The Importance of Documents in an International Trade Transaction

An international trade transaction involves both the physical movement of goods and the exchange of documents. Courts have long recognized that these transactions depend as much on documents as on the goods themselves. Exporters must therefore provide the correct documents and goods.

Key documents used in international commercial transactions:

  • The contract of sale
  • The bill of lading, air waybill, or other transport document
  • Payment-related documents (particularly the documentary credit and bill of exchange or bank draft)
  • Insurance document (policy, certificate, or note)

Paper documents can be forged, altered, or misrepresented. An importer may receive documents that appear valid but do not match the goods delivered and may be unable to stop or reverse payment.

To reduce this risk, importers verify the identity of counterparties and may require documentation, such as an inspection certificate or a certificate of origin.

For exporters, the documentary system creates different risks. Delivery of the goods does not excuse errors in the documents. While an exporter may meet the terms of the contract, they may still be unable to receive payment if they fail to meet documentary requirements.

Both parties can reduce risk by ensuring, before entering into an international contract of sale, that they understand their documentary obligations and any applicable restrictions. These may include insurance requirements in countries that mandate the use of national insurance schemes (currently over 60 countries worldwide, as well as import and export documentation requirements that vary by country.