Many banks and lenders are subject to this regulation, which aims to standardise international trade, reduce the risks of trading goods and services, and govern trade. UCP was created by industry experts, and mandated by the Banking Commission, rather than through legislation. The UCP rules are voluntarily incorporated into contracts and have to be specifically outlined in trade finance contracts in order to apply. They also allow flexibility for the international parties involved.

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It is used in determining any preferential custom tariff, duty on goods and whether or not goods originate in a country against which the importing country has trade restrictions.

The certificate should be consistent with and identified with the other shipping documents by shipping marks and numbers, and must be signed by the appropriate authority.

Unlike transport and insurance documents, Letter of credit rules UCP do not cover certificate of origin under any specific articles. Inspection Certificate An inspection certificate evidences that goods were inspected and details the result of the inspection. It is a preventative measure against possible fraud and a means of protecting the buyer against receiving substandard or unwanted goods. Inspection is generally carried out by a third party reputable firm which is independent.

The insurance document should cover the risk specified in the Documentary Credit. The declaration that is given on a Health Certificate by the exporting country is a government to government affirmation and is generally issued by government-authorized agencies and departments. However, in a LC transaction if there is no mention of who should issue the Health Certificate then it leaves the door open for anyone to issue the certificate and that includes the seller.

Phytosanitary Certificate: Similarly, a Phytosanitary Certificate is issued by the exporting country for plants and plant products that are being exported. The certificate is issued by the plant protection government body of the exporting country to the plant protection government body of the importing country certifying that the plants or plant products covered by the certificate have been inspected and are considered to be free from pests and that they conform to the existing phytosanitary requirements of the importing country.

Consular or Customs Invoice A consular or customs invoice is prepared by the seller on an official country-specific form. The value of goods required must agree with that shown on the commercial invoice. Certificate of Origin See No.

Calculate that the expiry date, the latest shipment date and presentation of the document period is workable. Ascertain if the requested documents can be produced and submitted within the above-stated timelines stipulated in the LC Check that the documents that are requested in the LC is what was mutually agreed upon and that there are no non-documentary conditions in the LC See if Merchandise description in the LC is proper and can be stated correctly on all relevant document like Commercial Invoice and Shipping Document.

Others: Make sure that the Shipping document shows the correct Consignee Make the Draft Bill of Exchange for the correct amount, correct tenor and is drawn upon the correct party. Make sure information stated on different documents is consistent and as per the LC requirements.

See that the currency is properly designated in the Commercial Invoice. An Opinion on Documents: An opinion: The seller should negotiate with the buyer to include only the most essential documents in the LC transaction. Perhaps just the first four in our list. For any other documents that the buyer requests the seller can deliver them directly to the buyer outside the LC arrangement. This will hasten up payment considerably and reduce the chances of discrepancies which mostly sprout from documents that have to be submitted to the bank for payment, since they are made part of the LC transaction by the buyer.

Keep in mind that any document that is made a part of the LC transaction has to be submitted to the bank for scrutiny and payment. For this reason you want to keep the list of documents that form part of the LC transaction to a minimum. B In this article there is a reference to UCP The current version of these rules is UCP This one-day course will allow the participant to gain a good understanding of the technical elements involved in the usage of a Letter of Credit and help avoid costly errors that could lead into nonpayment.

This seminar will be of particular benefit to those credit, sales, business associates and managers involved in international trade. It would also benefit those who are interested in learning more about risk mitigation or are planning on breaking into foreign markets. The course is case-based, interesting and very practical. Seminar: Letter of Credit.


Articles on Trade Credit

To check if documents are compliant, banks examine the required documents based on: The terms and conditions of the documentary credit. The applicable rules of UCP The applicable content of ISBP A generic checklist is given below to assist parties involved in the transaction in preparing compliant documents. Kindly note the below checklist is only illustrative and not exhaustive. Initial Scrutiny All documents called for in LC are submitted.



Dohn A Bill of Lading is the traditional instrument used in connection with sea shipments. Must comply with all other specific requirements of LC. Name of the vessel and voyage number. To check if documents are compliant, banks examine the required documents based on:.



The advising bank checks the documents and finds the presentation complying, then dispatches the documents to the issuing bank. This time, the issuing bank checks the same documents and comes back with a swift message, mentioning couple of discrepancies. How could one bank finds multiple discrepancies in a set of documents, while the same documents are found to be complying by another bank. Definition or Lack of Definition: It is strange, but there is no definition of a discrepancy in the letter of credit rules. Is it too simple to be forgotten? Or too complicated to define? What is the definition of a discrepancy according the UCP rules?


Top 10 Letter of Credit Discrepancies

Email Discrepancy can be defined as an error or defect, according to the issuing bank, in the presented documents compared to the documentary credit, the UCP rules or other documents that have been presented under the same letter of credit. Although the report is quite out-dated, the figures are presumably almost identical today. Discrepancies create problems especially for the exporters. Once the documents are rejected, the issuing banks can only pay the credit amount, if and only if the importers accept the discrepancies.

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