Legal Definitions - commercial set

A commercial set refers to a comprehensive collection of essential documents used in international trade. These documents are crucial for facilitating the shipment of goods, proving ownership, confirming insurance coverage, and authorizing financial transactions between parties in different countries. Often, a commercial set is specifically required to fulfill the conditions of a letter of credit, which is a bank's guarantee of payment to the seller.

Typically, a commercial set includes documents such as:

• A commercial invoice, detailing the goods sold, their quantity, price, and terms of sale.
• A bill of lading (for sea freight) or air waybill (for air freight), which is a contract between the shipper and the carrier, serving as a receipt for the goods and a document of title.
• A certificate of insurance, confirming that the goods are insured against loss or damage during transit.
• A bill of exchange (or draft), which is a written order from one party to another to pay a specified sum of money on a certain date.
• Other documents like a packing list, certificate of origin, or inspection certificates, depending on the specific trade agreement or letter of credit requirements.

Here are some examples illustrating the application of a commercial set:

• Example 1 (Standard International Shipment): A textile manufacturer in India sells a large consignment of fabrics to a clothing brand in Spain. To ensure a smooth transaction and shipment, the Indian manufacturer prepares a commercial set. This includes a detailed commercial invoice for the fabrics, a bill of lading issued by the shipping company confirming the goods are on board a vessel bound for Spain, and a certificate of insurance protecting against any damage during the long sea voyage. This set of documents allows the Spanish buyer to take possession of the goods upon arrival and for the Indian seller to receive payment.

  How this illustrates the term: This scenario demonstrates the core function of a commercial set as the primary collection of documents needed to manage the physical shipment of goods and facilitate the transfer of ownership and payment in international trade.

• Example 2 (Letter of Credit Transaction): An electronics company in South Korea agrees to export specialized components to an assembly plant in Mexico. To guarantee payment, the Mexican plant arranges a letter of credit through its bank. The letter of credit specifies that the South Korean company will only be paid once it presents a complete commercial set to its own bank, precisely matching the terms outlined in the credit. This set might include the usual shipping documents (invoice, bill of lading, insurance certificate) along with a packing list, a certificate of origin to qualify for preferential tariffs, and a draft drawn on the Mexican bank. If any document is missing or incorrect, payment can be delayed or refused.

  How this illustrates the term: This example highlights the second meaning of a commercial set, where it refers to the specific collection of documents required to satisfy the strict conditions of a letter of credit, ensuring that all contractual obligations are met before payment is released.

• Example 3 (Customs Clearance): A wine importer in the United States purchases several pallets of wine from a vineyard in France. When the shipment arrives at a U.S. port, customs officials require a complete commercial set to process the import, verify the goods, and calculate import duties and taxes. This set typically includes the commercial invoice for valuation, the bill of lading to confirm the shipment details and origin, and potentially a certificate of analysis for the wine. Without these accurate and complete documents, the wine cannot be cleared through customs and released to the importer.

  How this illustrates the term: This scenario shows how a commercial set is essential not only for the buyer and seller but also for regulatory compliance, particularly for customs authorities to control and tax goods entering a country.