with weights and counts
UCP 600 / ISBP
ISBP section M
Certificate of origin
Issued by
The issuer named in the credit, or anyone if none is named
What it proves
Where the goods were produced
UCP 600 / ISBP
ISBP section L
| Document | Issued by | What it proves | UCP 600 / ISBP |
|---|---|---|---|
| Commercial invoice | The beneficiary (seller) | What was sold, at what price, on what trade term | Art. 18; ISBP section C |
| Bill of exchange (draft) | Drawn by the beneficiary on the bank named in the credit | The demand for payment, at sight or a usance date | Art. 6(c); ISBP section B |
| Air transport document (air waybill) | Carrier, or a named agent for the carrier | Goods accepted for carriage between two airports | Art. 23; ISBP section H |
| Bill of lading | Carrier, master, or a named agent | Goods shipped on board a named vessel | Art. 20; ISBP section E |
| Insurance document | Insurance company, underwriter or their agents | Cover for the goods in transit | Art. 28; ISBP section K |
| Packing list | The issuer named in the credit, or anyone if none is named | How the goods are packed, with weights and counts | ISBP section M |
| Certificate of origin | The issuer named in the credit, or anyone if none is named | Where the goods were produced | ISBP section L |
What Each Document Must Show Under an LC
- Commercial invoice
- Must appear issued by the beneficiary, made out in the applicant's name, in the credit's currency, with a goods description that corresponds to the credit (Article 18). It need not be signed or dated. An invoice marked "pro-forma" or "provisional" does not satisfy a call for an invoice.
- Bill of exchange
- Drawn and signed by the beneficiary, for the amount demanded, with a maturity that can be worked out from the draft itself. If the amount in words and figures differ, the words are taken as the amount demanded. A credit must not be issued available by a draft drawn on the applicant (Article 6(c)); the drawee is a bank.
- Air transport document
- Must name the carrier and be signed by it or a named agent, show the goods accepted for carriage and the departure and destination airports, and be the original for consignor or shipper (Article 23). Its date of issue is the shipment date unless it carries a specific notation of the actual date of shipment. Other flight information, such as a requested flight date, is not that notation.
- Any other document
- Where the credit names a document but not its issuer or content, the bank accepts it if its content appears to fulfil the function of that document and does not conflict (Article 14(f)).
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Case: Examining an Air Shipment From Bengaluru
A Bengaluru electronics exporter ships by air under an LC for USD 48,000 at 30 days after shipment date, drafts drawn on the issuing bank. The presentation contains the following.
- 1
Invoice titled "Proforma Invoice", unsigned
Discrepant because of the title, not the missing signature. A pro-forma invoice does not satisfy a call for an invoice; a signature is not required unless the credit asks for one.
- 2
Draft for "USD 48,000" in figures and "forty-eight thousand five hundred US dollars" in words
The words are treated as the amount demanded, USD 48,500. That exceeds the invoice and the credit, so the draft is discrepant.
- 3
Air waybill dated 4 May, with "Requested flight date: 6 May" printed in a box
The shipment date is 4 May, the date of issue. A requested flight date is not a specific notation of the actual date of shipment, so the draft's maturity runs 30 days from 4 May.
- 4
Air waybill issued by a freight forwarder as house air waybill
Acceptable if it meets Article 23: it must show the carrier's name and be signed by the carrier or a named agent for the carrier.
How the IIBF Exam Tests This
IIBF's syllabus lists the bill of exchange, invoice, bill of lading, airway bill and insurance policy among trade documents. Questions usually take one field on one document and ask whether it is a discrepancy. The traps are rules that sound strict but are not (an invoice need not be signed; only the invoice must describe the goods exactly) and rules that sound lax but are not (a draft cannot be drawn on the applicant; words beat figures on a draft).
FAQs
Does a commercial invoice under an LC need to be signed?expand_more
No, unless the credit says so. Under UCP 600 Article 18 and ISBP, the invoice must appear issued by the beneficiary and made out to the applicant, but it need not be signed or dated.
What is the date of shipment on an air waybill?expand_more
The date of issue, unless the air waybill carries a specific notation of the actual date of shipment (UCP 600 Article 23). A requested flight date shown elsewhere on it does not count.
Can an LC draft be drawn on the applicant?expand_more
No. UCP 600 Article 6(c) says a credit must not be issued available by a draft drawn on the applicant.
If the amount in words and figures on a draft differ, which is taken?expand_more
The amount in words is examined as the amount demanded, under ISBP's rules on drafts.
Next steps
- Bill of Lading Under UCP 600arrow_forward
- Marine Insurancearrow_forward
- UCP 600 Casesarrow_forward
- Preparationarrow_forward
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