AIBS MBA-IB Exports-Imports Documentation & Logistics Sem-2

Negotiation of Export-Import Documents Supriya Lamba

Documents required under Letter of Credit

Sight or Usance Bill Of Exchange Commercial Invoice/ Customs Invoice Packing List Full set clean-on- board Bill of lading (all negotiable copies) / Airway bill/ Combined transport document Inspection Certificate Marine insurance policy/ certificate, in duplicate. GR-1/SDF Form, in duplicate Original letter of credit along with amendments made up to date Certificate of Foreign Inward remittance in case of advance payment Any other document as required by the buyer ,mentioned in letter of credit

When Documents can be negotiated?

Document should permit negotiation Not obligatory to negotiate Documents should be non- discrepant Slight discrepancy in documents takes away the Right Recourse to Drawer

Precautions in Scrutiny of Documents-Bill of Exchange

Drawn on the party /bank as stated in the Letter of Credit. Drawn in favour of the negotiating bank. Drawn for a period not exceeding six months from the date of shipment when it is usance bill. Drawn in sets as per the terms of L/C , marked first & second bill of exchange for the net amount of the invoice.

Precautions in Scrutiny of Documents-Invoice

It should be prepared on the standard invoice form & properly signed. Description of the goods in the invoice should strictly conform to the description of goods in L/C. It should be certified by the authority as required in L/C. Value of the invoice should not be more than the amount available on the L/C. Currency of the invoice should be as per L/C.

Precautions in Scrutiny of Documents-Bill of Lading

Should be presented in full set, with as many negotiable & nonnegotiable copies as mentioned in L/C. Bill of Lading should be marked shipped on board unless L/C permits shipment or combined transport document. It should not contain any adverse clauses as to the condition of goods or packing. It should be issued in the name of the shipper & blank endorsed or made out to the order of the overseas bank, as per the terms of L/C. If bill of lading states that the goods are received for shipment & later stamped ON BOARD with the authorised signature of the carrier. Date of shipment should not be later than the date specified in L/C. It should bear the name of the notifying party , if required in L/C. Additional condition such as stored in refrigerated compartment should be incorporated if it is requirement of the L/C.

Precautions in Scrutiny of Documents-Airway Bill

It should indicate name of the carrier It should indicate place & date of issuance It should indicate name of the consignor & consignee It should indicate port of loading destination Air way bill should not be claused or a charter party

Precautions in Scrutiny of Documents-Certificate of Origin

The Chamber of Commerce or other competent authority as required by L/C should issue it. It should state the country of original details. It should state the description of goods, invoice number & shipping marks.

Exchange Control Guidelines

Documents through Authorised dealer. Realisation through Authorised dealer. Payment within six months (i) Drawal on Invoice & bill of exchange (ii) Change of Buyer (iii) Presentation of Shipping Documents Export of jewellery.

Practical Mechanism of Documentary L/C

The buyer & seller agree to the terms of sale , including opening of L/C. The buyer approaches his bank to open L/C & incorporate the documents , specified in the export contract , in L/C. Opening Bank opens the L/C & advises the exporter about opening of credit , through the advising bank. After receipt of advice of opening of credit , if exporter is happy with the terms of credit & is in accordance with the contract of sale , proceeds to execute the export contract.

Practical Mechanism of Documentary L/C

Exporter ships the goods & obtains the relevant documents specified in the credit. Exporter presents the documents to a bank that may be paying/ negotiating bank; whichever one is appropriate to him. The bank checks the documents & effects the payment if the documents are in order. After payment to exporter , negotiating bank sends the documents to the issuing bank for reimbursement. Issuing bank checks the documents & if they are in order makes reimbursement to the negotiating bank. Issuing bank sends advice to importer to retire documents under the L/C opened, at his request. Importer retires documents to get possession of goods.

Common Errors in DocumentsGuidelines to Exporters

The L/C has expired The Bill of lading is Claused ( unclean or dirty) The goods were shipped on dock when it was not permitted ,as L/C has required clean on board Bill Of Lading Insurance cover was inadequate & expressed in a currency other than that required in the L/C. The description of goods or even the spelling is different from that in the L/C.

Common Errors in DocumentsGuidelines to Exporters

The amount in the invoice & bill of exchange differed. The drawing was for a value , in excess of the amount of the L/C. The Bill of Lading did not evidence whether the freight was paid or not. The Bill of Exchange was drawn on wrong party. The Bill of Lading , Insurance document & Bill of Exchange were not endorsed correctly.

Common Errors in DocumentsGuidelines to Exporters

Transshipment / partial shipment made when prohibited under the L/C. The facsimile signatures were used when not allowed. The Bill of Lading is stale.

Flow of Documents & Funds in L/C

Home Assignment
Describe the mechanism of Negotiation of Documents with pictorial presentation. Describe the role of negotiating bank in negotiation of documents. (minimum 150 words)