Speak about documents, required by an import/export transaction, say who takes responsibility for the documentation and arranges for the goods to be shipped.

 Payment for imported products is usually by documentary credit, also called a letter of credit. This is a written promise by a bank to pay a certain amount to the seller, within a fixed period, when the bank receives instructions from the buyer. Documentary credits are usually irrevocable, meaning that they cannot be changed unless all the parties involved agree. Irrevocable credits guarantee that the bank, which establishes the letter of credit, will pay the seller if the documents are presented within the agreed time.

Another method of payment is a bill of exchange or draft. This is a payment demand, written or drawn up by an exporter, instructing an importer to pay a specific sum of money at a future date.

The commercial invoice contains details of the goods: quantity, weight, number of packages, price, terms of delivery, terms of payment, and information about the transportation.

The bill of lading is a document signed by the carrier or transporter confirming that the goods have been received for shipment; it contains a brief description of the goods and details of where they are going.

The insurance certificate also describes the goods and contains details of how to claim if they are lost or damaged in transit - while being transported.

The certificate of origin states where the goods come from.

Quality and weight certificates, issued by private inspection and testing companies, may be necessary, confirming that these are the correct goods in the right quantity.

An export licence giving the right to sell particular goods abroad is necessary in some cases.

There should be a shipping agent and/or a freight forwarder (forwarding agent) who takes responsibility for the documentation and arranges for the goods to be shipped by air, sea, rail or road.

Expand on different methods of payment in international trade and people arranging them.

There are 5 types of payments available in international trade: cash-in-advance, open account, documentary collections, documentary credits (letters of credit) and bank payment obligation.

Cash in advance is a payment method in international trade in which an order is not processed until full payment is received by the supplier in advance. It has highest risk to the importer and lowest risk to the exporter.

Open account means that buyers pay the cost of the goods after goods have been shipped by the supplier. It has highest risk to the exporter, lowest risk to the importer.

Documentary collections are an international trade procedure in which a bank in the importer’s country acts on behalf of an exporter for collecting and remitting payment for a shipment. It has the same low risk for both importer and exporter.

Documentary credits, also known as letters of credit, are any arrangement, however named or described, that is irrevocable and thereby constitutes a definite undertaking of the issuing bank to honor a complying presentation. It has the same low risk for both importer and exporter.

Bank payment obligation is a new payment method in international trade. Bank payment obligation (BPO) is an irrevocable undertaking given by an Obligor Bank (typically buyer’s bank) to a Recipient Bank (usually seller’s bank) to pay a specified amount on a agreed date under the condition of successful electronic matching of data according to an industry-wide set of rules adopted by ICC.

Occasionally exporters want to take extra risk, while importers tend to trust their suppliers.

A risk-taking exporter may ship the goods against open account terms whereas a risk-taking importer may decide to pay in advance.

If both parties want to limit their risks, then they should either choose documentary collections or documentary credits.