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Introduction to Commercial Letters of Credit
Guidelines regarding the proper way to fill out the application
A letter of credit is a written undertaking to pay money; payment is generally conditioned upon presentation of a draft or other written demand for payment, together with other specified documents. If a letter of credit requires certain documents in addition to a draft or demand for payment, it is commonly referred to as a documentary letter of credit. If the additional documents relate to a sale of goods, the letter of credit is a commercial documentary letter of credit.
Commercial letters of credit are a means of paying for goods purchased in international trade transactions. They are also used, but with far less frequency, as a means of paying for goods purchased in domestic sales transactions.
In the typical letter of credit sale, the buyer will request his bank to issue and deliver its letter of credit to the seller directly or through an intermediary bank. The letter of credit will state that, upon presentation to the bank of the letter of credit and certain other specified documents, the bank will pay the seller the sum of money specified in the letter of credit.
The letter of credit protects the buyer because he knows that the seller will not be paid until he has presented documents to the bank evidencing shipment of the merchandise. The seller is protected because he knows that he will be paid once the merchandise has been shipped and the required documents tendered to the bank.
A letter of credit transaction involves three principal parties, two traditional contracts, and one obligation or engagement; intermediary banks may he brought into the transaction.
1- The Account Party, the Issuing Bank, and the Beneficiary:
The buyer and the seller are two of the three principal parties to a letter of credit transaction. The third party is the bank that issues the letter of credit. The relationships between the buyer and the seller and between the buyer and the issuing bank are founded on contract. However, the relationship between the issuing bank and the seller is a one-way engagement or obligation from the bank to the seller.
a) The Contract Between the Buyer and the Seller.
The contract of purchase between the buyer and the seller of goods is often referred to as the underlying transaction in the letter of credit arrangement. Generally, when a letter or credit is to be used to finance the transaction, the sellers performance under the sales contract will be conditioned on the issuance of a letter of credit.
(1) Contract of Sale
(Underlying transaction)
b) The contract Between the Buyer and the Issuer.
The buyer in a letter of credit transaction is generally referred to as the account party, or the applicant for the credit, or simply the applicant.
A bank issuing a letter of credit is referred to as the issuing bank or opening bank.
Letters of credit are traditionally issued "for the account of" the banks customer; thus the term "account party". Less frequently used is the phrase "by order of".
The application and reimbursement agreement for the issuance of a commercial letter of credit almost always includes a security agreement, granting the issuing bank a security interest in the documents presented under the credit and in the goods they cover (see appendix A and B for examples of application and reimbursement agreement).
When signed by the account party and accepted by the issuing bank, the application and reimbursement agreement constitutes the contract between the account party and the issuer, whereby the issuing bank is obliged to go forward with the letter of credit and the account party agrees to reimburse the issuer for amounts paid by the issuer pursuant to the letter of credit.
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c) The engagement of the Issuer to the Seller.
The issuer accepts the account partys application by issuing its letter of credit for the account of the buyer and in favour of the seller. The seller is referred to as the beneficiary.
The letter of credit constitutes the engagement or obligation of the issuer to perform as specified. The letter of credit is independent and separate from both the contract of sale between the buyer and the seller and the contract of reimbursement between the customer and the issuer.
In an international letter of credit transaction, the issuer would not deliver the letter of credit directly to the beneficiary, but would use an intermediary called an advising bank.
(i) Payment Letters of Credit and Acceptance Letters of Credit.
If the sellers draft is drawn on the bank at sight, that is, drawn payable upon presentation, the credit is called a sight letter of credit or payment letter of credit. Once the draft is presented and paid, it constitutes a receipt for the payment made and serves no other purpose and has no other value.
On the other hand, if the draft is drawn at time, for acceptance rather than payment, the credit is called acceptance letter of credit. Under an acceptance letter credit, the bank will keep the documents tendered with the exception of the draft which is accepted by the bank and returned to the seller-beneficiary who may discount it and obtain funds immediately.
(ii) Deferred Payment Letters of Credit.
A draft is not required under a deferred payment letter of credit. A deferred payment credit generally calls for the presentation of specified documents and provides for payment to be made to the beneficiary a stipulated number of days after the presentation of the documents, or after the date of shipment or some other stipulated date. In this type of credit, the bank will issue and deliver to the seller-beneficiary a deferred payment letter of undertaking when compliant documents are tendered.
(iii) Straight Letters of Credit and Negotiation Letters of Credit.
If the letter or credit contains a commitment by the issuing bank to honor a demand for payment by the seller upon his performance of the terms and conditions of the credit, with no other commitment to any other party than the beneficiary, it is referred to as a straight letter of credit.
If the engagement of the issuing bank is extended to any bank that purchases drafts or demands for payment made under the letter of credit by the seller, it is a negotiation letter of credit. This engagement is usually made in the letter of credit by including the following phrase:
"We hereby engage with the drawer, endorsers and bona fide holders of drafts drawn under and in compliance with the terms of this credit that the same will be duly honored on due presentation."
2) The Advising Bank and the Confirming Bank.
In addition to the three main parties to a letter of credit transaction, other parties can be, and often are, brought into the transaction at various points. The two parties most often encountered are the advising bank and the confirming bank.
(a) The Advising Bank.
Quite often, rather than notifying the beneficiary directly of the issuance of a letter of credit, the opening bank will have a correspondent bank advise, or notify, the beneficiary of the credit. This bank is referred to as the advising bank or notifying bank. The advising bank takes its instructions strictly from the issuing bank, and the relationship between the two banks is that of principal and agent, the advising bank being the agent of the issuing bank.
The obligation or the advising bank is limited to the accurate transmission of the terms and conditions of the letter of credit; it assumes no other liability to the beneficiary. The solvency of the advising bank, however, is of no concern to the beneficiary. Whether or not the advising bank fails, the beneficiary may still look to the issuing bank for payment under the letter of credit.
(b) The Confirming Bank.
For various reasons, it is often desirable to have another bank undertake the same obligations assumed by the issuer. This other bank is called the confirming bank. The beneficiary can then depend on the direct obligation of the confirming bank in addition to the liability of the opening bank.
If the confirming bank pays under the letter of credit, it acquires the rights of an issuer. Those rights include a direct cause of action against the account party for reimbursement of any amounts paid pursuant to the letter of credit, in case the issuing bank fails.
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FORM OF REIMBURSEMENT AGREEMENT |
To: (Bank)
In consideration of your opening or establishing from time to time at our request such Commercial Credits as you may think fit we hereby agree that the following agreements and conditions shall apply to all such credits:
We authorize you to accept and/or pay for our account all drafts purporting to be drawn under any such credit.
We undertake to indemnify you against all losses costs damages expenses claims and demands which you may incur or sustain by reason of your opening or establishing any such credit and to provide you with Lebanese Pounds in Beirut unless otherwise agreed to meet all payments made by you or your agents and all drafts drawn or accepted by you or your agents and the amount of all charges commission and interest in connection with such credits and in connection with the relative goods and we authorize you to debit our account with you with such moneys on receipt by you of advice of payment or at any time thereafter at your discretion.
We agree that any credit opened by you shall be subject to the Uniform Customs and Practice for Documentary Credits current at the time of any particular transaction it being acknowledged, for avoidance of doubt that the indemnity contained herein shall be interpreted in accordance with English law.
We undertake that all goods shall be fully insured against all risks that the insurance policies shall be assigned to you and that until payment by us of all amounts due to you in respect of Credits opened and of all our other indebtedness or liability to you on any account the insurance moneys payable are to be held as available to you and if received by us shall be paid to you forthwith and until so paid shall be held by us on your behalf.
All documents received by you or your agents under any such credit and the goods represented thereby shall be held by you as security for the due payment by us of all moneys due to you by us in respect of credits opened and of the moneys hereinbefore mentioned and of all our indebtedness or liability to you from time to time on any account. We agree to assign to you our rights as unpaid sellers to transfer the goods into your control and that until payment by us of such moneys due to you the proceeds of the sales of the goods are to held as available to you and if received by us shall be paid to you forthwith and until so paid shall be held by us on your behalf.
On arrival of the goods you shall be at liberty to have them warehoused in your name and insured against fire without obligation on you to so warehouse and insure and you will be in no way responsible for any loss or damage entailed through your omission to so warehouse and insure. Without prejudice to any other rights or remedies to which you may be entitled we agree that if we fail to repay on demand all moneys due by us to you from time to time as aforesaid you may without notice or further consent of any persons interested sell the goods in such manner and at such times as you may think fit and to apply the net proceeds of any such sale in or towards the discharge of such moneys and we undertake to pay you on demand the amount of any deficiency remaining after such sale together with all usual commission charges and expenses and interest at .percent above the BLF base rate with minimum .percent.
We agree that the rights and powers conferred by this agreement are in addition and without prejudice to any other securities which you may now or hereafter hold for our account and this agreement shall continue in force and be applicable to all transactions notwithstanding any change in the individuals composing our firm or otherwise.
GUIDELINES REGARDING THE PROPER WAY TO FILL OUT THE APPLICATION
APPLICATION FOR DOCUMENTARY CREDIT
Place ..
Date ..
To: BANQUE LIBANO-FRANÇAISE - Beirut
According to the terms of our Agreement for the opening of Documentary Credits, please issue an irrevocable documentary credit by full text operative SWIFT, or any other teletransmission of your choice, subject to the Uniform Customs and Practice for Documentary Credits, 1993 Revision, ICC Publication no. 500 as follows:
Documentary Credit No. .. (For bank use only)
Date and Place of Expiry / ..
Name and full address of applicant:
..
Name and full address of beneficiary: ...
..
Currency and Amount: .. / ..
Credit amount tolerance: +/- 0 % About ( +/- 10 %) +/- %
Maximum
Available with: . Nominated bank)
By:
- Sight Payment
- Deferred Payment
Acceptance of Draft drawn on the nominated bank
Negotiation of draft drawn on the issuing bank
At days after: date of shipment
date of acceptance of documents by the nominated bank
Partial Shipment: Not Permitted Permitted
Transshipment Not Permitted Permitted
On Board/dispatch/taking charge: .
For Transportation To: ..
Latest Date of Shipment:
Shipment Period (if any): ..
Description of goods and/or services:
Price: ...
Incoterm: EXW CFR FCA CPT FOB CIF FAS CIP ................................
As per: Pro Forma Invoice N. dated ......................................................................
Documents required:
Commercial invoice in 1 original (s) and 2 copies, signed by handwriting, bearing the following statement: We certify that this invoice is authentic, that it is the only one issued by us for the goods described herein, that it shows their exact value without deduction of any advance payment and that their origin is .. .
The original (s) must be certified by the Chamber of commerce. The original must also be legalized by the Lebanese consulate, if available in the area of the chamber of commerce: if not available, a declaration to that effect is required on invoice.
Marine Bill of Lading issued:
To the order of BANQUE LIBANO-FRANCAISE - Beirut
To the order and endorsed in blank
* marked: freight prepaid payable at destination
* notify: (full name and address of the applicant) .................................................................
* indicating the present credit number
- Evidencing that shipment is effected by .. Containers
Through .
Mentioning shipping marks:
. Short form/blank back bill of lading are not acceptable.
Certificate from the carrier or its agent attesting that the vessel carrying the goods is not of Israeli nationality, will not call at any Israeli port during its voyage and is not blacklisted by Israel Boycott Committee is eligible to enter into the port of destination.
Air waybill Truck waybill consigned to Banque Libano-Française - Beirut, indicating the actual date of dispatch and the present credit number, marked freight prepaid payable at destination, notify: the applicant ( his full name and address as above) ...
Insurance policy or certificate in 2 negotiable copies, blank endorsed by beneficiary, showing claims if any, payable in Lebanon, for CIF/CIP value of the goods plus 10 %, covering the following risks without franchise :
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for sea shipment: .institute cargo clauses (A) , .institute strikes clauses (cargo), .institute war clauses (cargo), transshipment risks, if any, .fire and theft in the custom house, valid for 60 days after the discharge of goods |
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Certificate of origin in original and copy (ies) issued or certified by the Chamber of commerce.
Packing list in original and copy (ies) detailing the contents of each package
Health Sanitary Phytosanitary certificate issued in original and copy(ies) by attesting that the goods are conform to the L/C specifications ........................................ .
Certificate of inspection of the quality quantity weight issued in .. original and copy (ies) by .. certifying that .
Certificate from the carrier or its agent attesting having received the following documents:
- one extra original invoice certified by the chamber of commerce
- ..
- ..
Certificate from the beneficiary supported by courier receipt evidencing beneficiarys direct dispatch by express courier to the applicant and within days of shipment of the following documents:
- one extra original invoice certified by the chamber of commerce
- ..
- ..
Other documents required:
Additional conditions:
Transport document indicating a third party as shipper is not acceptable
Documents must not show the name of the applicant but only the name of:
., as the buyer.
Applicant informs that the insurance will be arranged locally by him.
Negotiation under reserve or against indemnity is prohibited.
.
Bank Charges:
all bank charges and commissions outside Lebanon are for the account of the beneficiary
..
Period for presentation of documents to the nominated bank:
Days maximum after the date of shipment but within the validity of the credit.
Confirmation instructions:
Confirm without May add (if requested by the beneficiary)
Intermediary Bank:
The Nominated Bank is requested to advise the beneficiary through: ..
Dispatch of Documents:
By express courier in two separate covers to your Documentary Credit Central Dep.
Please debit our account no . of credit amount and credit same in a separate account in our name as a pledge in your favour until full settlement of the credit
Authorized signature and stamp
1- Place and Date of Making
This is the date on which the customer requests the issuing bank to open the letter of credit. The place of making may have significance in determining the law applicable to the contract between the customer and the issuing bank.
2- Letter of Credit Identification Number:
When the letter of credit is issued, the issuing bank will assign it a number that will generally be referenced in the documentation submitted to the bank in availment of the credit.
3- Issuing Bank
The name of the issuing bank is pre-printed on the form application.
4- Revocable or Irrevocable Credit:
Most letters of credit today are irrevocable. A revocable credit may be amended or revoked by the issuer without notice to or consent from the beneficiary. An irrevocable credit can be amended or revoked only with the agreement of the customer, the issuing and confirming banks and the beneficiary.
5- Method of Notification
There are three alternatives:
- Full text teletransmission: this is the fastest way to notify the beneficiary of the issuance of the letter of credit, together with all of its terms and conditions.
- Airmail : This notification method is the least expensive, but is almost the slowest.
- Airmail with a preliminary teletransmission advice: the preliminary teletransmission advice puts the beneficiary on notice that a letter of credit is on its way, but he cannot present documents for negotiation until airmail details are received.
The word teletransmission permits the transfer of information via cable, telex, electronic mail, the SWIFT network, or other similar means and even telefax provided that the message bears correct test keys.
6- Identification of the Applicant
The applicant for the letter of credit is generally the buyer of the goods in the underlying transaction. Since the name and address inserted in this box will appear in the credit, care should be taken that the name and address are complete and correct in all respects.
7- Nominated Bank
The issuing bank will designate the nominated bank (usually a correspondent bank) which is authorized to pay, accept or negotiate drafts, unless the applicant designates a particular bank requested by the beneficiary. The applicant should be aware that under the UCP the issuing bank will not be responsible to him for any failure of the nominated bank to follow credits instructions. This is so even though the issuing bank may have selected the nominated bank.
8- Identification of the Beneficiary
The beneficiary is the party in whose favour the letter of credit is to be issued, and the party that must comply with the terms and conditions of the credit to be entitled to its proceeds. Generally, the beneficiary is the seller of the goods in the underlying transaction. Before the applicant instructs the issuing bank to issue its letter of credit, he should satisfy himself as to the reliability and trustworthiness of the beneficiary.
In order to properly address the letter or credit, the issuing bank must know the beneficiarys exact name and how to contact him by mail and teletransmission and phone. In a rare case, the issuing bank may not want to issue the letter of credit if the beneficiary is not creditworthy (and, therefore, the underlying transaction is jeopardized). This would be as much for the protection of the customer as for the issuing bank
9- Allowances in Credit Amount, Quantity and Unit Price
The word about used in connection with the amount of the credit, the quantity or the unit price stated in the credit are to be construed as allowing a difference not to exceed 10 % more or 10 % less than the amount or the quantity or the unit price to which they refer.
Unless if otherwise stated, and unless the quantity is expressed in terms of a stated number of packing units or individual items, a tolerance of 5 % more or 5 % less in quantity will be permissible
Unless above provisions are applicable and if partial shipments are prohibited and the amount is stated without mentioning any tolerance, then a difference of up to 5 % less in the amount of the drawing will be permissible, provided that the quantity, if stipulated in the credit, is shipped in full and the unit price, if stipulated in the credit, is not reduced.
10- Date and Place of Expiry
The credit must state the last possible day for presentation of documents for payment acceptance or negotiation. The expiry date should be determined in light of the circumstances of the transaction. If the time comes too soon, an extension may be required. If the date is too far distant, additional bank charges may be incurred.
If the expiry date of the credit falls on a day on which the bank to which presentation has to be made is closed for reasons other than those referred to in article 44a of the UCP 500, the stipulated expiry date shall be extended to the first following day on which such bank is open.
Unless the credit is freely negotiable, the credit must specify a place for the presentation of documents, for example: at the counters of the nominated bank. If the credit is freely negotiable, it is considered freely negotiable by any bank anywhere in the world unless the place is specified.
11- Availability and Tenor of Drafts
The UCP requires indicating clearly whether the credit is available:
· By SIGHT PAYMENT: With such type of credit, applicant may require documents without any drafts, or documents accompanied by beneficiarys draft drawn on the nominated bank.
· By DEFERRED PAYMENT: In this case, applicant should call for documents to be presented, but not for any drafts to be drawn. He must also specify at what maturity date (other than sight) payment is to be made and how it is calculated, for example, 30 days after presentation of documents, 60 days after date of shipment, etc. Deferred payment credits are common in countries that impose stamp duties
· By ACCEPTANCE: With an acceptance letter of credit, the applicant should call for a draft drawn on the nominated bank and indicate the time period for which they should be drawn, for example : 30 days sight, or 60 days after date of shipment, etc...
· By NEGOTIATION: There are 2 kinds: (1) those restricting negotiation to a nominated bank and (2) the freely negotiable credits that allow negotiation to be effected by any bank willing to negotiate. In both cases, drafts should be called for and drawn on the issuing bank at sight or at a stated tenor.
12- Required Documents
A- Documents vs. Facts:
- Non-documentary Conditions:
Applicant should bear in mind that in letter or credit transactions, the parties deal with documents, not with the facts that the documents purport to reflect. In practice, there are a number of non-documentary conditions in every letter or credit, but which can be checked by looking at documents. Determining whether partial shipments have been made is an example. Issuing bank should not be required to determine matters of a purely factual nature, such as whether shipment is made on a conference line vessel, or the ship has actually departed the port by a specified date.
If a credit contains conditions without stating the documents to be presented in compliance therewith, banks shall deem such conditions as not stated and shall disregard them. In that regard, the application should not call for documents that the beneficiary cannot obtain.
- Stating Documents With Precision :
Deciding which documents to ask for may depend on export and import regulations, as well as other matters. If documents are known by specific names, applicant should identify those documents by such names. Clarity in description is the key.
B- Issuers of Documents:
Applicant should not use terms such as first class, well known, independent, qualified, official, competent, to describe the issuer of any document to be presented under the credit. If such subjective and ambiguous terms are used, banks will ignore them and accept the document as presented, provided that it appears on its face to be in accordance with the other terms and conditions of the credit.
If documents other than transport documents, insurance documents and commercial invoices are called for, applicant should specify by whom such documents are to be issued and their wording or data content. If the credit does not so specify, banks will accept such documents as presented, provided that their data content make it possible to relate the goods described in the document to the goods referred to in the commercial invoice presented.
- Commercial invoice:
As the invoice customarily evidences a debt owed by a buyer to a seller and states the full amount of such debt, the invoice will typically be a document required for presentation. The invoice also describes the goods that are the subject of the underlying transaction. The description will generally be more detailed than the goods description in the letter of credit. However, the description of the goods in file invoice cannot include a variety of the goods different from the variety of the goods described in the credit. For example, if the credit specifies: Automobiles - Model T, the description of goods in the invoice cannot include Automobiles - Model A. On the other hand, if the invoice added the name of the manufacturer, Ford, that would not constitute a discrepancy. If the invoice describes the goods exactly as described in the credit, but adds the phrase goods are reconditioned as new, the invoice will be rejected.
In the application, applicant should describe the merchandise as briefly as possible. It is acceptable simply to refer to the contract number or purchase order and to the type of goods purchased. A copy of the contract or purchase order should not be attached; reference is for identification purposes only.
If the description of the goods in other documents is detailed, and differs in any material respect from the description of the goods in the commercial invoice, a discrepancy may be claimed. It would be better to describe the goods in the other documents in more general terms. For example, if the goods are chemicals, and a detailed description of the particular chemicals shipped is given in the invoice, the bill of lading should describe the goods simply as "chemical products".
- Transport Document:
The transport document or bill of lading is a pivotal document in the letter of credit transaction. It serves at least 3 functions:
(1) It is evidence of a contract of carriage between the shipper and the carrier, giving the terms and conditions of carriage.
(2) it is the shippers receipt for the goods delivered to the carrier
(3) It is a document of title to the goods. The possessor of the original bill of lading is the only one with the right to reclaim the goods from the carrier.
Bills of lading may be negotiable or nonnegotiable. If the words TO ORDER are included, the bill of lading is negotiable. If the goods are consigned to a specific person and the words to order are omitted, the bill of lading is nonnegotiable and is commonly referred to as Straight Bill of Lading. The designated consignee under a straight bill of lading may take possession of the goods without presenting the bill of lading.
A straight bill of lading, does not afford any protection against non-payment because the shipper loses control over the goods when they are delivered to the carrier.
A negotiable bill of lading generally consigns the goods to the sellers own order with the result that he is able to maintain control over the goods until his draft has been paid or accepted. The carrier will not release the goods until a negotiable copy of the bill of lading, properly endorsed by the consignee, has been delivered to the carrier. This protects not only the seller-shipper, but also all intermediary parties to the transaction.
Unless specifically authorized in the credit, banks will reject a transport document if it states that the goods are or will be loaded on deck. However, they will not reject such document if it provides only that the goods may be carried on deck. If the shipment on deck is authorized, the insurance document should provide for coverage against on deck risks, such as rust and corrosion due to exposure to salt air. When filling out the application, the customer should bear in mind that dangerous cargo, such as explosives, is normally loaded on deck and that livestock is also often carried on deck.
The words "freight pre payable" or "freight to be prepaid" or words of similar effects, if appearing on transport documents, will not be accepted as evidence of the payment of freight.
Banks will accept transport documents bearing reference by stamp or otherwise to costs additional to the freight charges, such as costs in connection with loading, unloading, or similar operations, unless the credit specifically prohibits such reference.
On occasion, the goods purchased by the buyer may be sent directly to the buyer by a third-party shipper from whom the seller-beneficiary obtained the goods. The seller-beneficiary may also send the goods to a third party, who then forwards them on to the buyer-account party. In either event, the transport document may show the third party, instead of the seller-beneficiary as the consignor of the goods. The UCP provides that banks will accept such a document indicating as the consignor of the goods a party other than the beneficiary of the credit.
- Marine/Ocean Bill of Lading:
It is a bill of lading that covers a port-to-port shipment. When a credit calls for a marine/ocean bill of lading, banks will accept such a document if the document:
(1) Appears on its face to indicate the name of the carrier and to have been signed or otherwise authenticated by the carrier or a named agent for the carrier, or the master or a named agent for the master, and
(2) Indicates that the goods have been loaded on board or shipped on a named vessel and
(3) Indicates the port of loading and the port of discharge stipulated in the credit
(4) Consists of a sole original bill or lading or, if issued in more than one original, the full set as so issued, and
(5) Appears to contain all the terms and conditions of carriage or contains some or all of such conditions by reference to a source or document other than the bill of lading, and
(6) Contains no indication that it is subject to a charter party and/or no indication that the carrying vessel is propelled by sail only, and
(7) In all other respects meets the stipulations of the credit.
Unless transshipment is prohibited by the terms of the credit, banks will accept a bill of lading which indicates that the goods will be transshipped, provided that the entire ocean carriage is covered by one and the same bill of lading. Even if the credit prohibits transshipment, banks will accept a bill of lading which indicates that transshipment will take place as long as the relative cargo is shipped in containers, trailers, or LASH barges as evidenced by the bill of lading, provided that the entire voyage is covered by one and the same bill of lading, and/or incorporates clauses stating that the carrier reserves the right to transship. This last provision recognizes the reality of modern day transportation where containers are often transshipped. This usually occurs where the goods are unloaded onto smaller feeder vessels that can navigate into the main port itself. This loading and unloading of goods may take place at a regional port with feeder vessel service from the main vessel to the regional port, insomuch as the main vessel may be too large to dock at the main port. This practice is carried on throughout the world and is not considered by the transport industry to be transshipment in the true sense.
- Charter Party Bill of Lading:
A charter party is a contract for the hiring of a ship, or part of a ship, for a given voyage (voyage charter), or a given time (time charter) to carry cargo. A charter party bill of lading is signed by the owner of the ship or his agent, or by the master or his agent. More often than not, the charterer is not as financially responsible as the owner of the ship, nor as responsive in the event of a problem concerning the shipment. As a consequence, the charter party bill of lading is not as acceptable as one issued by a known steamship company and, unless otherwise stipulated in the credit, will be rejected by the issuing bank.
- Air Waybill:
The air waybill or air consignment note serves the same function for air transport as the bill of lading does for marine and rail transport. It is evidence given by the carrier that the goods have been received by him.
Air waybills are issued only on a consigned or straight nonnegotiable basis; they are not issued to order. Unless the transaction is otherwise properly secured, or the customer is entitled to unsecured credit, the issuing bank will require that the air waybill be consigned to the bank for the account of the customer. The air carrier will contact the bank when the goods arrive, and the bank will release the merchandise to the account party only after the bank is assured that settlement is made.
UCP 500 states that if a credit calls for an air transport document, banks will accept a document, however named, which:
(1) Appears on its face to indicate the name of the air carrier and to have been signed or otherwise authenticated by the air carrier, or a named agent for the air carrier, and
(2) Indicates that the goods have been accepted for carriage, and
(3) Where the credit calls for an actual date of dispatch, indicates a Specific notation of such date, and
(4) Indicates the airport of departure and the airport of destination stipulated in the credit, and
(5) Appears to be the original for consignor/shipper even if the credit stipulates a full set of originals, or similar expression, and
(6) Appears to contain all of the terms and conditions of carriage, or some of such terms and conditions, by reference to a source or document other than the air transport document, and
(7) In all other respects meets the stipulations of the credit.
Even if the credit prohibits transshipment, banks will accept an air transport document which indicates that transshipment will or may take place, provided that the entire carriage is covered by one and the same air transport document.
- Freight Forwarders Receipt :
A freight forwarder is a firm or individual that arranges for the shipment of goods for others for a fee, and is often referred to as a forwarding agent or forwarder.
A freight forwarders receipt does not attest to the actual shipping of the goods but only to their reception by the Forwarder. It also reconfirms the shipping instructions. Obviously, the freight forwarders receipt does not offer the same protection to the account party or the bank as the bill of lading and thus is not as acceptable as the bill of lading. The freight forwarders receipt can also be negotiable in form, and thus consigned to order.
UCP 500 provides that, unless otherwise authorized in the credit, banks will accept a transport document issued by a freight forwarder if it appears to have been signed by him as a named carrier, or a multimodal transport operator, or as an agent for the carrier or the multimodal transport operator.
- Truck Bill of Lading :
A truck bill of lading designates the form of transportation the goods will take; in this case by truck. As with the freight forwarders receipt, the truck bill of lading can also be negotiable in form.
If a credit calls for a road transport document, banks will accept a document, however named, which:
(1) Indicates the name of the carrier and is signed and/or bears a reception stamp or other indication of receipt by the carrier, or by a named agent for the carrier
(2) Indicates the place and date of shipment and place of destination as stipulated in the credit.
(3) Indicates that the goods have been received for shipment, dispatch or carriage.
- Combined Transport Document:
Where the through movement of the goods involves a transfer of the goods from one mode of transport to another, as front ship to truck, it is referred to as a combined transport and the goods are said to be transshipped. Under the combined transport document the contract of carriage is for a combined transport from the place of receipt to the place of delivery. The document evidences that the goods have been taken in charge for through carriage from the place of acceptance or receipt to the place of delivery instead of being loaded on board a named vessel.
The document may be issued by an operator that does not necessarily own the vessel used to transport the goods.
UCP 500 has new provision that applies specifically to multimodal or combined transport documents.
- Insurance certificate or Policy:
Shipping, especially across international boundaries, is a risky business. The goods may be handled at several different stages - receipt, loading, unloading, warehousing. The carriers themselves are susceptible to mechanical failures, natural disasters. To guard against the risk that goods might be damaged or lost in transit, an insurance policy or certificate should be required and must indicate the specific risks to be covered, the amount of the coverage, and how long the coverage is to last.
Insurance documents are issued by insurance companies or underwriters. Such documents consist of a policy and, if one policy covers more than one shipment (open policy), a certificate for each shipment. The policy should be dated on or before the date of shipment, be in the currency of the credit, and identify the voyage and the goods in a manner consistent with the other documents. If the insurance should be effected by the buyer-applicant, the issuing bank should obtain a loss-payable endorsement in its favour and a copy of the policy or certificate.
- Certificate or origin:
A certificate of origin is a signed statement providing evidence of the origin of the merchandise. Because of preferential tariff (duties, taxes) rates between some countries, the buyer may require a certificate of origin to certify that the goods purchased have been manufactured in the sellers country, and not in another country which may not have preferential tariff arrangements with the buyers country.
Certificates of origin can also be used to prevent from the sellers substituting second grade for the merchandise ordered. They have also been used to assure compliance with legal boycotts.
The certificate of origin must be issued or signed by an independent official organization, such as a chamber of commerce.
- Packing Lists:
A packing list often accompanies the commercial invoice. In the event the shipment includes one or more cases containing identical goods, separate packing lists are not required. The packing list enables the buyer or seller to locate a particular item if there are several packages with different contents.
- Certificate of Inspection:
A certificate of inspection may take various forms. It may be a certificate of quality, weight, analysis, or the like. Usually, the certificate of inspection is signed by an independent third party, attesting to the quality, type, number, etc., of the goods being, shipped by the seller. Requiring such a certificate offers some assurance to the buyer that file merchandise shipped is the one ordered. If the certificate or inspection is prepared by the seller, it will constitute an express warranty of its contents to the issuing bank and the buyer.
If the buyer fails to specify the content and data required in the certificate, the issuing bank will accept such document as presented, provided that their data content makes it possible to relate the goods referred to therein to those referred to in the invoice presented.
One way of definitively specifying the inspection certificate is to attach as an exhibit to the letter of credit a blank or unsigned copy of the certificate.
- Sanitary and. Phytosanitary Certificates:
Generally, for agricultural products or goods destined for human consumption, the buyer will require a certificate from all official inspectors stating that the goods meet the standards of the sellers country or some other specifications indicated in the credit.
13- Trade Terms
- "EXW": This designation stands for "EX WORKS (... named place). This term means that the seller fulfils his obligation to deliver the goods to the buyer, when he has made them available at his factory, mill, warehouse, plantation, etc.; in other words, the seller is not responsible for loading the goods on the vehicle provided by the buyer or for clearing the goods for export, unless otherwise agreed.
- "FCA": stands for "FREE CARRIER (... named place). It means that the seller fulfils his obligation to deliver the goods to the buyer, when he has handed them over, cleared for export, into the charge of the carrier named by the buyer at the named place or point.
When, according to commercial practice, sellers assistance is required in making the contract with the carrier, the seller may act at buyers risk and expense. FCA may be used for any mode of transport, including multimodal transport.
- "FAS": "Free alongside Ship (... named port of shipment) means that the seller fulfils his obligation to deliver the goods when they have been placed alongside the vessel on the quay (or wharf) or in lighters (barges) used for loading and unloading ships, usually offshore) at the named port of shipment. This means that the buyer has to bear all costs and risk of loss of or damage to the goods from that moment. This term should not be used if the buyer is unable to carry out, directly or indirectly, the export formalities. FAS can only be used for sea or inland waterway transport.
- "FOB": " Free On Board ( ... named port of shipment ) means that the seller fulfils his obligation to deliver the goods when they have passed over the ships rail at the named port of shipment- The buyer has to bear all costs and risks of loss of or damage to the goods from that point. FOB requires the seller to clear the goods for export.
This term call only be used for sea or inland waterway transport when the ships rail serves no practical purpose, such as in the case of roll-on/roll-off or container traffic, the FCA term is more appropriate to use.
- "CFR": "Cost and Freight (... named port or destination). The seller must in this case pay the costs and freight necessary to bring the goods to the named port of destination but the risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time the goods have been delivered on board the vessel, is transferred from the seller to the buyer when the goods pass the ships rail in the port of shipment. CFR requires the seller to clear the goods for export.
It call only be used for sea and inland waterway transport. When the ships rail serves no practical purpose, such as in the case of roll-on/roll-off or container traffic, the CPT term is more appropriate to use
- "CIF" : " Cost, Insurance and Freight ( ... named port or destination) means that the seller has the same obligations as under CFR but with the addition that he has to procure marine insurance against the buyers risk of loss of or damage to the goods during the carriage. The seller contracts for the insurance and pays the insurance premium. CIF requires the seller to clear the goods for export.
It can only be used for sea and inland waterway transport. When the ships rail serves no practical purpose such as in the case of roll-on/roll-off or container traffic, the CIP term is more appropriate to use.
- "CPT": "Carriage Paid To (... named place of destination). The seller pays the freight for the carriage of the goods to the named place of destination. The risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time the goods have been delivered to the carrier, is transferred from the seller to the buyer when the goods have been delivered into the custody of the carrier.
The term "CARRIER" means any person who, in a contract of carriage, undertakes to perform or to procure the performance of carriage, by rail, road, sea, air, inland waterway or by a combination of such modes. If subsequent carriers are used for the carriage to the agreed destination, the risk passes when the goods have been delivered to the first carrier. CPT requires the seller to clear the goods for export. It may be used for any mode of transport including multimodal transport.
- "CIP": "Carriage and Insurance Paid to (... named place of destination). The seller has the same obligations as under CPT, but with the addition that he has to procure cargo insurance against the buyers risk of loss of or damage to the goods during the carriage. The seller contracts for insurance and pays the insurance premium. CIP requires the seller to clear the goods for export. It may be used for any mode of transport including multimodal transport.
- "DAF" : " Delivered At Frontier ( named place). The seller fulfills his obligations to deliver the goods to the buyer when the goods have been made available, cleared for export, at the named point and place at the frontier, but before the customs border of the adjoining country. The term " frontier " may be used for any frontier including that of the country of export. This term is primarily intended to be used when goods are to be carried by rail or road.
- "DES": "Delivered Ex Ship" (... named port of destination) . The seller fulfills his obligation to deliver the goods to the buyer when the goods have been made available to the buyer on board the ship uncleared for import at the named port of destination. The seller has to bear all the costs and risks involved in bringing the goods to the named port of destination. This can only be used for sea or inland waterway transport.
- "DEQ" : "Delivered Ex Quay (duty paid) ( ... named port of destination). The seller fulfills his obligation to deliver the goods to the buyer when he has made them available to the buyer on the quay (wharf) at the named port of destination, cleared for importation. The seller has to bear all risks and costs including duties, taxes and other charges of delivering the goods to this point. This term should not be used if the seller is unable, directly or indirectly, to obtain the import license. If the buyer is to clear the goods for importation and the duty, the words "duty paid "should be used instead of "duty unpaid". This term can only be used for sea or inland waterway transport.
- "DDU" : " Delivered Duty Unpaid ( ... named place of destination). The seller fulfills his obligation to deliver the goods to the buyer when the goods have been made available at the named place in the country of importation. The seller has to bear the costs and risks involved in bringing the goods to this point (excluding duties taxes and other official charges payable upon importation as well as the cost and risks of carrying out customs formalities). The buyer must pay any additional costs and bear any risks caused by his failure to clear the goods for import in time.
This term may be used irrespective or the mode of transport.
- "DDP" : " Delivered Duty Paid ( ... named place of destination). The seller fulfills his obligation to deliver the goods to the buyer when the goods have been made available at the named place in the country of importation. The seller has to bear the risks and costs, including duties, taxes and other charges of delivering the goods to this point, cleared for importation. DDP represents the maximum obligation for the seller. This term may be used irrespective of the mode of transport.
14- Shipment From and To: Latest date of shipment
The place or loading on board/dispatch/taking in charge and the place or destination should be inserted in the appropriate spaces of the application. If the port of shipment is unknown, the country or continent from which the goods will be shipped should be indicated.
Note that if a combined transport document is called for, theses spaces should not be left in blank, bill should identify either the ports of loading or discharge or the country from which and to which the goods will be shipped and delivered.
The latest date that shipment will be acceptable should be inserted in the appropriate space. When all earliest or latest date is being specified the word shipment is understood to include the expressions "loading on board", "dispatch" and "taking in charge".
Terms such as prompt, immediately as soon as possible, and the like should not be used to specify date of shipment. If they are used, they will be disregarded.
If the term on or about is used, banks will interpret it as providing that shipment is to be made during the period from 5 days before to five days after the specified date, both end days included.
The words to, until, from and the like will be understood to include the date mentioned. The word after will be understood to exclude the date mentioned. The first half and second half of a month will be construed, respectively, to mean from the 1st to the 15th and from the 16th to the last day of the month, inclusive. The terms beginning, middle or end, of a month will be construed, respectively, as from the 1st to the 10th, the 11th to the 20th and 21st to the last day of the month inclusive.
If no date is shown, the issuing bank will consider the expiration date of the letter of credit to be the latest date of shipment. If a date is established, it will not be extended by reason of an extension of the expiry date of the credit.
15- Transshipment, Partial Shipments, and Container Shipment/s
- Transshipment Means a transfer and reloading during the course of carriage from one vessel or conveyance to another. Unless transshipment is prohibited banks will accept documents which indicate that the goods will be transshipped provided the entire carriage is covered by the same document. If a combined transport document is acceptable, transshipment should not be prohibited.
- Partial shipments are allowed unless the credit specifies otherwise.
- Container Shipment/s : The hull of a container ship is like a huge floating warehouse divided into cells by vertical guide rails. The cells hold cargo in pre-packaged units called containers. The containers, usually standard sized aluminum boxes, measuring either 20 feet by 8 feet or 40 feet by 8 feet, are loaded by the seller and delivered to the dock. Giant cranes lift the containers into the cells.
- "Roll-on/Roll-off ships" carry containers mounted on a framework or wheels like a truck trailer. Dockworkers drive the containers up ramps and into a stern or side opening in the ship. Roll-On/Roll-Off Ships also carry cars, buses, house trailers, trucks and any other cargo that can be rolled aboard.
- "LASH ships" are huge freighters that carry preloaded seagoing lighters, or barges, stacked one upon the other. The lighters are loaded at upriver polls and then towed to the seaport where cranes on the ship lift the barges on board. When they reach their destination, the lighters are lowered into the harbour and towed upstream to their final port.
- Containerization is a great boom to shippers because it saves money. A container ship can be loaded and unloaded in a fraction of the time it takes for a traditional cargo vessel. Thus labour costs less, there is less breakage, and the cargo shifts less during the voyage. In addition, theft of goods is less likely, since the containers are sealed. As a result, container shipments are becoming more frequent and more often required in the letter of credit.
16- Shipping documents: Notification
If a bill of lading is issued in blank by the shipper, the carrier will not know whom to notify for retrieval when the goods arrive at destination.
The applicant must indicate whether the issuing bank, the buyer himself or some other party, such as his freight forwarder, is to be contacted when the goods arrive.
17- Time of presentation
If this space is left in blank, the issuing bank will reject documents presented more than 21 days after the date shipment. When the blank is completed, the number of days specified is generally based on the mailing time for the bill of lading from the place of shipment to the place of destination. The latest date that the documents can be presented should allow sufficient time for the bills of lading to be processed and delivered to the applicant before the goods arrive. Bills or lading that arrive after the goods -arrive are said to be stale and the unclaimed merchandise may incur storage charges.
18- Special Instructions
On this line, the applicant should indicate any instructions or conditions desired by him as part of the transaction that do not fit in any space of the application form ; for example, if bank charges are for his account or for the account of the beneficiary, or if the letter of credit is to be a revolving credit, etc.
- "Red Clause Credit ": Under certain circumstances, the buyer may allow the seller to receive all or part or the purchase funds, made available under a letter or credit, prior to shipping the goods. To accomplish this, the buyer should instruct the issuing bank to insert a special clause in the letter of credit. The clause may authorize the advising or confirming bank to provide financing to the beneficiary under the issuing banks guarantee, or it may authorize the beneficiary to draw under the letter or credit by draft, supported by a receipt for the funds and a promise to provide the specified documents in the future. The clause was originally written in red ink to draw attention to the unique nature of the credit and thus the instrument became known as a red clause credit.
The advising or confirming bank generally obtains repayment or the funds paid to the beneficiary, plus interest, from the proceeds due to the seller when the goods are shipped and documents presented in accordance with the terms and conditions of the letter of credit. If, however, the beneficiary fails to ship the goods and present the documents or otherwise fails to repay the funds advanced, the advising or confirming bank will look to the issuing bank for reimbursement of the amounts advanced under the red clause plus interest charges. The issuing bank would then have recourse to the buyer.
Provision for a red clause in a letter of credit would be made under this part of the application.
- "Green Clause": Somewhat similar to a red clause credit, a green clause credit also permits advances to the beneficiary before presentation of documents evidencing shipment of the goods, but requires storage of the goods in the name of the advising or confirming bank making the advances. These credits developed in Australia and New Zealand with respect to the wool trade.
HOW TO CHECK DOCUMENTS
On the Following pages you will find sample documents frequently required in documentary Credits.
The corresponding checklists should enable you to prepare the necessary documents to meet the condition of file documentary credit.
Please note that the checklists reflect file requirements according to file new guidelines of the International Chamber of Commerce in Paris (UCPDC 500). It may be that the documentary credits in question will exclude portions of the guidelines or prescribe additional requirements. Please take these individual requirements into account when preparing your documents.
Unfortunately, we are obviously unable to provide examples of all the possible documents in this brochure. We will, however, be happy to advise you in special cases.
MARINE/OCEAN BILL OF LADING
Questions:
1- Does the name of the ship appear?
2- Are the ports of loading and discharge stated and consistent with the requirements of the documentary credit?
3- Does the bill of lading bear a date of issue?
4- Is the Issuer
a) The carrier (identifiable as file carrier) or
b) Named agent of the named carrier, or
c) The master (identifiable as the master) or
d) A named agent of the named master?
If (c) or (d) applies, the document must indicate the name of the carrier)
5- Is the bill of lading signed by the issuer?
6- Does the bill of lading bear an "on board" notation?
a) In the pre-printed wording on the bill of fading?
(The date of issue of the bill of lading is then deemed to be the date of loading on board).
b) In the form of an added "on board" notation oil the bill of lading?
(The notation must also indicate the date of loading on board but does not need to be signed).
7- Does the document indicate the number of original bills of lading Issued?
a) Is the complete set of originals present?
b) Is the bill of lading "clean", i.e. it does not bear a clause or notation declaring a defective condition in the goods and/or packaging?
8- Is the bill of lading issued to the correct order party as required by the documentary credit, i.e.:
a) To a specific order?
b) To your order? (Remember to endorse it)
Are all the other conditions required in the documentary credit such as:
9- Name/Address of the shipper
10- Name/Address of the consignee (straight bills of lading)
11- Name/Address of the notify party
12- Shipping marks
13- Number of packages
14- Description of goods
15- Weight
16- Freight notations
17- Additional notations
Met?
For example click here
NON-NEGOTIABLE SEA WAYBILL
In contrast to the marine/ocean bill of lading like non-negotiable sea waybill is not a title document
Questions
1- Does the name of the ship appear?
2- Are the ports of lading and discharge stated and consistent with the documentary credit regulations?
3- Does the non-negotiable sea waybill bear date of issue?
4- Is the issuer:
The carrier (identifiable as the carrier), or
a) A named agent of the named carrier, or
b) The captain (identifiable as the captain), or
c) A named agent of the named captain?
If (c) or (d) applies, the document must indicate the name of the carrier.
5- Is the non-negotiable sea waybill signed by the issuer?
6- Does the non-negotiable sea waybill bear an "on board" notation
a) in the pre-printed wording of the non-negotiable sea waybill?
(The date of issue of the non-negotiable sea waybill is considered the date of loading on board).
b) Or, in the form of an added "on board" notation on the non-negotiable sea waybill
(The notation must also indicate the date of loading on board but does not need to be signed).
7- Is the non-negotiable sea waybill "clean", i.e. it does not bear a clause or notation regarding a defective condition in the goods and/or packaging?
8- Are all the other conditions required in the documentary credit such as
Name/Address of the shipper
Name/Address of the consignee
Name/Address of the notify party
Shipping marks
Number of packages
Description of goods
Weight
Freight notations
Additional notations
Met?
Please also note
- Article 31 (UCPDC 500) "On Deck", "Shipper's Load and Count" Name of Consignor
- Article 32 (UCPDC 500) Clean Transport Documents
- Article 33 (UCPDC 500) Freight Payable/Prepaid Transport Documents
For example click here
CHAPTER PARTY BILL OF LADING UCPDC Art. 25
Questions:
1- Does the name of the ship appear?
2- Are the ports of loading and discharge stated and consistent with the documentary credit regulations?
3- Does the bill of lading bear a date of issue?
4- Is the Issuer
a) the master (identifiable as the master), or
b) a named agent of file named master, or
c) the owner of the ship (identifiable as the owner), or
d) a named agent of the named owner of the Ship?
5- Is the bill of lading signed by the Issuer?
6- Does life bill of lading indicate that it is subject to a charter party?
7- Does the bill of lading bear an "on board" notation ?
a) in the pre-printed wording of the bill of lading?
(the date of issue of file bill of lading is deemed to be the date of loading on board)
b) in the form of an added "on board" notation on the bill of lading?
(the notation must also indicate the date of loading on board but does not need to be signed)
8- Does the document indicate the number of originals in which it was issued?
9- Is the complete set of originals present?
10- is the bill of lading "clean" i.e. it does not bear a clause or notation regarding a defective condition in the goods and/or packaging?
11- is the bill of lading issued to the order as required in the documentary credit, i.e,
a) to a specific order?
b) to your order? (remember to endorse it)
12- Are all the other conditions required in the documentary credit such as
- Name/Address of the shipper.
- Name/Address of the consignee (for straight bills of hiding).
- Name/Address of the notify party .
- Shipping marks.
- Number of packages.
- Description of goods.
- Weight.
- Freight notation.
Additional notations.
Met?
Please also note:
Article 31 (UCPDC 500) "On Deck", "Shipper's Load and Count" Name of Consignor.
Article 32 (UCPDC 500) Clean Transport Documents
Article 33 (UCPDC 500) Freight Payable/Prepaid Transport Documents
General remarks : From a documentary Credit point of view there is no difference between the Charter Party Bill of Lading and the Marine/Ocean Bill of Lading. In accordance with ICC guidelines, however, the document has to contain all indication that it is subject to a charter party. Please note that UCPDC Art. 25 does not refer to transshipment.
For example click here
MULTIMODAL, TRANSPORT DOCUMENT UCPDC Art. 26
Questions
1- Are the place of dispatch taking in charge or port of loading and place of delivery stated and consistent with the documentary credit conditions?
2- Does the document indicate the name of the carrier or multimodal transport operator?
3- Has the document been signed by
the carrier or multimodal transport operator (identifiable as the carrier or multimodal transport operator), or
a named agent of the named carrier or multimodal transport operator or
the master (identifiable as the master) or
a named agent of the named master?
4- Does the document bear a date of issue? (deemed to be the date of dispatch, taking lit charge or loading on board and date of shipment unless separately indicated in the document)
5- Does the document indicate the number of originals in which it was issued, if more than one original was issued? If applicable, is the complete set of originals present?
6- if issued in negotiable form, does the document indicate the order party required in the documentary credit, i.e. :
a- to a specific order?
b- to your orders (remember to endorse it)
7- Are all the other conditions required in the documentary credit such as
Name/Address of the shipper.
Name/Address of the consignee.
Name/Address of the notify party .
Shipping marks.
Number of packages.
Description of goods
Weight.
Freight notations.
Met?
Please also note:
Article 27 (UCPDC 500) Air Transport Document
Article 28 (UCPDC 500) Road, Rail or Inland waterway Transport Documents
Article 30 (UCPDC 500) Transport Documents issued by Freight Forwarders
Article 31 (UCPDC 900) "On Deck", "Shipper's Load and Count" Name of Consignor
Article 32 (UCPDC 5()0) Clean Transport Documents
Article 33 0 (UCPDC 500) Freight Payable/Prepaid Transport Documents
General remarks
- The document must indicate at least two different modes of transport.
- The document may contain the term "intended" in relation to the ship, port of loading or port of discharge as long as this is not prohibited by the documentary credit.
For example click here
AIR TRANSPORT DOCUMENTARY UCPDC Art. 27
Questions:
1- Are the airports of departure and destination stated and consistent with the documentary credit Conditions?
2- Is the issuer the carrier (identifiable as the carrier) or an agent of a named carrier?
3- Is the document signed by the issuer?
4- Does the document bear a date of issue? (deemed to be the flight date unless otherwise indicated with a specific notation).
5- Does the document indicate that the goods have been accepted for carriage?
6- Is the document presented the original for the consignor/shipper?
7- Are all the other conditions required in the documentary credit such as
Name/Address of the shipper.
Name/Address of the consignee.
Name/Address of the notify party.
Shipping marks.
Number of packages
Description of goods.
Weight.
Freight notations.
Met?
Please also note:
Article 32 (UCPDC 500) Clean Transport Documents
Article 33 (UCPDC 500) Freight Payable/Prepaid Transport Documents
For example click here
ROAD, RAIL OR INLAND WATERWAY TRANSPORT DOCUMENTS UCPDC Art. 28
Questions:
1- Are the places of shipment and destination stated and consistent with the documentary credit conditions?
2- Is the Issuer
the carrier (identifiable as the carrier), or
a named agent of the named carrier?
3- Is the document signed by the issuer?
4- Does the document bear a date of issue? (deemed to be the date of dispatch receipt or shipment, unless separately indicated).
5- Are all the other conditions required in the documentary credit such as
Name/Address of the shipper.
Name/Address of the consignee.
Shipping marks.
Number of packages.
Description of goods.
Weight.
Freight notations.
Met?
Please also note:
Article 32 (UCPDC 500) Clean Transport Documents
Article 33 (UCPDC 500) Freight Payable/Prepaid Transport Documents
General remarks: Banks will accept as original(s) the transport document whether marked as original(s) or not.
See examples of Road, Rail or Inland Waterway Transport Documents
COURRIER AND POST RECEIPTS UCPDC Art. 29
Questions:
1- Is the name of the issuer stated?
2- Does the document bear the stamped or otherwise authenticated signature of the Issuer?
3- Does the document bear a date of receipt or dispatch? (deemed to be the (late of shipment or dispatch)
4- Are all the other conditions required in the documentary credit such as
Name/Address of the consignee
Freight notations
Place of shipment etc.
Met?
For example click here
TRANSPORT DOCUMENTS ISSUED BY FREIGHT FORWARDERS UCPDC Art. 30
Questions:
1- is the named issuer (freight forwarder) acting
a) as the carrier or the multimodal transport operator, or
b) as a named agent of the named carrier or multimodal transport operator?
2- Is the document signed by the issuer?
3- Does the document bear a date of Issue? (deemed to be the shipment date)
4- Are all the other conditions required in the documentary credit such as
Name/Address of the shipper.
Name/Address of the consignee
Name/Address of the notify party.
Places of shipment and dispatch
Shipping marks
Number of packages
Description of goods
Weight
Freight notations
Met?
Please also note:
Article 32 (UCPDC 500) Clean Transport Documents
Article 33 (UCPDC 500) Freight Payable/Prepaid Transport Documents
For example click here
INSURANCE DOCUMENT UCPDC Art. 34, 35, 36
Questions:
1- Was the insurance document issued as a policy or certificate in compliance with the documentary credit stipulations?
2- Have all issued originals of the insurance document been presented?
3- Is the insurance document issued and signed by an insurance company or underwriter or their agents? Confirmation of cover from insurance broker will be rejected by the banks.
4- Is the insurance document correctly dated and signed?
Note: The insurance document may not be issued at a date later than the date of loading on board, etc., as indicated on the corresponding shipping document, unless the insurance document specifically states that cover takes effect on the day of shipment at the latest.
5- Is the information regarding the transport route and mode of transport consistent with the documentary credit?
6- Is the amount insured sufficient and the value correct? (at least 110% of the CIF or CIP value unless a higher insurance is required by the documentary credit). See UCPDC Art. 34 f.ii., if the CIF/CIP value cannot be determined.
The insurance currency must be consistent with that of the documentary credit unless otherwise stated.
7- Does the insurance cover all risks as required in the documentary credit? If the documentary credit states "I insurance against all risks", an insurance document with the notation "all risks" is accepted even if it is stated that certain risks are excluded.
8- Does the insurance cover all additional risks resulting from the type of shipping or transport route such as reloading, "on deck" loading, storage?
9- Is the insurance certificate correctly endorsed if endorsement is required?
Please also note:
Article 35 (UCPDC 500) Type of- Insurance Cover
Article 36 (UCPDC 500) All Risks Insurance Cover
For example click here
COMMERCIAL INVOICE UCPDC Art. 37
Questions:
1- Is the invoice issued by the beneficiary as stated 111 in the documentary credit?
2- Is the invoice issued to the purchaser (applicant) named lit the documentary credit?
3- Does the address lit the invoice match that lit the documentary credit?
4- Does the description of the goods correspond exactly to that stated in the documentary credit?
5- Does the value of the goods and/or unit price match that of the documentary credit as regards the amount/currency
6- Are the delivery conditions (CIF/FOB, etc.) listed in the invoice?
7- Are these consistent with the documentary credit conditions?
8- Is the Invoice signed, if required by the documentary credit?
9- Are any certifications/legalizations required in the documentary credit present?
10- Are special conditions required in the documentary credit (customs tariff number, license number, etc.) indicated on the invoice?
For example click here
DRAFT (Bill of Exchange)
Questions:
1- Does the format comply with the requirements of a draft?
2- Name of the document (draft/bill of exchange) in the language in which ii is issued
3- Unconditional instruction to pay
4- Drawee
5- Expiry
6- Place of payment
7- Order notation
8- Place and date of issue
9- Signature of issuer
10- Does the draft call for payment at sight or payment at a future determinable date?
11- Are the amounts in words and figures identical?
12- Is the draft drawn on the party indicated in the documentary credit?
13- If made out to own order, is the draft endorsed?
14- Does the draft contain the notations and clauses provided for in the documentary credit, such as "drawn under documentary credit No"?.
For example click here
OTHER DOCUMENTS
If documentary credits require other documents in addition to the invoice, transport and insurance documents, the text of the documentary credit should state the issuer and contents of such additional documents.
If the documentary credit does not indicate the issuer of such documents and their content, the banks will accept these documents as presented, provided that their data Content is not inconsistent with any other stipulated documents and that they do not contradict the other conditions of the documentary credit and the
Please ensure that the other documents are consistent with the documentary credit conditions in
The following points:
Name/Address of the shipper
Name/Address of the consignee
Description of the goods
Country of origin /destination
Additional notations (e.g. number of documentary credit)
Issuer
Shipping marks
Weight, volume, number of packages
General remarks:
Certificates must usually bear the signature of the issuer.
Documents must be consistent with one another.
The number of packages, gross and net weight, etc. must be the same on all documents.
See examples of certificate of origin, movement certificate EUR1, certificate of inspection, certificate of quality
