CHAPTER 22 IMPORT BILLS UNDER LC (PAYMENT …

1 1 CHAPTER 22 IMPORT BILLS UNDER LC ( payment against documents ) 2 CHAPTER 22 IMPORT BILLS UNDER LC ( payment against documents ) INDEX Para No TOPIC Page No 22 Introduction 3 22 1 Receipt of Documents and Control in PAD 3 22 2 Scrutiny of Documents 3 22 2 1 Initial Scrutiny Scrutiny of Individual Documents 4 22 2 2 bill of Exchange 5 22 2 3 Invoice 6 22 2 4 bill of Lading 6 22 2 5 Airway bill or Air consignment Note 9 22 2 6 Insurance document 10 22 2 7 Other Documents 11 22 2 8 Certificate of Origin 12 22 3 Presentation of Documents 12 22 3 1 Retirement of IMPORT BILLS UNDER LC 15 22 4 Overdue IMPORT BILLS 17 22 4 1 Clearing / Storage of goods of Unpaid IMPORT BILLS UNDER LC 18 22 5 Cancellation of LC due to Frustration of Contract 20 22 6 Cancellation of Partly utilized / Unutilized LC 21 22 7 Revival of Expired LC 21 22 8 Missing IMPORT Documents 22 22 9 Missing BL Guarantee 22 22 10

2 Issuance of Delivery Order in the absence of AWB 23 22 11 Co-acceptance of Deferred Payment IMPORT BILLS 24 Annex No Annexure 1 Letter to negotiating bank informing discrepancies 25 2 Trust Receipt agreement 27 3 Counter Indemnity BL 31 3 22. INTRODUCTION Payment UNDER documentary credit is made only if the documents received conform to terms laid down in the credit. Hence scrutiny of documents plays a vital role. Various check points for scrutiny of documents and other related procedures are explained hereunder : RECEIPT OF DOCUMENTS AND CONTROL BY PAD SECTION The documents, on receipt, should be inwarded by affixing the Bank's date stamp and entered in the Safe-in Register. The documents are to be attached to the LC folder after ensuring that all the documents listed in the overseas bank's covering schedule are received.

3 In case any of the documents listed in the covering schedule are not received, it should be brought to the forwarding Bank s notice immediately. The covering schedule has to be scrutinised to ascertain whether the documents have been sent on approval/collection basis. It is also to be verified whether the reimbursement has been claimed / to be claimed as per terms of the LC or whether they are claiming reimbursement from us. In case a duplicate set of documents are received earlier than the original set, the same is to be treated as 1st set and scrutinised accordingly. The negotiating bank is to be informed immediately in case the 1st set is not received and should be followed up for the same. SCRUTINY OF DOCUMENTS Documents should be carefully examined and it must be determined on the basis of the documents alone whether or not they are in compliance with the terms and conditions of the LC.

4 Following are the guidelines for scrutiny of documents : As soon as the documents are presented, identify the LC against which the relative documents are presented. Generally, it will be apparent from the forwarding schedule of the negotiating bank. 4 Even if it is omitted (particularly in case of documents sent on collection basis) the relative LC number can be identified from the notations appearing on draft, invoice or shipping/other documents. Take out the relative LC together with all the amendments effected and prior authorisation, if any, given for waiver of discrepancies. Arrange all of them in chronological order and run through them so that a broad idea of operative (amended) terms and conditions of LC is formed. Check whether all documents listed in the forwarding schedule are received or not.

5 If not, inform the same to the negotiating bank, along with other discrepancies if any, arising out of scrutiny, clearly stating that documents are held at their disposal or otherwise. Before scrutiny of individual documents presented, an overall scrutiny of documents with reference to the general conditions of the credit and the basic necessities of documents should be verified. SCRUTINY : Check whether All documents called for in LC are submitted. All documents are submitted in the requisite number of copies (take into account the duplicate set/second mail that may be following) Documents are issued and signed by the persons specified/required to issue Documents, where necessary and stipulated, are dated. If they are dated, the dates should be consistent with the terms of LC. Documents, where necessary and stipulated, are manually signed.

6 Material alterations/additions on documents are duly authenticated. The requisite and stipulated documents are originals or marked as originals and appear to be signed. All documents, on their face appear to be in compliance with the terms and conditions of the credit. Shipment is effected within the time stipulated. If it is an instalment credit whether the requisite quantity is shipped within the stipulated time schedule and is as per the terms of the LC. 5 Any partial shipment is effected ? If so whether it was permissible UNDER LC. If so, ensure that the partial shipment effected as per the terms of the LC. [Note : Split transport documents for the same vessel/voyage not to be treated as partial shipments]. Documents are presented at the place of expiry stipulated in the LC. Documents are presented within the expiry date (validity) of the credit.

7 If documents are presented to the nominated bank on an extended validity date in terms of provisions of (a) of UCP 600, the nominated bank should confirm on its covering schedule that the presentation at their counters was made within the time limits extended in accordance with article 29(a) of UCP 600. SCRUTINY OF INDIVIDUAL DOCUMENTS bill OF EXCHANGE (DRAFTS) It should bear a date. It should be drawn by beneficiary or any other person authorised in this regard. It should be signed by the drawer or his authorized representative. It should be drawn unconditionally and should be free from any extraneous conditions and should contain the reference to LC. It should be drawn for a specified amount and should be consistent with the terms of the drawing permitted in the LC. It should be drawn payable to a specified payee as mentioned in LC and properly endorsed.

8 It should be drawn payable at tenor specified in the LC. It must indicate that it is drawn UNDER the subject LC. It should, unless otherwise specified, be drawn in the same currency of invoice/LC. INVOICE Should be made out by the beneficiary or other authorised person(s) as stipulated in the LC. Should unless otherwise specified be made out in the name of the applicant. 6 Description of goods specified must correspond with the description in the LC. Quantity of goods, unit prices, delivery terms etc. must correspond with the LC terms and be consistent with other relative documents. Should be drawn in the same currency of LC, unless otherwise specified. Should not include any charges which are not permitted by LC. As per stipulations of LC, the gross value of invoice should not exceed the credit amount. Should show deduction towards agency commission payable etc.

9 As applicable. Arithmetical calculations should be accurate, (compare unit price and quantity). Final amount of invoice or the percentage of drawing as permitted in LC should correspond with the draft amount. If partial shipments are effected, amount of drawings should correspond to proportionate quantities shipped (where only quantity is mentioned without unit prices etc.) Invoice being a 'documents of contents', the details stated therein must correspond/be consistent with details appearing on all other documents. Must confirm to facts like IEC No. and ITC(HS) classification No. etc. as stipulated in the LC. If invoice is issued for an amount in excess of the amount permitted by credit (when not specifically prohibited by terms of LC), the nominated bank or the issuing bank has the option to accept a commercial invoice issued for an amount in excess of amount permitted by the credit, and its decision will be binding upon all the parties, provided the bank in question has not honoured or negotiated for an amount in excess of that permitted by the credit as per Article 18(b) of UCP 600 bill OF LADING bill of Lading (BL) is one of the most common transport documents called for UNDER the LCs.

10 However, there are various types of BILLS of Lading. Articles 19 to 27 of UCP 600 apply to shipping documents and deal at length with types of BL which will be accepted and what will not be accepted etc. It must be clearly understood that a 'Marine BL' which otherwise is also known as an 'OCEAN bill OF LADING' or ' bill of Lading covering carriage by sea' is one which is issued only when the goods are being transported from one sea port to another sea port ( port to port voyage by sea). 7 On the other hand other BL such as 'Combined transport bill of Lading' or 'Port to Port bill of Lading' are those which are issued for movement of goods from one place or port to another place or port with one leg of transaction by sea voyage. Accordingly, UCP 600 lays down different norms of acceptability or otherwise to 'Marine bill of Lading' and other types of BL.