Legal Definitions - documentary instruction

Documentary Instruction

A documentary instruction is a written agreement, primarily used in international trade, that specifies how various documents related to the shipment, ownership, and delivery of goods should be managed, transferred, and presented between the parties involved, such as the importer and exporter.

These instructions ensure that all necessary paperwork—like bills of lading, commercial invoices, certificates of origin, and insurance policies—is correctly handled to facilitate customs clearance, payment, and the smooth transfer of ownership.

• Example 1: Standard International Sale

  An electronics manufacturer in South Korea agrees to sell a large shipment of televisions to a retailer in France. Their documentary instruction specifies that the South Korean exporter must provide a clean bill of lading, a commercial invoice, and a packing list to the French importer's bank. Upon verification that these documents match the terms of the agreement, the bank will release payment to the exporter.

  This example illustrates how the documentary instruction dictates the specific documents required and their transfer mechanism (via banks) to trigger payment in a typical international transaction.

• Example 2: Complex Machinery Export

  A German company exports specialized industrial machinery to a construction project in Brazil. The documentary instruction in this case is more detailed, requiring the German exporter to provide not only standard shipping documents but also a certificate of inspection from an independent third-party surveyor, an insurance certificate covering all risks during transit, and a detailed customs declaration form. These documents must be submitted to the Brazilian importer's freight forwarder before the machinery leaves the port of Hamburg.

  Here, the documentary instruction ensures that all necessary compliance and risk management documents, including those from third parties, are properly handled and delivered to the correct intermediary before shipment.

• Example 3: Trade Finance with Specific Conditions

  An American clothing brand sources textiles from a supplier in Vietnam. To mitigate risk, their documentary instruction stipulates that the Vietnamese supplier must present a commercial invoice, a bill of lading, and a certificate of quality assurance from a mutually agreed-upon testing laboratory. Crucially, the instruction also specifies that the bill of lading must show "freight prepaid" and the quality certificate must confirm a defect rate below 2%. Only when all these conditions are met and documents presented to the American brand's bank will the payment be authorized.

  This example demonstrates how a documentary instruction can include specific conditions and requirements for documents, acting as a crucial control mechanism for quality and payment release in international trade finance.