Document trade: how the process runs, step by step

Trade documentation runs from a confirmed order to an archived file. Sales fixes the terms. Compliance classifies the goods and screens the parties. Logistics books the freight. A documentation clerk builds the paper set. Treasury presents it to the bank when a letter of credit applies. Finance books the costs and keeps the records.

The steps in order

1. Confirm the order and its trade terms. The salesperson or order desk records the Incoterm, the destination and the payment method. If the customer is paying by letter of credit, the credit itself arrives here. Everything later depends on this record being right.

1. Classify the goods and check whether they may ship. A trade compliance analyst assigns tariff codes, determines country of origin and checks whether an export licence is needed. The same analyst screens the buyer, the consignee and any intermediaries against restricted party lists. A hit stops the shipment until compliance clears it.

1. Review the letter of credit terms. When a credit is involved, a trade finance specialist in treasury reads it line by line. They list every document the bank will demand and note the wording each one must carry. Terms the business cannot meet go back to sales so the customer can amend the credit before goods move.

1. Book transport. The logistics coordinator arranges carriage with a freight forwarder or carrier. They confirm the routing, the shipping marks and the latest date the goods can be loaded.

1. Prepare the commercial invoice and packing list. A documentation clerk drafts both from the order and from the warehouse pick confirmation. Descriptions, quantities and values have to agree with the tariff classification. They also have to agree with the credit, where one exists.

1. Obtain supporting certificates and permits. Compliance applies for any licence. It also requests certificates of origin from the chamber of commerce or issuing body. Inspection or phytosanitary certificates come from third parties, and the logistics coordinator usually chases those.

1. File the export declaration. The customs broker or forwarder lodges it using data the clerk supplies. Errors here create penalties later, so many teams have compliance approve the filing data first.

1. Collect the transport document. Once the goods are loaded, the carrier issues the bill of lading or air waybill. The logistics coordinator checks it against the booking and sends it to whoever holds the document set.

1. Check the full set for discrepancies. The trade finance specialist or a senior clerk compares every document against every other and against the credit. Dates and descriptions cause most rejections, and so do missing signatures.

1. Present documents to the bank or send them to the buyer. Under a credit or a documentary collection, treasury presents the set to the bank. Under open account terms, the clerk sends copies to the customer and the import broker. If the bank raises discrepancies, treasury decides whether to correct, ask the buyer for a waiver or accept the risk.

1. Record duties, fees and charges. Accounts payable processes broker invoices and duty bills. The general ledger team books bank charges against the right shipment. Treasury reconciles the credit proceeds when payment arrives.

1. Retain the file and support reviews. Compliance keeps the complete record for the retention period that customs law requires. When internal or external auditors ask for evidence, the same team pulls sample files and the related approvals. Findings from those reviews feed adjustments to classification rules or checklists.

Where the handoffs break

Most failures happen between teams. Sales agrees terms that compliance has never seen. A clerk works from an old product description while the broker files from a newer one. Treasury learns about a credit only when the bank calls. A process change should look hardest at these junctions, because each team usually believes its own part is sound.

Corrections are another weak point. When a document is fixed, the fix has to reach every other document that repeats the same data. It also has to reach the declaration already filed.

Questions to ask the people who run it

Written procedures often describe how the work was meant to go. The people doing it will describe something else. Ask them directly:

• Where does the product description on the invoice really come from, and who last changed it?
• When a restricted party screening returns a possible match, who decides, and how is that decision recorded?
• At what point does treasury first see a letter of credit? Is it before or after the goods are booked?
• Which documents get retyped by hand from another system?
• What happens when the bank rejects a presentation? Who pays the discrepancy fee, and does anyone track why it happened?
• Does the broker file from data the clerk sends, or from their own records of earlier shipments?
• Which shipments skip steps because of urgency, and who approves that?
• If a customs auditor asked for a shipment file today, how long would the search take, and who would do it?
• Which customer or country has its own unwritten rules that only one person knows?

The answers usually show where informal workarounds carry the process. Those workarounds need to survive any redesign, or be replaced on purpose.

APQC's Process Classification Framework® (PCF) is an open standard developed by APQC, a nonprofit that promotes benchmarking and best practices worldwide. To download the full PCF or to view definitions and measures, please visit www.apqc.org/pcf.