Vo Tien
Source: http://english.vietnamnet.vn
Wednesday, 28 May 2008
Miss Universe Vietnam: Photogenic Beauties
VietNamNet Bridge – The twenty girls in the Miss Universe Vietnam 2008 finals in the morning on May 25 participated in a photogenic competition to choose the winner of Miss Photo at Vinpearl Land, Nha Trang city.
Vo Tien
Source: http://english.vietnamnet.vn
Vo Tien
Source: http://english.vietnamnet.vn
Letter of Guarantees in detail
Letter of Guarantees in detail
Meaning
A bank guarantee is an undertaking by the bank at the request of a party, whereby the bank – in the event of default by the principal in the fulfillment of his obligations to make payment to the beneficiary within the limits of specified sum of money and within the specified period of time. So, bank guarantees are usually limited with respect to amount and time. As for as the time is concerned - a grace period is usually granted to the beneficiary to claim under the guarantee. This is basically given for the time taken by the beneficiary to present his claim.
Guarantees are generally given by banks, insurance companies and other guarantors.
These guarantees are given in the form of tender bonds, performance guarantees and repayment guarantees in relation to projects in the same country or another country which involves supply of goods or services or the performance of work. These guarantees are currently an important tool of international trade.
Parties involved in guarantees and their interest differs. Lets see the same:
1.The beneficiary: He is the party inviting the tender or He is the party awarding the contract or He is the person who wants to receive a compensatory sum of money incase the tenderer fails to perform his obligations or fails to perform the contract in accordance with its terms or to secure repayment of any payment or advances made by him if the principal fails to perform the contract.
2.The principal : He is the party tendering the contract or He is the party to whom the contract has been awarded.
3.Guarantor : Guarantor is a party who will meet his commitment in terms of the guarantee, without becoming involved in possible disputes between beneficiary and principal.
4.The Instructing Party : The new rules recognise the existing widespread practice whereby an instructing party may forward to the guarantor instructions received from or on behalf of the principal and counter-guarantee such instructions.
Need for a Guarantee
1.To provide an assurance of the intention of the principal to sign the contract.
2.To safegaurd against the principal failing to meet his obligations under such a contract
3.To protect interest of a party awarding the contract (beneficiary) in respect of the repayment of payments and advances made by him in the even of principal not fulfilling the contract terms.
Types of guarantee :
1.Conditional and Unconditional Guarantees.
2.Fixed and Fluctuating Guarantees.
3.Financial Guarantees.
4.Performance / Non-financial guarantees.
1.Conditional and Unconditional Guarantees :
In case of conditional guarantees, the right to claim payment is conditional on external factors besides the beneficiary’s demand for payment. For example – If a guarantee states the clause that this guarantee is payable only on a particular ruling of a court
An unconditional / demand guarantee on the other hand, is payable on first demand by the beneficiary. Generally, banks prefer to issue unconditional guarantees so that they can avoid their obligation to pay being contingent on external factors. Because, these unconditional guarantees will afford them certainty about their obligation.
Fixed and Fluctuating Guarantees :
Under a fixed guarantee, the bank;s liability can be ascertained at the time of issuance.
On the other hand, in case of fluctuating guarantee, the bank’s liability can fluctuate subject to a fixed maximum amount.
1.Banks can exercise control over the fluctuating liability by retaining the right to cancel the guarantee at any time and crystallising their obligation on the date of cancellation.
2.Enough care should be taken in the text of guarantee which should not prohibit bank from terminating the guarantee before the expiry date.
3.The bank should give prior intimation to the parties involved in the guarantees for termination of guarantee.
4.The termination of guarantee should take place only upon the receipt of notice by the respective parties.
5.The bank’s liability would then be limited to the debt incurred prior to the receipt of notice.
Financial guarantees : A guarantee to ensure adherence to a financial commitment is a financial guarantee.
1.Disputed income tax / Customs & excise duties : Banks will issue guarantee to guard against non-payment of tax / duty amount.
2.Customs / Excise guarantee for clearance of goods : To guard against non-payment of duty amount after final assessment by the competent authority.
3.Insurance premium guarantee : To guard against non-payment of premium on demand from the insurance company.
4.Guarantee for grant of facilities to another company : To guard against non-payment of dues by the company to whom such facilities are granted.
5.Deferred payment Guarantee : To guard against non-payment of bill of exchange / loan instalment on the due date.
6.Bill of lading / Shipping guarantee : Indemnifies the transporter against all adverse consequences resulting from the delivery of goods without surrender of the transport document.
Performance / Non-financial guarantees : A guarantee to ensure adherence to a commitment to perform a certain act as per stipulated conditions is a performance guanrantee.
1.Advance payment guarantee / Prepayment bond : To guard against non-delivery of goods/services for which advance has been received from the buyer.
2.Performance guarantee / Retention bond : to guard against non-performance of contracted obligations by the seller of the goods or the provider of the services.
3.Security deposit / Tenders / EMD / Bid bonds : To guard against failure of the principal to accept the contract as per the terms and conditions laid down in his tender / bid.
4.Retention money guarantee : To guard against non-compliance (with the terms of the contract) of the project executed by the principal.
5.Export performance guarantee : To guard against non-performance of the contracted export obligation.
General Aspects of Guarantee :
1.Benefits to the parties:
Benefits to the bank : It gets commission income.
Benefits to the principal / Instructing party : (a) It enables better liquidity by deferring payment and making it contingent on non-performance. (b) Cheaper than fund-based facilities except where it involves credit substitution.
Benefits to the beneficiary : Certiainty of payment, in the event of non-performance, guaranteed by the bank.
2.Important points to be noted before issuing a guarantee :
Since the bank is liability to pay on behalf of the principal, it must be protected against any loss arising out of meeting such an obligation. So, principal need to indemnify the bank against all losses that the bank may incur in the performance of its obligation to pay. Such indemnification is called counter guarantee / counter indemnify.
The bank can obtain further comfort by specifying the place of payment under a guarantee and the governing law. So that the beneficiary cannot claim with another branch / head office of the guarantor bank.
Date of expiry of the guarantee.
Total amount payable in local currency, for guarantees issued in foreign currency, and whether the extent exchange control regulations permit remittance in case of invocation.
Forece majeure clause – A guarantee should not be invoked due to non-performance arising on account of factors beyond the control of the principal.
For safety sake – the principal’s liability under the counter guarantee or any cash collateral / margine, should not be released until the expiry of the claims period or the return of the cancelled guarantee, whichever is earlier.
3.Bank guarantees are different from letters of credit. Payment under bank guarantee is contingent on non-performance whereas under LCs it is contingent on performance
4.A bank guarantee can be amended and whenever an amendment ‘weakens’ the BG for the beneficiary, his prior written permission should be obtained. Ex. Increase in amount requires a written permission from the principal whereas the decrease in the amount should have the written permission of the beneficiary.
5.Bank guarantee expires when – the validity period has ended or the BG is returned for cancellation or the entire amount of BG is paid by the bank or the bank is released from its obligations.
6.Documents required :
For grant of Bank guarantee limits
Hypothecation / Pledge agreement for collateral security formalities connected with registration charges where necessary.
For guarantee issuance :
Counter guarantee / indemnity from the principal.
Formal application for BG issuance.
Meaning
A bank guarantee is an undertaking by the bank at the request of a party, whereby the bank – in the event of default by the principal in the fulfillment of his obligations to make payment to the beneficiary within the limits of specified sum of money and within the specified period of time. So, bank guarantees are usually limited with respect to amount and time. As for as the time is concerned - a grace period is usually granted to the beneficiary to claim under the guarantee. This is basically given for the time taken by the beneficiary to present his claim.
Guarantees are generally given by banks, insurance companies and other guarantors.
These guarantees are given in the form of tender bonds, performance guarantees and repayment guarantees in relation to projects in the same country or another country which involves supply of goods or services or the performance of work. These guarantees are currently an important tool of international trade.
Parties involved in guarantees and their interest differs. Lets see the same:
1.The beneficiary: He is the party inviting the tender or He is the party awarding the contract or He is the person who wants to receive a compensatory sum of money incase the tenderer fails to perform his obligations or fails to perform the contract in accordance with its terms or to secure repayment of any payment or advances made by him if the principal fails to perform the contract.
2.The principal : He is the party tendering the contract or He is the party to whom the contract has been awarded.
3.Guarantor : Guarantor is a party who will meet his commitment in terms of the guarantee, without becoming involved in possible disputes between beneficiary and principal.
4.The Instructing Party : The new rules recognise the existing widespread practice whereby an instructing party may forward to the guarantor instructions received from or on behalf of the principal and counter-guarantee such instructions.
Need for a Guarantee
1.To provide an assurance of the intention of the principal to sign the contract.
2.To safegaurd against the principal failing to meet his obligations under such a contract
3.To protect interest of a party awarding the contract (beneficiary) in respect of the repayment of payments and advances made by him in the even of principal not fulfilling the contract terms.
Types of guarantee :
1.Conditional and Unconditional Guarantees.
2.Fixed and Fluctuating Guarantees.
3.Financial Guarantees.
4.Performance / Non-financial guarantees.
1.Conditional and Unconditional Guarantees :
In case of conditional guarantees, the right to claim payment is conditional on external factors besides the beneficiary’s demand for payment. For example – If a guarantee states the clause that this guarantee is payable only on a particular ruling of a court
An unconditional / demand guarantee on the other hand, is payable on first demand by the beneficiary. Generally, banks prefer to issue unconditional guarantees so that they can avoid their obligation to pay being contingent on external factors. Because, these unconditional guarantees will afford them certainty about their obligation.
Fixed and Fluctuating Guarantees :
Under a fixed guarantee, the bank;s liability can be ascertained at the time of issuance.
On the other hand, in case of fluctuating guarantee, the bank’s liability can fluctuate subject to a fixed maximum amount.
1.Banks can exercise control over the fluctuating liability by retaining the right to cancel the guarantee at any time and crystallising their obligation on the date of cancellation.
2.Enough care should be taken in the text of guarantee which should not prohibit bank from terminating the guarantee before the expiry date.
3.The bank should give prior intimation to the parties involved in the guarantees for termination of guarantee.
4.The termination of guarantee should take place only upon the receipt of notice by the respective parties.
5.The bank’s liability would then be limited to the debt incurred prior to the receipt of notice.
Financial guarantees : A guarantee to ensure adherence to a financial commitment is a financial guarantee.
1.Disputed income tax / Customs & excise duties : Banks will issue guarantee to guard against non-payment of tax / duty amount.
2.Customs / Excise guarantee for clearance of goods : To guard against non-payment of duty amount after final assessment by the competent authority.
3.Insurance premium guarantee : To guard against non-payment of premium on demand from the insurance company.
4.Guarantee for grant of facilities to another company : To guard against non-payment of dues by the company to whom such facilities are granted.
5.Deferred payment Guarantee : To guard against non-payment of bill of exchange / loan instalment on the due date.
6.Bill of lading / Shipping guarantee : Indemnifies the transporter against all adverse consequences resulting from the delivery of goods without surrender of the transport document.
Performance / Non-financial guarantees : A guarantee to ensure adherence to a commitment to perform a certain act as per stipulated conditions is a performance guanrantee.
1.Advance payment guarantee / Prepayment bond : To guard against non-delivery of goods/services for which advance has been received from the buyer.
2.Performance guarantee / Retention bond : to guard against non-performance of contracted obligations by the seller of the goods or the provider of the services.
3.Security deposit / Tenders / EMD / Bid bonds : To guard against failure of the principal to accept the contract as per the terms and conditions laid down in his tender / bid.
4.Retention money guarantee : To guard against non-compliance (with the terms of the contract) of the project executed by the principal.
5.Export performance guarantee : To guard against non-performance of the contracted export obligation.
General Aspects of Guarantee :
1.Benefits to the parties:
Benefits to the bank : It gets commission income.
Benefits to the principal / Instructing party : (a) It enables better liquidity by deferring payment and making it contingent on non-performance. (b) Cheaper than fund-based facilities except where it involves credit substitution.
Benefits to the beneficiary : Certiainty of payment, in the event of non-performance, guaranteed by the bank.
2.Important points to be noted before issuing a guarantee :
Since the bank is liability to pay on behalf of the principal, it must be protected against any loss arising out of meeting such an obligation. So, principal need to indemnify the bank against all losses that the bank may incur in the performance of its obligation to pay. Such indemnification is called counter guarantee / counter indemnify.
The bank can obtain further comfort by specifying the place of payment under a guarantee and the governing law. So that the beneficiary cannot claim with another branch / head office of the guarantor bank.
Date of expiry of the guarantee.
Total amount payable in local currency, for guarantees issued in foreign currency, and whether the extent exchange control regulations permit remittance in case of invocation.
Forece majeure clause – A guarantee should not be invoked due to non-performance arising on account of factors beyond the control of the principal.
For safety sake – the principal’s liability under the counter guarantee or any cash collateral / margine, should not be released until the expiry of the claims period or the return of the cancelled guarantee, whichever is earlier.
3.Bank guarantees are different from letters of credit. Payment under bank guarantee is contingent on non-performance whereas under LCs it is contingent on performance
4.A bank guarantee can be amended and whenever an amendment ‘weakens’ the BG for the beneficiary, his prior written permission should be obtained. Ex. Increase in amount requires a written permission from the principal whereas the decrease in the amount should have the written permission of the beneficiary.
5.Bank guarantee expires when – the validity period has ended or the BG is returned for cancellation or the entire amount of BG is paid by the bank or the bank is released from its obligations.
6.Documents required :
For grant of Bank guarantee limits
Hypothecation / Pledge agreement for collateral security formalities connected with registration charges where necessary.
For guarantee issuance :
Counter guarantee / indemnity from the principal.
Formal application for BG issuance.
Letter of Guarantee
About Guarantees
Standby letters of credit are remarkably versatile instruments for a bank to represent to a third party that they are willing to make payments on their customer’s behalf, if and when called for. Most often, these payments are to be made when the customer has failed or refused to do so themselves. The value of the bank’s commitment lies in the fact the bank is obligated to pay, even in the event of a dispute, as long as the documents specified in the L/C are presented as required.
Federal regulations prohibit most banks in the U.S. from issuing guarantees. To fill this void, American banks developed the standby letter of credit as a means of financial support for a variety of trade and investment needs. Originally, these same regulations even required that all letters of credit be "conspicuously titled" as letters of credit. Banks in other countries have long issued letters of credit that they have designated to be "demand guarantees" or "independent guarantees." These are not to be confused with "ancillary" or "contract" guarantees, which are not letters of credit. As U.S. banks are now, as of 1996, free to use any desired designation, the important thing to keep in mind is not what the arrangement is called, but how it works. Any letter of credit should state that it is subject to the Uniform Customs and Practice for Documentary Credits to ensure that it will work as expected.
Regardless of what it’s called, a letter of credit represents the issuing bank’s undertaking to pay the named beneficiary a sum of money upon presentation of specified documents conforming to the terms and conditions of the credit. As with a commercial L/C, the intent of a standby letter of credit is to substitute the creditworthiness of the bank for that of its customer, the applicant. The commercial letter of credit facilitates a commercial transaction through the use of shipping documents and negotiable drafts. A standby letter of credit, however, often takes the form of an obligation by the issuer to the beneficiary (1) to repay money borrowed by or advanced to or for the applicant, (2) to make payment of an indebtedness of the applicant, or (3) to make payment because of a claimed default by the applicant in the performance of an obligation. As such, it may require documents are simple as a statement signed by the beneficiary attesting to the existence of one of these types of situations.
Note that although the beneficiary of a standby credit may be required by the L/C to present a written statement claiming that some sort of default has occurred, in no case does the issuing bank agree to guarantee the completion of any project or contract nor is it bound to make determinations of fact regarding the underlying transaction (as is generally the case with a "contract" or "ancillary"
guarantee). The bank’s responsibilities and liabilities are financial only. If the beneficiary presents documents that comply with the letter of credit requirements, the bank must pay regardless of any assertions of fraud or non-validity made by the applicant. Furthermore, the applicant is legally bound to reimburse the bank. For this reason, the applicant for a standby letter of credit must trust the beneficiary not to draw improperly under the L/C.
The applicant for a standby letter of credit should consider the risks involved in having a bank issue a standby letter of credit for its account and can take two important steps to minimize these risks. The applicant should, just as in the commercial letter of credit transaction, know the beneficiary and be comfortable with the beneficiary’s character and business reputation. Many sources can assist the applicant: trade associations, credit reporting firms, chambers of commerce, etc. Second, the applicant and the beneficiary should negotiate and document the terms of the underlying transaction. This may take the form of a written contract or be as simple as a purchase order or pro forma invoice. Once the issuing bank has made payment, the applicant’s recourse to recover the payment through legal channels is only as strong as his ability to prove that the beneficiary has violated the contract.
If the beneficiary of a standby letter of credit is in a foreign country and the letter of credit is to remedy non-performance, the applicant should be sure that his contract with the beneficiary relieves the applicant from responsibility for non-performance due to force majeure. Strikes, military coups, hurricanes, and other events beyond the control of the applicant which prevent the applicant from fulfilling the contract should not constitute non-performance of the applicant’s obligations.
Bid Bonds
Government buyers and buyers involved in sizable projects frequently request suppliers and contractors who are bidding on a sale or project to post "bid bonds" in the form of standby letters of credit, usually for a percentage of the contract amount. These are used for the bidding process only and assure the buyer that the original bid will be honored by the bidder selected. The winning bidder is commonly required to post a "performance bond" (see below) to prove his ability to honor his bid. If the performance bond is not posted in a timely manner, the amount of the bid bond will be forfeited as a penalty.
Performance Bonds
When a buyer awards a large contract for goods and/or supplies, especially commodities like oil and grain, to a particular seller, he wants assurance that the agreed price will be honored and that the seller will not otherwise default on the contract. Similarly, throughout the life of a project, the contracting party is interested in ensuring that the project will in fact be completed in accordance with the terms and conditions of the contract. In cases like these, a standby letter of credit may be required to provide financial compensation in the event of default. These are generally designed to decrease in amount over the life of the contract until completion.
Performance bonds are also used to back up international warranties that machinery or other goods will work properly for a certain period of time. If the machinery breaks down and the manufacturer fails to provide timely repairs, the buyer may arrange repairs himself and draw on the L/C for costs incurred and/or a penalty.
Advance Payment Bonds
When the manufacturer who has been awarded a sale begins work, partial payment may be required in advance for materials, start-up costs, or general working capital. The buyer often requests a bond or standby letter of credit for assurance that such advances will be used for the project. In the event of contract default, the advance can be recovered from the bank that issued the standby letter of credit. These standby L/Cs can be issued to decrease in amount progressively as shipments take place.
Credit Line Support
When a buyer and seller agree to an "open account" or "cash-in-advance" relationship, a standby letter of credit can be used as financial security. In these situations, payments are made directly between the buyer and seller, but, in the event of default (e.g., non-payment in an open account transaction or defective goods in a cash-in-advance transaction), the affected party has recourse to a commercial bank.
Evergreen Letters of Credit
Sometimes a standby letter of credit will be issued with an initial expiration date but containing a clause that states that it will be automatically extended for additional periods unless the issuing bank provides notice to the beneficiary stating otherwise. Such a clause is called an "evergreen clause." Such a credit, in effect, has no expiration date and will remain open until the beneficiary returns it for cancellation since the beneficiary will simply draw the full amount of the credit if he receives notice from the bank that it is not going to extend it. Of course, the applicant’s obligation to reimburse the issuing bank remains in effect as long as the credit is open.
Clean Letters of Credit
In some instances, the beneficiary will request a letter of credit in which the only document required is a draft drawn on the issuing bank. This is sometimes called a "clean letter of credit." The issuing bank is required to pay, and the applicant in turn is required to reimburse, once the draft is presented. Such a letter of credit is very open and the beneficiary’s ability to draw is limited only by the amount and expiration date of the letter of credit; it may be thought of as giving the beneficiary a cashier’s check and asking him not to cash it unless necessary.
Standby letters of credit are remarkably versatile instruments for a bank to represent to a third party that they are willing to make payments on their customer’s behalf, if and when called for. Most often, these payments are to be made when the customer has failed or refused to do so themselves. The value of the bank’s commitment lies in the fact the bank is obligated to pay, even in the event of a dispute, as long as the documents specified in the L/C are presented as required.
Federal regulations prohibit most banks in the U.S. from issuing guarantees. To fill this void, American banks developed the standby letter of credit as a means of financial support for a variety of trade and investment needs. Originally, these same regulations even required that all letters of credit be "conspicuously titled" as letters of credit. Banks in other countries have long issued letters of credit that they have designated to be "demand guarantees" or "independent guarantees." These are not to be confused with "ancillary" or "contract" guarantees, which are not letters of credit. As U.S. banks are now, as of 1996, free to use any desired designation, the important thing to keep in mind is not what the arrangement is called, but how it works. Any letter of credit should state that it is subject to the Uniform Customs and Practice for Documentary Credits to ensure that it will work as expected.
Regardless of what it’s called, a letter of credit represents the issuing bank’s undertaking to pay the named beneficiary a sum of money upon presentation of specified documents conforming to the terms and conditions of the credit. As with a commercial L/C, the intent of a standby letter of credit is to substitute the creditworthiness of the bank for that of its customer, the applicant. The commercial letter of credit facilitates a commercial transaction through the use of shipping documents and negotiable drafts. A standby letter of credit, however, often takes the form of an obligation by the issuer to the beneficiary (1) to repay money borrowed by or advanced to or for the applicant, (2) to make payment of an indebtedness of the applicant, or (3) to make payment because of a claimed default by the applicant in the performance of an obligation. As such, it may require documents are simple as a statement signed by the beneficiary attesting to the existence of one of these types of situations.
Note that although the beneficiary of a standby credit may be required by the L/C to present a written statement claiming that some sort of default has occurred, in no case does the issuing bank agree to guarantee the completion of any project or contract nor is it bound to make determinations of fact regarding the underlying transaction (as is generally the case with a "contract" or "ancillary"
guarantee). The bank’s responsibilities and liabilities are financial only. If the beneficiary presents documents that comply with the letter of credit requirements, the bank must pay regardless of any assertions of fraud or non-validity made by the applicant. Furthermore, the applicant is legally bound to reimburse the bank. For this reason, the applicant for a standby letter of credit must trust the beneficiary not to draw improperly under the L/C.
The applicant for a standby letter of credit should consider the risks involved in having a bank issue a standby letter of credit for its account and can take two important steps to minimize these risks. The applicant should, just as in the commercial letter of credit transaction, know the beneficiary and be comfortable with the beneficiary’s character and business reputation. Many sources can assist the applicant: trade associations, credit reporting firms, chambers of commerce, etc. Second, the applicant and the beneficiary should negotiate and document the terms of the underlying transaction. This may take the form of a written contract or be as simple as a purchase order or pro forma invoice. Once the issuing bank has made payment, the applicant’s recourse to recover the payment through legal channels is only as strong as his ability to prove that the beneficiary has violated the contract.
If the beneficiary of a standby letter of credit is in a foreign country and the letter of credit is to remedy non-performance, the applicant should be sure that his contract with the beneficiary relieves the applicant from responsibility for non-performance due to force majeure. Strikes, military coups, hurricanes, and other events beyond the control of the applicant which prevent the applicant from fulfilling the contract should not constitute non-performance of the applicant’s obligations.
Bid Bonds
Government buyers and buyers involved in sizable projects frequently request suppliers and contractors who are bidding on a sale or project to post "bid bonds" in the form of standby letters of credit, usually for a percentage of the contract amount. These are used for the bidding process only and assure the buyer that the original bid will be honored by the bidder selected. The winning bidder is commonly required to post a "performance bond" (see below) to prove his ability to honor his bid. If the performance bond is not posted in a timely manner, the amount of the bid bond will be forfeited as a penalty.
Performance Bonds
When a buyer awards a large contract for goods and/or supplies, especially commodities like oil and grain, to a particular seller, he wants assurance that the agreed price will be honored and that the seller will not otherwise default on the contract. Similarly, throughout the life of a project, the contracting party is interested in ensuring that the project will in fact be completed in accordance with the terms and conditions of the contract. In cases like these, a standby letter of credit may be required to provide financial compensation in the event of default. These are generally designed to decrease in amount over the life of the contract until completion.
Performance bonds are also used to back up international warranties that machinery or other goods will work properly for a certain period of time. If the machinery breaks down and the manufacturer fails to provide timely repairs, the buyer may arrange repairs himself and draw on the L/C for costs incurred and/or a penalty.
Advance Payment Bonds
When the manufacturer who has been awarded a sale begins work, partial payment may be required in advance for materials, start-up costs, or general working capital. The buyer often requests a bond or standby letter of credit for assurance that such advances will be used for the project. In the event of contract default, the advance can be recovered from the bank that issued the standby letter of credit. These standby L/Cs can be issued to decrease in amount progressively as shipments take place.
Credit Line Support
When a buyer and seller agree to an "open account" or "cash-in-advance" relationship, a standby letter of credit can be used as financial security. In these situations, payments are made directly between the buyer and seller, but, in the event of default (e.g., non-payment in an open account transaction or defective goods in a cash-in-advance transaction), the affected party has recourse to a commercial bank.
Evergreen Letters of Credit
Sometimes a standby letter of credit will be issued with an initial expiration date but containing a clause that states that it will be automatically extended for additional periods unless the issuing bank provides notice to the beneficiary stating otherwise. Such a clause is called an "evergreen clause." Such a credit, in effect, has no expiration date and will remain open until the beneficiary returns it for cancellation since the beneficiary will simply draw the full amount of the credit if he receives notice from the bank that it is not going to extend it. Of course, the applicant’s obligation to reimburse the issuing bank remains in effect as long as the credit is open.
Clean Letters of Credit
In some instances, the beneficiary will request a letter of credit in which the only document required is a draft drawn on the issuing bank. This is sometimes called a "clean letter of credit." The issuing bank is required to pay, and the applicant in turn is required to reimburse, once the draft is presented. Such a letter of credit is very open and the beneficiary’s ability to draw is limited only by the amount and expiration date of the letter of credit; it may be thought of as giving the beneficiary a cashier’s check and asking him not to cash it unless necessary.
BANKING THEORY & PRACTICE
1.WHAT IS SWIFT: SWIFT stands for Society of World Wide Inter bank Financial Telecommunication. It is a communication system that advices member banks to transfer funds from one member to another. It is not a payment system, but an information and instruction network. Based in Brussels, the SWIFT network of terminals links thousand five hundred banks in Europe, USA, Africa, Asia, Australia and Latin America.
2.WHAT IS SWAP: The means by which a barrower can exchange the type of founds must easily raised for the type of founds required usually through the intermediary of a bank. A swap will enable them to exchange the currency the interest-rate swap, in which borrowers exchange fixed-for floating-interest rates.
3.WHAT IS VOSTRO ACCOUNT: A local currency account held by a foreign bank with a bank in India itself.
4.WHAT IS NOSTRO ACCOUNT: A foreign currency account held by a bank at foreign country.
5.WHAT IS DEMAT ACCOUNT: An electronic form of keeping shares in an account is called demat account.
6.WHAT IS FORECLOSURE: The legal right of lender of money if the borrower fails to repay the money or part of if on due date. The lender must apply to court to be permitted to sell the property that has held us security for debt.
7.WHAT IS JOINT ACCOUNT: Account held by two or more persons jointly is called joint A/c.
8.WHAT IS RD: A deposit were a fixed amount is paid on monthly installment.
9.WHAT IS EMI & NEMI: Equated monthly installments (EMI) is an amount which represents the combination of interest + principle proposionatly.
10.WHAT IS LC : Letter of credit is performing bank guarantee. A letter from one banker to another authorizing the payment of specified sum to the person named in the letter under specified condition. Usually in a forex. Irrevocable letter of credit cannot be cancelled by the person who opens it or by the issuing bank without the beneficiary’s consent, whereas a revocable letter of credit can.
11.WHAT IS RTGS: Real time gross settlements. It is a elementary process were realize at pan takes place at some day.
12.WHAT IS DELINQUENCY: Failure to make a payment on a debt or obligation by the specified due date
13.WHAT IS FLEXI DEPOSIT: It is a deposit in which the interest rate can fluctuate based on the duration or time.
14.WHAT IS SWEEP: A service provided by a bank which automatically transfers funds above a certain level from a current account to a higher interest earning account.
15.WHAT IS TD: It is also called time deposit or term deposit. It is the period of time before a deposit security expires or is returned(renewed).
http://sivaninandu.blogspot.com/: Tax deduced at source. It denotes an amount that can be deductible from income or profits from a deposit in accordance with the tax legislation.
17.WHAT IS PLR: It stands for prime lending Rate. It is the rate of interest at which the banks lend money to first-class borrowers. It is similar in operation to the base rate.
18.WHAT IS OD: It represents an over draft. A lean made to a customer with a Cheque account at a bank in which the account is allowed to go into debit, usually up to a specified limit.
19.WHAT IS STANDING INSTRUCTION: An instruction by a customer to a bank to pay a specified amount of money on a specified date or dates to a specified payee.
20.WHAT IS ECS: It stands for electronic clearing system. The insurance premium payments and house electricity payment. It serves for utility bill payments.
21. What is EFT: It stands for electronic funds transfer. It represents the transfer of money from one bank account to another by means of communication. It is also for credit card payments.
22.WHAT IS ACCRUAL: It represents accrued charges. An amount incurred as a charge in a given accounting period but not paid by the end of that period.
23.WHAT IS MORTGAGE: An interest in property created as a security fro a loan or payment of a debit and terminated on payment of the loan or debit.
24.WHAT IS PLEDGE: An article given by a barrower (pledgeer) to a lender (pledge) as a security fro a debit. It remains in the ownership of the pledgeer although it is in the possession of the pledge until the debt is repaid.
25.WHAT IS HYPOTHECATION: An authority given to a banker, usually a letter of hypothecation to enable the bank to sell goods that have been pledged to them as security for loan.
26.WHAT IS BALANCE SHEET: A statement of the total assets and liabilities of an organization of a particular date, usually the last day of the accounting period.
27.WHAT IS DOUBLE ENTRY BOOK KEEPING: The records kept enable a profit and loss account and the balance sheet to be compiled. Most firms now use business software packages of programs to enable the books to be kept by computer.
28.WHAT IS NOMINAL ACCOUNT: A ledger account that is not a personal account in that it bears the name of a concept eg. Light of heat, bad debits, investments, etc.,
29.WHAT IS PERSONAL ACCOUNT: Account used to record transactions with persons, for example “debtors and creditors.
30.WHAT IS REAL ACCOUNT: A ledger account for some types of property (eg. Land & building, plat, investment, stock) to distinguish it from a nominal account, which would be for revenue or expense items.
31.WHAT IS DAY BOOK: A specialized journal or book of prime entry recording specific transactions. For example, the sales day book records invoice for sales, the purchase day book records invoices received from suppliers. Day book entries are transferred to memorandum ledgers, such as the debtors ledger and the creditors ledger, while totals of entries are transferred to the nominal ledger control accounts. Such as the debtors ledger control account and the creditors ledger control account.
32.WHAT IS LEDGER: A collection of accounts of a similar type. Traditionally, a ledger was a large book with separate pages for each account.
33.WHAT IS PAY ORDER: It is also called banker’s Cheque or Manager’s Cheque. It is a Cheque drawn by a banker on himself. It is payable only at the issuing bank to it is not transferable.
34.WHAT IS DEMAND DRAFT: It is an instrument drawn by one branch of a bank upon another branch of the same bank instructing the latter to pay a certain sum of money to the person named there in or to his order.
35.WHAT IS CHEQUE: A Cheque is a negotiable instrument and it is freely transferable from one person to another. It performs all the functions of a currency note through it is not a legal tender money. It is an instrument in writing containing an unconditional order, signed by the bearer directing a certain person to pay a certain money only to or order of a certain person.
36.WHAT IS CHEQUE GENERAL CROSSING: According to negotiable instrument action general crossing is where a Cheque bears across it’s face a addition of words and company or its abbreviation there of between two parallel traverse lines, simply, either with or without the words not negotiable.
37.WHAT IS CHEQUE SPECIAL CROSSING: Its where a Cheque bears across its face an addition of the name of a banker either with or without the words not negotiable that addition shall be deemed to be crossed specially.
38.WHAT IS ENDORSEMENT: According to negotiable instrument act when the maker or holder of a negotiable instrument signs the same, side of a Cheque for the purpose of negotiation.
39.WHAT IS ALLONGE: If the back side of the instrument is not sufficient to make endorsements, a piece of paper may be attached there to for making further endorsements. Such piece of paper is known as allonge.
40.WHAT IS ORDER CHEQUE/BEARER CHEQUE: A Cheque is an order Cheque if it is expressed to be payable to the order of a certain person or to a certain person without restricting its further transfer. A bearer Cheque is transferable by men delivery without endorsement. A bearer Cheque is always a bearer instrument but an order Cheque will become a bearer one when it is endorsed in black.
41.WHAT IS I/W CLNG: It is inward Cheques for collection for outward returns.
42.WHAT IS O/W CLNG: It includes outward cheques for booking collection and inward returns.
43.WHAT IS TELLER: The us name for a bank or building society cashier, ie., some one who accepts deposit and pays out cash over the counter to customer.
44.WHAT IS BANK GUARANTEE: An undertaking given by a bank to settle a debit should the debtor fails to do so. A bank guarantee can be used as a security for a loan but the banks themselves will require good cover in cash or certain indemnity before they issue.
45.WHAT IS DPN: Demand promissory note. It is promises to pay guarantee to or to the lending for society very week sectors such as agriculture and formers where the interest rate is low.
46.WHAT IS PRIORITY SECTOR LENDING: It is the lending for society very week sectors such as agriculture and formers where the interest rate is low.
47.WHAT IS SPREAD: It is spreading the areas of lending into different kinds of society where a loss in one society will be adjusted with the income from others.
48.WHAT IS CRR(Cash Reserve Ratio): Out of demand and time liabilities 10% is maintained as a cash in RBI.
49.WHAT IS SLR(Statutory Liquidity Ratio) : Out of demand and time liabilities some percent is kept as security in RBI.
50.WHAT IS LCD: It stands for low cast deposit. It includes a mixture of demand deposits ie., pure current & savings deposit.
51.WHAT IS INSURANCE: A Legal contract in which an insurer promises to pay a specified amount to another party , the insured , if a particular event such as Death (or) Loss of property happens.
52.WHAT IS MUTUAL FUND: A mutual fund is simply a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. The mutual fund will have a fund manager who is responsible for investing the pooled money into specific securities (usually stocks or bonds). When you invest in a mutual fund, you are buying shares (or portions) of the mutual fund and become a shareholder of the fund
53.WHAT IS REFINANCING OR HIREPURCHASE: A method of buying goods in which the purchase takes possession of them as soon as an initial installment of the price( a deposit) has been paid ; ownership is obtained when all the agreed number of subsequent installments have been completed.
54.WHAT IS LIQUIDITY: The extent to which an organization assets are Liquid (Assets held in cash or in something that can be readily returned into cash), enabling it to pay its debts when they fall due and also to move into new investment opportunities .
55.WHAT IS PREMINUM: (a) The consideration payable for a contract of insurance (or) life assurance. (b) An amount in excess of the nominal value of a share , bond or other security.
56.WHAT IS BONUS: An extra amount of money additional to the proceeds, which is distributed to a policy holder by an insurer who has made a profit on the investment of a Life Assurance fund.
57.WHAT IS EQUITY: It represents the stocks & shares i.e., the ordinary shares of a company , especially those of a publicly owned quoted company.
58.WHAT IS FACE VALUE OF A STOCK: The nominal value (Nominal price ) printed on the face of a security . This is also known as the par value. It may be more (or) less than the market value.
59.WHAT IS STOCK BROKING & STOCK EXCHANGE: A stock broker is an agent who buys & sells securities on a stock exchange ( A market for the sale & purchase of securities in which prices are controlled by demand & supply ) on behalf of clients and receives remuneration in the form of commission.
60.WHAT IS FLEXI BOND: A bond in which the interest i.e., the coupon rate changes according to market is called Flexi Bond.
61.WHAT IS DIVIDEND WARRENT: The Cheque issued by a company to it share holders when paying dividends. It states the Tax deducted and the net amount paid. This document must be sent by non-taxpayers to the Inland Revenue, when claiming back the tax.
62.WHO IS A MINOR: A person who has not attained 18 years of age is a minor. But if a guardian is appointed by the court for a person during the period of minority, he will remain as a minor till he/she attain the age of 21 years.
63.WHO IS A TRUSTEE & BENEFICIARY: A trust is created to look after the properties of a person, usually a deceased . The person appointed to manage such properties is called a trustee and the person for whose benefit the trust is created is called beneficiary.
64.WHO IS AN ASSIGNOR & ASSIGNEE: Assignment means transfer of an existing or future right on property of debt by one person to another. The person who transfers the property is the assignor and the person to whom it is transferred is the assignee.
65.WHAT IS INDEMNITY BOND: An undertaking by a bank’s client who has lost a document (such as a share certificate (or) bill of lading) that the bank will be held harmless against any consequences of the document’s absence if it proceeds to service the documents that have not been mislaid.
66.WHAT IS DEFERRED PAYMENT: It refers the Hire Purchase , a method of buying goods in which the ownership passes when the contract is signed.
67.WHAT IS GRANISHEE ORDER: An order made by a judge on behalf of a judgment creditor restraining a third party (often a bank) called a garnishee from paying money to the judgment debtor until sanctioned to do so by the court.
68.WHAT IS CASH CREDIT: A cash credit is an arrangement by which a customer is allowed by a banker to borrow money up to a certain limit. Such an arrangement is made against the security of tangible assets or guarantees. The amount of cash credit sanctioned need not be drawn by the customer at once. He may draw such amount as and when required. Further he can pay back the amount so withdrawn whenever he has a surplus. The interest will be charged on the actual amount utilized and for the period of utilization only. The cash credit system is for commercial and industrial concerns to get long term funds for doing regular business.
69.WHAT IS SECURED OVER DRAFT: Under A customer is allowed to withdraw over and above the credit balance in his current account upto certain limit . The interest will be charged only on the amount actually overdrawn by him.
70.WHAT IS A CREDIT CARD: A plastic card issued by a bank (or) finance organization to enable holders to obtain credit in shops , hotels , restaurants , petrol stations etc., The retailer (or) trader receives monthly payments from the credit card company equal to its total sales in the month by means of that credit card ,less a service charge.
71.WHAT IS DEBIT CARD: A plastic card issued by a bank to enable its customers with Cheque accounts to pay for goods (or) service at certain retail outlets by using the telephone network to debit their Cheque accounts directly. It is also known as payment card.
72.WHO IS SOLE PROPEREITOR: A single person owns the assets of the company . He is held responsible for his company’s liabilities.
73.WHO IS A PARTNER: 1. Partners share equally in the profit (or) loss of the partnership 2. Partners are not entitled to receive salaries. 3.Patners are not entitled to interest on their capital . 4. On dissolution the assets is settled for the creditors first and then to partners.
74.CAN A MINOR BE A PARTNER: A minor may be admitted as a partner to the benefits of a partnership firm with the consent of all partners. But he/she is not personally liable for the debts of the firm except to the extent of his share in the profits and properties of the firm.
75.WHAT IS PRIVATE LIMITED COMPANY: Any limited company that is not a public limited company. Such a company is not permitted to offer its shares for sale to public and it is free from the rules that apply to public limited companies.
76.WHAT IS PUBLIC LIMITED COMPANY: A company registered under Companies Act 1980 as a public company . It may offer shares and securities to the public . Regulation of such companies is
77.WHAT IS MEANT BY PCL: PCL stands for Packing Credit Loan. It’s the loan given for the manufacture & export of goods & its expenses made for the export of the commodity.
78.WHAT IS Pre-Shipment & Post Shipment FINANCE: The finance charges for the Pre-Shipment expenses & finance charges for the post shipment activities.
79.WHAT IS DISCOUNTING & PURCHASING OF A BILL: The term “Purchase “ is used in case of demand bills which are payable in demand , whereas the term ‘discounting’ is used in case of Usance bills which are payable on due dates. In both cases the amount of the bill less bank charges will be credited to customer’s account.
80.WHAT IS INCUMBERANCE CERTIFICATE: A lien or claim on property. A liability on real property. For example, a mortgage encumbers title to real estate because the lender has an interest in the property. a claim (as a lien) against property; specifically : an interest or right (as an easement or a lease) in real property that may diminish the value of the estate but does not prevent the conveyance of the estate
81.WHAT IS A JOINT STOCK COMPANY: A company in which the members pool their stock and trade on the basis of their joint stock. This differs from the earliest type of company . The merchant corporations (or) regulated companies of 14th century in which members tracked their own stock subject to the rules of the company.
82.WHAT IS MERCHANT BANKING: A bank that formerly specialized in financing foreign trade , an activity that often grew out of its own merchanting business they function as accepting houses.
83.WHAT IS CHIT FUND: A collection of members called a chit group makes their contribution in the form of money to collect a chit amount and they bid in an auction to be awarded with the prized money which is equal to the chit amount minus the discount and the foreman's commission.
84.WHAT IS MEANT BY NEGOTIABLE INSTRUMENT: A document of title that can be freely negotiated. Such documents are cheques and bills of exchange in which the stated payee of the instrument can negotiate the instrument by either inserting the name of a different payee(or) making the document ‘open’ by endorsing it on the reverse.
85.WHAT IS ANTE-DATED CHEQUE: A Cheque which bears a date prior to the date of its issue is known as ante-dated Cheque.
86.WHAT IS POST-DATED CHEQUE: A Cheque which bears a date subsequent to the date of its issue is called a post-dated Cheque.
87.WHAT IS STALE CHEQUE: If a Cheque bears a date before 6 months from the current date, then the Cheque becomes invalid and it’s called Stale Cheque.
88.WHAT IS LIEN: The right of one person to retain possession of goods owned by another until the possessions claim against the owner has been satisfied.
89.WHAT IS A FORGED INSTRUMENT: An instrument which illegally bears a signature of the maker of the Cheque without the knowledge of the maker (Drawer) of the Cheque.
90.WHAT IS ASSIGMENT: The act of transferring, or a document (a deed of assignment) transferring property to some other person . Examples of assignment include the transfer of rights under a contract or benefits under a trust to another person.
91.WHAT IS WAREHOUSE LOAN: It is a Loan against the security of a warehouse receipt . By this receipt a warehouse keeper acknowledges the receipt of goods for warehousing & promises to deliver them to the person mentioned their on request.
92.WHAT IS BILL OF LADING: A document acknowledging the shipment of a consignor’s goods for carriage by sea. It is used primarily when the ship is carrying goods belonging to a number of consignors (a general ship). In this case, each consignor receives a bill issued (normally by the master of the ship)on behalf of either the shipowner or a character under a charterparty. The bill serves three functions: it is a receipt for the goods it summarizes the terms of the contract of carriage; and it acts as a document of title to the goods.
93.WHAT IS BILL OF EXCHANGE: An unconditional order in writing addressed by one person (that is the drawer ) to another (drawee) and signed by the person giving it requiring the drawee to pay on demand or at a fixed or determinable future time a specified sum of money to or to the order of a specified person (the payee) or to the bearer. If the bill is payable at a future time the drawee signifies acceptance, which makes the drawee the party primarily liable upon the bill; the drawer and endorsers may also be liable upon a bill. The use of bills of exchange enables one person to transfer another an enforceable right to a sum of money. A bill of exchange in not only transferable but also negotiable , since , if a person without an enforceable right to the money transfers a bill to a holder in due course , the latter obtains a good title to it.
94.WHAT IS BILL OF ENTRY: It is the customs control copy for the proof of a foreign transaction held for the clearance of the imported goods.
95.WHO IS CALLED AUTHORISED DEALER: A bank which is licensed to hold any foreign exchange transaction by itself is referred to as authorized dealer of a foreign exchange.
96.WHAT IS TRAVELLERS CHEQUE: A Cheque issued by a Bank , Travel Agency , Credit – Card company etc., to enable a traveler to obtain cash in a foreign currency in abroad . They may be cashed at banks, exchange bureaus, restaurants etc., in abroad on proof identity.
97.WHAT IS FOREIGN EXCHANGE: A trade between two different countries which involves a transaction in foreign currency . In simple terms foreign exchange means buying and selling of currencies ( Say Dollars).
98.WHAT IS NRO ACCOUNT: When a Resident becomes a Non-Resident , the domestic resident account of the resident becomes Non-Resident Ordinary (NRO)Account . (a) Can be in the form of savings, Term Deposit. (b) Non- Repatriable.(c) Credit comes by foreign remittance only.
99.WHAT IS NRE ACCOUNT: It is Non-Resident external rupee account . (a) It can be in the form savings , Term deposit (b) No local in-flow allowed. (c) It can be Repatriable(amount can be taken & spent abroad ). (d) Only by foreign remittance.
100.WHAT IS FCNR ACCOUNT: It is a foreign currency non-resident account. (a) It is maintained in foreign currency . (b) Can be Repatriable .(C) Mainted only as a term deposits. (d) Can be closed and converted to Indian rupee when needed.
101.WHAT IS FIXED EXCHANGE RATE: A rate of exchange between one currency and another that is fixed by government and maintained by that government buying or selling its currency to support or depress its currency.
102.WHAT IS FLOATING EXCHANGE RATE: A rate of exchange between one currency and another that is permitted to float according to market forces. Most major currencies and countries now have floating exchange rates but governments and central banks intervene buying or selling currencies when rates become too high or too low.
103.WHAT IS FIXED RATE LOAN: A loan in which the interest rate is fixed at the start of the loan. It is standard for bond issue, but unusual for bank borrowing.
104.WHAT IS FLOATING RATE LOAN: A loan that does not have a fixed interest rate throughout its life. Floating-rate loans can take various forms but they are all tied to short term market indicators in the UK this is usually the London Inter Bank Offered Rate.
105.WHAT IS ECGC: Export Credit Guarantee Corporation of India Limited, was established in the year 1957 by the Government of India to strengthen the export promotion drive by covering the risk of exporting on credit. Being essentially an export promotion organization, it functions under the administrative control of the Ministry of Commerce, Government of India. It is managed by a Board of Directors comprising representatives of the Government, Reserve Bank of India, banking, and insurance and exporting community. ECGC is the fifth largest credit insurer of the world in terms of coverage of national exports. The present paid-up capital of the company is Rs.500 crores and authorized capital Rs.1000 crores. The paid-up capital is expected to be enhanced to Rs.800 crores
106.WHAT IS MEANT BY CAT-A, CAT-B&CAT-C BRANCH: CAT –A branch deals mainly into foreign exchange and which got a dealing room for bidding on the inter-bank price rates. CAT –B branch deals mainly into foreign exchange in addition to its retail transactions and can make the payment directly. But a CAT – C branch cannot make the payment for the FOREX transaction directly. It has to route through the CAT – A branch.
107.WHAT IS MICR CLEARING: The ordinary clearing instrument which is encoded by the MICR codes(16 digits) is called MICR clearing instrument.
108. WHAT IS NON-MICR CLEARING: A clearing instrument without the MICR encodings and which is cleared the same day itself (it can be Inter Bank Clearing or High Value Clearing).
109.WHAT IS NON-INTEREST INCOME (NII): It represents the service charges collected from the customer for any kind of transaction held in a bank.
110.WHAT IS CALLED NI-ACT: A government act that represents the document of title that can be freely negotiated. Such documents are Cheques and bill of exchange in which the stated payee of the instrument can negotiate the instrument by either inserting the name of a different payee or making the document ‘open’ by endorsing it (signing once the name) usually on the reverse.
111.WHAT IS SUPER SAVINGS PACK: also called rainbow savings pack where a suitable amount above the minimum balance in savings account is transferred to term deposit account where they get higher rate of interest .it is the combination of savings account and fixed deposit account
112.WHAT IS TERM LOAN: A fixed-period loan usually for 1 to 10 years that is paid back by the borrower in regular installments with interest it may be secured or unsecured.
113.WHAT IS RUNNING LOAN: A loan or advance in which both credit and debit transactions takes place within the sanction limit is called running loan ( Drawing Power will be equivalent to sanctioned limit).
114.WHAT IS “DONATIO MORTIS CAUSA”: It means a gift made in contemplation of death. A fixed deposit receipt may also be made as a subject matter of such gift. Hence a holder of a fixed deposit receipt can give it as a gift to another person in anticipation of his death. In this case it will become valid and the donee will get a good title only on the death of the donor. On the other hand, if the donee dies before the death of the donor, it will become void.
115.WHAT IS BANK STATEMENT: A regular record, issued by a bank showing the credit and debit entries in a customer’s cheque account, together with the current balance. The frequency of issue will vary with the customer’s needs and the volume of transactions going through the account. Cash dispensers enable customers to ask for a statement whenever they are needed.
2.WHAT IS SWAP: The means by which a barrower can exchange the type of founds must easily raised for the type of founds required usually through the intermediary of a bank. A swap will enable them to exchange the currency the interest-rate swap, in which borrowers exchange fixed-for floating-interest rates.
3.WHAT IS VOSTRO ACCOUNT: A local currency account held by a foreign bank with a bank in India itself.
4.WHAT IS NOSTRO ACCOUNT: A foreign currency account held by a bank at foreign country.
5.WHAT IS DEMAT ACCOUNT: An electronic form of keeping shares in an account is called demat account.
6.WHAT IS FORECLOSURE: The legal right of lender of money if the borrower fails to repay the money or part of if on due date. The lender must apply to court to be permitted to sell the property that has held us security for debt.
7.WHAT IS JOINT ACCOUNT: Account held by two or more persons jointly is called joint A/c.
8.WHAT IS RD: A deposit were a fixed amount is paid on monthly installment.
9.WHAT IS EMI & NEMI: Equated monthly installments (EMI) is an amount which represents the combination of interest + principle proposionatly.
10.WHAT IS LC : Letter of credit is performing bank guarantee. A letter from one banker to another authorizing the payment of specified sum to the person named in the letter under specified condition. Usually in a forex. Irrevocable letter of credit cannot be cancelled by the person who opens it or by the issuing bank without the beneficiary’s consent, whereas a revocable letter of credit can.
11.WHAT IS RTGS: Real time gross settlements. It is a elementary process were realize at pan takes place at some day.
12.WHAT IS DELINQUENCY: Failure to make a payment on a debt or obligation by the specified due date
13.WHAT IS FLEXI DEPOSIT: It is a deposit in which the interest rate can fluctuate based on the duration or time.
14.WHAT IS SWEEP: A service provided by a bank which automatically transfers funds above a certain level from a current account to a higher interest earning account.
15.WHAT IS TD: It is also called time deposit or term deposit. It is the period of time before a deposit security expires or is returned(renewed).
http://sivaninandu.blogspot.com/: Tax deduced at source. It denotes an amount that can be deductible from income or profits from a deposit in accordance with the tax legislation.
17.WHAT IS PLR: It stands for prime lending Rate. It is the rate of interest at which the banks lend money to first-class borrowers. It is similar in operation to the base rate.
18.WHAT IS OD: It represents an over draft. A lean made to a customer with a Cheque account at a bank in which the account is allowed to go into debit, usually up to a specified limit.
19.WHAT IS STANDING INSTRUCTION: An instruction by a customer to a bank to pay a specified amount of money on a specified date or dates to a specified payee.
20.WHAT IS ECS: It stands for electronic clearing system. The insurance premium payments and house electricity payment. It serves for utility bill payments.
21. What is EFT: It stands for electronic funds transfer. It represents the transfer of money from one bank account to another by means of communication. It is also for credit card payments.
22.WHAT IS ACCRUAL: It represents accrued charges. An amount incurred as a charge in a given accounting period but not paid by the end of that period.
23.WHAT IS MORTGAGE: An interest in property created as a security fro a loan or payment of a debit and terminated on payment of the loan or debit.
24.WHAT IS PLEDGE: An article given by a barrower (pledgeer) to a lender (pledge) as a security fro a debit. It remains in the ownership of the pledgeer although it is in the possession of the pledge until the debt is repaid.
25.WHAT IS HYPOTHECATION: An authority given to a banker, usually a letter of hypothecation to enable the bank to sell goods that have been pledged to them as security for loan.
26.WHAT IS BALANCE SHEET: A statement of the total assets and liabilities of an organization of a particular date, usually the last day of the accounting period.
27.WHAT IS DOUBLE ENTRY BOOK KEEPING: The records kept enable a profit and loss account and the balance sheet to be compiled. Most firms now use business software packages of programs to enable the books to be kept by computer.
28.WHAT IS NOMINAL ACCOUNT: A ledger account that is not a personal account in that it bears the name of a concept eg. Light of heat, bad debits, investments, etc.,
29.WHAT IS PERSONAL ACCOUNT: Account used to record transactions with persons, for example “debtors and creditors.
30.WHAT IS REAL ACCOUNT: A ledger account for some types of property (eg. Land & building, plat, investment, stock) to distinguish it from a nominal account, which would be for revenue or expense items.
31.WHAT IS DAY BOOK: A specialized journal or book of prime entry recording specific transactions. For example, the sales day book records invoice for sales, the purchase day book records invoices received from suppliers. Day book entries are transferred to memorandum ledgers, such as the debtors ledger and the creditors ledger, while totals of entries are transferred to the nominal ledger control accounts. Such as the debtors ledger control account and the creditors ledger control account.
32.WHAT IS LEDGER: A collection of accounts of a similar type. Traditionally, a ledger was a large book with separate pages for each account.
33.WHAT IS PAY ORDER: It is also called banker’s Cheque or Manager’s Cheque. It is a Cheque drawn by a banker on himself. It is payable only at the issuing bank to it is not transferable.
34.WHAT IS DEMAND DRAFT: It is an instrument drawn by one branch of a bank upon another branch of the same bank instructing the latter to pay a certain sum of money to the person named there in or to his order.
35.WHAT IS CHEQUE: A Cheque is a negotiable instrument and it is freely transferable from one person to another. It performs all the functions of a currency note through it is not a legal tender money. It is an instrument in writing containing an unconditional order, signed by the bearer directing a certain person to pay a certain money only to or order of a certain person.
36.WHAT IS CHEQUE GENERAL CROSSING: According to negotiable instrument action general crossing is where a Cheque bears across it’s face a addition of words and company or its abbreviation there of between two parallel traverse lines, simply, either with or without the words not negotiable.
37.WHAT IS CHEQUE SPECIAL CROSSING: Its where a Cheque bears across its face an addition of the name of a banker either with or without the words not negotiable that addition shall be deemed to be crossed specially.
38.WHAT IS ENDORSEMENT: According to negotiable instrument act when the maker or holder of a negotiable instrument signs the same, side of a Cheque for the purpose of negotiation.
39.WHAT IS ALLONGE: If the back side of the instrument is not sufficient to make endorsements, a piece of paper may be attached there to for making further endorsements. Such piece of paper is known as allonge.
40.WHAT IS ORDER CHEQUE/BEARER CHEQUE: A Cheque is an order Cheque if it is expressed to be payable to the order of a certain person or to a certain person without restricting its further transfer. A bearer Cheque is transferable by men delivery without endorsement. A bearer Cheque is always a bearer instrument but an order Cheque will become a bearer one when it is endorsed in black.
41.WHAT IS I/W CLNG: It is inward Cheques for collection for outward returns.
42.WHAT IS O/W CLNG: It includes outward cheques for booking collection and inward returns.
43.WHAT IS TELLER: The us name for a bank or building society cashier, ie., some one who accepts deposit and pays out cash over the counter to customer.
44.WHAT IS BANK GUARANTEE: An undertaking given by a bank to settle a debit should the debtor fails to do so. A bank guarantee can be used as a security for a loan but the banks themselves will require good cover in cash or certain indemnity before they issue.
45.WHAT IS DPN: Demand promissory note. It is promises to pay guarantee to or to the lending for society very week sectors such as agriculture and formers where the interest rate is low.
46.WHAT IS PRIORITY SECTOR LENDING: It is the lending for society very week sectors such as agriculture and formers where the interest rate is low.
47.WHAT IS SPREAD: It is spreading the areas of lending into different kinds of society where a loss in one society will be adjusted with the income from others.
48.WHAT IS CRR(Cash Reserve Ratio): Out of demand and time liabilities 10% is maintained as a cash in RBI.
49.WHAT IS SLR(Statutory Liquidity Ratio) : Out of demand and time liabilities some percent is kept as security in RBI.
50.WHAT IS LCD: It stands for low cast deposit. It includes a mixture of demand deposits ie., pure current & savings deposit.
51.WHAT IS INSURANCE: A Legal contract in which an insurer promises to pay a specified amount to another party , the insured , if a particular event such as Death (or) Loss of property happens.
52.WHAT IS MUTUAL FUND: A mutual fund is simply a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. The mutual fund will have a fund manager who is responsible for investing the pooled money into specific securities (usually stocks or bonds). When you invest in a mutual fund, you are buying shares (or portions) of the mutual fund and become a shareholder of the fund
53.WHAT IS REFINANCING OR HIREPURCHASE: A method of buying goods in which the purchase takes possession of them as soon as an initial installment of the price( a deposit) has been paid ; ownership is obtained when all the agreed number of subsequent installments have been completed.
54.WHAT IS LIQUIDITY: The extent to which an organization assets are Liquid (Assets held in cash or in something that can be readily returned into cash), enabling it to pay its debts when they fall due and also to move into new investment opportunities .
55.WHAT IS PREMINUM: (a) The consideration payable for a contract of insurance (or) life assurance. (b) An amount in excess of the nominal value of a share , bond or other security.
56.WHAT IS BONUS: An extra amount of money additional to the proceeds, which is distributed to a policy holder by an insurer who has made a profit on the investment of a Life Assurance fund.
57.WHAT IS EQUITY: It represents the stocks & shares i.e., the ordinary shares of a company , especially those of a publicly owned quoted company.
58.WHAT IS FACE VALUE OF A STOCK: The nominal value (Nominal price ) printed on the face of a security . This is also known as the par value. It may be more (or) less than the market value.
59.WHAT IS STOCK BROKING & STOCK EXCHANGE: A stock broker is an agent who buys & sells securities on a stock exchange ( A market for the sale & purchase of securities in which prices are controlled by demand & supply ) on behalf of clients and receives remuneration in the form of commission.
60.WHAT IS FLEXI BOND: A bond in which the interest i.e., the coupon rate changes according to market is called Flexi Bond.
61.WHAT IS DIVIDEND WARRENT: The Cheque issued by a company to it share holders when paying dividends. It states the Tax deducted and the net amount paid. This document must be sent by non-taxpayers to the Inland Revenue, when claiming back the tax.
62.WHO IS A MINOR: A person who has not attained 18 years of age is a minor. But if a guardian is appointed by the court for a person during the period of minority, he will remain as a minor till he/she attain the age of 21 years.
63.WHO IS A TRUSTEE & BENEFICIARY: A trust is created to look after the properties of a person, usually a deceased . The person appointed to manage such properties is called a trustee and the person for whose benefit the trust is created is called beneficiary.
64.WHO IS AN ASSIGNOR & ASSIGNEE: Assignment means transfer of an existing or future right on property of debt by one person to another. The person who transfers the property is the assignor and the person to whom it is transferred is the assignee.
65.WHAT IS INDEMNITY BOND: An undertaking by a bank’s client who has lost a document (such as a share certificate (or) bill of lading) that the bank will be held harmless against any consequences of the document’s absence if it proceeds to service the documents that have not been mislaid.
66.WHAT IS DEFERRED PAYMENT: It refers the Hire Purchase , a method of buying goods in which the ownership passes when the contract is signed.
67.WHAT IS GRANISHEE ORDER: An order made by a judge on behalf of a judgment creditor restraining a third party (often a bank) called a garnishee from paying money to the judgment debtor until sanctioned to do so by the court.
68.WHAT IS CASH CREDIT: A cash credit is an arrangement by which a customer is allowed by a banker to borrow money up to a certain limit. Such an arrangement is made against the security of tangible assets or guarantees. The amount of cash credit sanctioned need not be drawn by the customer at once. He may draw such amount as and when required. Further he can pay back the amount so withdrawn whenever he has a surplus. The interest will be charged on the actual amount utilized and for the period of utilization only. The cash credit system is for commercial and industrial concerns to get long term funds for doing regular business.
69.WHAT IS SECURED OVER DRAFT: Under A customer is allowed to withdraw over and above the credit balance in his current account upto certain limit . The interest will be charged only on the amount actually overdrawn by him.
70.WHAT IS A CREDIT CARD: A plastic card issued by a bank (or) finance organization to enable holders to obtain credit in shops , hotels , restaurants , petrol stations etc., The retailer (or) trader receives monthly payments from the credit card company equal to its total sales in the month by means of that credit card ,less a service charge.
71.WHAT IS DEBIT CARD: A plastic card issued by a bank to enable its customers with Cheque accounts to pay for goods (or) service at certain retail outlets by using the telephone network to debit their Cheque accounts directly. It is also known as payment card.
72.WHO IS SOLE PROPEREITOR: A single person owns the assets of the company . He is held responsible for his company’s liabilities.
73.WHO IS A PARTNER: 1. Partners share equally in the profit (or) loss of the partnership 2. Partners are not entitled to receive salaries. 3.Patners are not entitled to interest on their capital . 4. On dissolution the assets is settled for the creditors first and then to partners.
74.CAN A MINOR BE A PARTNER: A minor may be admitted as a partner to the benefits of a partnership firm with the consent of all partners. But he/she is not personally liable for the debts of the firm except to the extent of his share in the profits and properties of the firm.
75.WHAT IS PRIVATE LIMITED COMPANY: Any limited company that is not a public limited company. Such a company is not permitted to offer its shares for sale to public and it is free from the rules that apply to public limited companies.
76.WHAT IS PUBLIC LIMITED COMPANY: A company registered under Companies Act 1980 as a public company . It may offer shares and securities to the public . Regulation of such companies is
77.WHAT IS MEANT BY PCL: PCL stands for Packing Credit Loan. It’s the loan given for the manufacture & export of goods & its expenses made for the export of the commodity.
78.WHAT IS Pre-Shipment & Post Shipment FINANCE: The finance charges for the Pre-Shipment expenses & finance charges for the post shipment activities.
79.WHAT IS DISCOUNTING & PURCHASING OF A BILL: The term “Purchase “ is used in case of demand bills which are payable in demand , whereas the term ‘discounting’ is used in case of Usance bills which are payable on due dates. In both cases the amount of the bill less bank charges will be credited to customer’s account.
80.WHAT IS INCUMBERANCE CERTIFICATE: A lien or claim on property. A liability on real property. For example, a mortgage encumbers title to real estate because the lender has an interest in the property. a claim (as a lien) against property; specifically : an interest or right (as an easement or a lease) in real property that may diminish the value of the estate but does not prevent the conveyance of the estate
81.WHAT IS A JOINT STOCK COMPANY: A company in which the members pool their stock and trade on the basis of their joint stock. This differs from the earliest type of company . The merchant corporations (or) regulated companies of 14th century in which members tracked their own stock subject to the rules of the company.
82.WHAT IS MERCHANT BANKING: A bank that formerly specialized in financing foreign trade , an activity that often grew out of its own merchanting business they function as accepting houses.
83.WHAT IS CHIT FUND: A collection of members called a chit group makes their contribution in the form of money to collect a chit amount and they bid in an auction to be awarded with the prized money which is equal to the chit amount minus the discount and the foreman's commission.
84.WHAT IS MEANT BY NEGOTIABLE INSTRUMENT: A document of title that can be freely negotiated. Such documents are cheques and bills of exchange in which the stated payee of the instrument can negotiate the instrument by either inserting the name of a different payee(or) making the document ‘open’ by endorsing it on the reverse.
85.WHAT IS ANTE-DATED CHEQUE: A Cheque which bears a date prior to the date of its issue is known as ante-dated Cheque.
86.WHAT IS POST-DATED CHEQUE: A Cheque which bears a date subsequent to the date of its issue is called a post-dated Cheque.
87.WHAT IS STALE CHEQUE: If a Cheque bears a date before 6 months from the current date, then the Cheque becomes invalid and it’s called Stale Cheque.
88.WHAT IS LIEN: The right of one person to retain possession of goods owned by another until the possessions claim against the owner has been satisfied.
89.WHAT IS A FORGED INSTRUMENT: An instrument which illegally bears a signature of the maker of the Cheque without the knowledge of the maker (Drawer) of the Cheque.
90.WHAT IS ASSIGMENT: The act of transferring, or a document (a deed of assignment) transferring property to some other person . Examples of assignment include the transfer of rights under a contract or benefits under a trust to another person.
91.WHAT IS WAREHOUSE LOAN: It is a Loan against the security of a warehouse receipt . By this receipt a warehouse keeper acknowledges the receipt of goods for warehousing & promises to deliver them to the person mentioned their on request.
92.WHAT IS BILL OF LADING: A document acknowledging the shipment of a consignor’s goods for carriage by sea. It is used primarily when the ship is carrying goods belonging to a number of consignors (a general ship). In this case, each consignor receives a bill issued (normally by the master of the ship)on behalf of either the shipowner or a character under a charterparty. The bill serves three functions: it is a receipt for the goods it summarizes the terms of the contract of carriage; and it acts as a document of title to the goods.
93.WHAT IS BILL OF EXCHANGE: An unconditional order in writing addressed by one person (that is the drawer ) to another (drawee) and signed by the person giving it requiring the drawee to pay on demand or at a fixed or determinable future time a specified sum of money to or to the order of a specified person (the payee) or to the bearer. If the bill is payable at a future time the drawee signifies acceptance, which makes the drawee the party primarily liable upon the bill; the drawer and endorsers may also be liable upon a bill. The use of bills of exchange enables one person to transfer another an enforceable right to a sum of money. A bill of exchange in not only transferable but also negotiable , since , if a person without an enforceable right to the money transfers a bill to a holder in due course , the latter obtains a good title to it.
94.WHAT IS BILL OF ENTRY: It is the customs control copy for the proof of a foreign transaction held for the clearance of the imported goods.
95.WHO IS CALLED AUTHORISED DEALER: A bank which is licensed to hold any foreign exchange transaction by itself is referred to as authorized dealer of a foreign exchange.
96.WHAT IS TRAVELLERS CHEQUE: A Cheque issued by a Bank , Travel Agency , Credit – Card company etc., to enable a traveler to obtain cash in a foreign currency in abroad . They may be cashed at banks, exchange bureaus, restaurants etc., in abroad on proof identity.
97.WHAT IS FOREIGN EXCHANGE: A trade between two different countries which involves a transaction in foreign currency . In simple terms foreign exchange means buying and selling of currencies ( Say Dollars).
98.WHAT IS NRO ACCOUNT: When a Resident becomes a Non-Resident , the domestic resident account of the resident becomes Non-Resident Ordinary (NRO)Account . (a) Can be in the form of savings, Term Deposit. (b) Non- Repatriable.(c) Credit comes by foreign remittance only.
99.WHAT IS NRE ACCOUNT: It is Non-Resident external rupee account . (a) It can be in the form savings , Term deposit (b) No local in-flow allowed. (c) It can be Repatriable(amount can be taken & spent abroad ). (d) Only by foreign remittance.
100.WHAT IS FCNR ACCOUNT: It is a foreign currency non-resident account. (a) It is maintained in foreign currency . (b) Can be Repatriable .(C) Mainted only as a term deposits. (d) Can be closed and converted to Indian rupee when needed.
101.WHAT IS FIXED EXCHANGE RATE: A rate of exchange between one currency and another that is fixed by government and maintained by that government buying or selling its currency to support or depress its currency.
102.WHAT IS FLOATING EXCHANGE RATE: A rate of exchange between one currency and another that is permitted to float according to market forces. Most major currencies and countries now have floating exchange rates but governments and central banks intervene buying or selling currencies when rates become too high or too low.
103.WHAT IS FIXED RATE LOAN: A loan in which the interest rate is fixed at the start of the loan. It is standard for bond issue, but unusual for bank borrowing.
104.WHAT IS FLOATING RATE LOAN: A loan that does not have a fixed interest rate throughout its life. Floating-rate loans can take various forms but they are all tied to short term market indicators in the UK this is usually the London Inter Bank Offered Rate.
105.WHAT IS ECGC: Export Credit Guarantee Corporation of India Limited, was established in the year 1957 by the Government of India to strengthen the export promotion drive by covering the risk of exporting on credit. Being essentially an export promotion organization, it functions under the administrative control of the Ministry of Commerce, Government of India. It is managed by a Board of Directors comprising representatives of the Government, Reserve Bank of India, banking, and insurance and exporting community. ECGC is the fifth largest credit insurer of the world in terms of coverage of national exports. The present paid-up capital of the company is Rs.500 crores and authorized capital Rs.1000 crores. The paid-up capital is expected to be enhanced to Rs.800 crores
106.WHAT IS MEANT BY CAT-A, CAT-B&CAT-C BRANCH: CAT –A branch deals mainly into foreign exchange and which got a dealing room for bidding on the inter-bank price rates. CAT –B branch deals mainly into foreign exchange in addition to its retail transactions and can make the payment directly. But a CAT – C branch cannot make the payment for the FOREX transaction directly. It has to route through the CAT – A branch.
107.WHAT IS MICR CLEARING: The ordinary clearing instrument which is encoded by the MICR codes(16 digits) is called MICR clearing instrument.
108. WHAT IS NON-MICR CLEARING: A clearing instrument without the MICR encodings and which is cleared the same day itself (it can be Inter Bank Clearing or High Value Clearing).
109.WHAT IS NON-INTEREST INCOME (NII): It represents the service charges collected from the customer for any kind of transaction held in a bank.
110.WHAT IS CALLED NI-ACT: A government act that represents the document of title that can be freely negotiated. Such documents are Cheques and bill of exchange in which the stated payee of the instrument can negotiate the instrument by either inserting the name of a different payee or making the document ‘open’ by endorsing it (signing once the name) usually on the reverse.
111.WHAT IS SUPER SAVINGS PACK: also called rainbow savings pack where a suitable amount above the minimum balance in savings account is transferred to term deposit account where they get higher rate of interest .it is the combination of savings account and fixed deposit account
112.WHAT IS TERM LOAN: A fixed-period loan usually for 1 to 10 years that is paid back by the borrower in regular installments with interest it may be secured or unsecured.
113.WHAT IS RUNNING LOAN: A loan or advance in which both credit and debit transactions takes place within the sanction limit is called running loan ( Drawing Power will be equivalent to sanctioned limit).
114.WHAT IS “DONATIO MORTIS CAUSA”: It means a gift made in contemplation of death. A fixed deposit receipt may also be made as a subject matter of such gift. Hence a holder of a fixed deposit receipt can give it as a gift to another person in anticipation of his death. In this case it will become valid and the donee will get a good title only on the death of the donor. On the other hand, if the donee dies before the death of the donor, it will become void.
115.WHAT IS BANK STATEMENT: A regular record, issued by a bank showing the credit and debit entries in a customer’s cheque account, together with the current balance. The frequency of issue will vary with the customer’s needs and the volume of transactions going through the account. Cash dispensers enable customers to ask for a statement whenever they are needed.
Financial Documents
Bill of Exchange
Place & date of execution …………………(1)…………….…… (2) .
At/On …………………(3)…………….……, for value received, pay against this draft
to the order of ………………………….……(4)…..…………………...……………...
the sum of
…..…………………...……………...(5)…..…………………...……………...
effective payment to be made in …………(6)…………… without deduction for and free of any present or future taxes, impost, collection charges, levies or duties of any nature.
This draft is payable at …………………(7)…………….……
Drawn on: ……………………(9)……………………
…..……………(8)………………..
By
A Draft/Bill of Exchange should be filled out as follows:
(1) The Issue Date and the Name of the City and Country in which it was issued
(2) The Amount in Numbers of each Draft
(3) The Maturity Date or Tenor for each Draft
(4) The Draft will be issued to the order of Name of Exporter, which is normally also the Drawer (see (9)).
(5) The Amount in Words
(6) Effective Payment to be made in Name of Currency
(7) Each Draft is payable at Name of Domicile Bank (who will present the Draft and collect payment from the Drawee at Maturity), with their Location
(8) Box on the bottom will have the Name and full Address of the Drawee
(9) The blank area to the right of the box would contain the Name of the Drawer and the signature(s) of the authorized individual(s) who are drawing the Draft on behalf of the exporter, thereby demanding acceptance and ultimate payment
(10) This area, labeled “Accepted,” will have the authorized signature(s) of the Drawee and indicate the Maturity Date
(11) If the draft is to be accepted and also guaranteed, the Guarantor Bank will indicate their name and sign “Per Aval.” (The Guarantor Bank will normally also be the Domicile Bank (see (7)).)
Promissory Note
Place & date of execution …………………(1)…………….…… (2) .
On …………………(3)…………….……, the undersigned, for value received, promise(s) to
pay to the order of ………………………….……(4)…..…………………...……………...
the sum of
…..…………………...……………...(5)…..…………………...……………...
effective payment to be made in …………(6)…………… without deduction for and free of any present or future taxes, impost, collection charges, levies or duties of any nature.
This note is payable at …………………(7)…………….……
……………………(8)……………………
By
A Promissory Note should be filled out as follows:
(1) The Issue Date and the Name of the City and Country in which it was issued
(2) The Amount in Numbers of each Note
(3) The Maturity Date of each Note.
(4) The Note will be issued to the order of Name of Payee.
(5) The Amount in Words.
(6) Effective Payment to be made in Name of Currency
(7) Each Note is payable at Name of Domicile Bank (who will present the Note and collect payment from the Maker at Maturity), with their Location
(8) This area would contain the Name of the Maker and the signature(s) of the authorized individual(s) who are signing for the Maker, thereby promising to pay
(9) If the draft is to be guaranteed, the Guarantor Bank will indicate their name and sign “Per Aval.” (The Guarantor Bank will normally also be the Domicile Bank (see (7)).)
Place & date of execution …………………(1)…………….…… (2) .
At/On …………………(3)…………….……, for value received, pay against this draft
to the order of ………………………….……(4)…..…………………...……………...
the sum of
…..…………………...……………...(5)…..…………………...……………...
effective payment to be made in …………(6)…………… without deduction for and free of any present or future taxes, impost, collection charges, levies or duties of any nature.
This draft is payable at …………………(7)…………….……
Drawn on: ……………………(9)……………………
…..……………(8)………………..
By
A Draft/Bill of Exchange should be filled out as follows:
(1) The Issue Date and the Name of the City and Country in which it was issued
(2) The Amount in Numbers of each Draft
(3) The Maturity Date or Tenor for each Draft
(4) The Draft will be issued to the order of Name of Exporter, which is normally also the Drawer (see (9)).
(5) The Amount in Words
(6) Effective Payment to be made in Name of Currency
(7) Each Draft is payable at Name of Domicile Bank (who will present the Draft and collect payment from the Drawee at Maturity), with their Location
(8) Box on the bottom will have the Name and full Address of the Drawee
(9) The blank area to the right of the box would contain the Name of the Drawer and the signature(s) of the authorized individual(s) who are drawing the Draft on behalf of the exporter, thereby demanding acceptance and ultimate payment
(10) This area, labeled “Accepted,” will have the authorized signature(s) of the Drawee and indicate the Maturity Date
(11) If the draft is to be accepted and also guaranteed, the Guarantor Bank will indicate their name and sign “Per Aval.” (The Guarantor Bank will normally also be the Domicile Bank (see (7)).)
Promissory Note
Place & date of execution …………………(1)…………….…… (2) .
On …………………(3)…………….……, the undersigned, for value received, promise(s) to
pay to the order of ………………………….……(4)…..…………………...……………...
the sum of
…..…………………...……………...(5)…..…………………...……………...
effective payment to be made in …………(6)…………… without deduction for and free of any present or future taxes, impost, collection charges, levies or duties of any nature.
This note is payable at …………………(7)…………….……
……………………(8)……………………
By
A Promissory Note should be filled out as follows:
(1) The Issue Date and the Name of the City and Country in which it was issued
(2) The Amount in Numbers of each Note
(3) The Maturity Date of each Note.
(4) The Note will be issued to the order of Name of Payee.
(5) The Amount in Words.
(6) Effective Payment to be made in Name of Currency
(7) Each Note is payable at Name of Domicile Bank (who will present the Note and collect payment from the Maker at Maturity), with their Location
(8) This area would contain the Name of the Maker and the signature(s) of the authorized individual(s) who are signing for the Maker, thereby promising to pay
(9) If the draft is to be guaranteed, the Guarantor Bank will indicate their name and sign “Per Aval.” (The Guarantor Bank will normally also be the Domicile Bank (see (7)).)
ISBP
INTRODUCTION
At its May 2000 meeting the Commission on Banking Technique and Practice of the International Chamber of Commerce (ICC Banking Commission) established a task force to document international standard banking practice for the examination of documents presented under documentary credits issued subject to the Uniform Customs and Practice for Documentary Credits, the International Chamber of Commerce’s Publication No. 500 (UCP).
The international standard banking practices documented in this publication are consistent with the UCP and the Opinions and Decisions of the ICC Banking Commission. This document does not amend UCP. It explains how the practices articulated in the UCP are to be applied by documentary practitioners. It is, of course, recognized that the law in some countries may compel a different practice than that stated here.
No single publication can anticipate all the terms or the documents that may be used in connection with documentary credits or their interpretation under the UCP and the standard practice it reflects. However, the task force preparing this publication has endeavoured to cover terms commonly seen on a day-to-day basis and the documents most often presented under documentary credits.
It should be noted that any term in a documentary credit which modifies or affects the applicability of a provision of the UCP may also have an impact on international standard banking practice. Therefore, in considering the practices described in this publication, parties must take into account any term in a documentary credit that expressly excludes or modifies a provision in an article of the UCP. This principle is implicit throughout this publication, whether or not stated, but it is sometimes expressly repeated for purposes of emphasis or for illustration. Where examples are given, these are solely for the purpose of illustration and are not exhaustive.
This publication reflects international standard banking practice for all parties to a documentary credit. Since applicants’ obligations, rights, and remedies depend upon their undertaking with the issuing bank, the performance of the underlying transaction, and the timeliness of any objection under applicable law and practice, applicants should not assume that they may rely on these provisions in order to excuse their obligations to reimburse the issuing bank. The incorporation of this publication into the terms of a documentary credit should be discouraged, as the requirement to follow agreed practices is implicit in the UCP.
Because this publication reflects current documentary credit practice as provided by ICC national committees and individual ICC members, it will be of considerable use in the formulation of any future revision of the UCP.
PRELIMINARY CONSIDERATIONS
The application and issuance of the credit
1) The terms of a credit are independent of the underlying transaction even if a credit expressly refers to that transaction. To avoid unnecessary costs, delays, and disputes in the examination of documents, however, the applicant and beneficiary should carefully consider which documents should be required, by whom they should be produced, and the time frame for presentation.
2) The applicant bears the risk of any ambiguity in its instructions to issue or amend a credit. Unless expressly stated otherwise, a request to issue or amend a credit authorizes an issuer to supplement or develop the terms in a manner necessary or desirable to permit the use of the credit.
3) The applicant should be aware that the UCP contains Articles such as Articles 13, 20, 21, 23, 24, 26, 27, 28, 39, 40, 46 and 47 that define terms in a manner that may produce unexpected results unless the applicant fully acquaints itself with these provisions. For example, a credit requiring presentation of a marine bill of lading and containing a prohibition against transhipment will, in most cases, have to exclude UCP sub-Article 23(d) to make the prohibition against transhipment effective.
4) A credit should not require presentation of documents that are to be issued and/or countersigned by the applicant. If a credit is issued including such terms, the beneficiary must either seek amendment or comply with them and bear the risk of failure to do so.
5) Many of the problems that arise at the examination stage could be avoided or resolved by careful attention to detail in the underlying transaction, the credit application, and issuance of the credit as discussed.
GENERAL PRINCIPLES
Abbreviations
6) The use of generally accepted abbreviations, for example “Ltd.” instead of “Limited”, “Int’l” instead of “International”, “Co.” instead of “Company”, “kgs” or “kos.” instead of “kilos”, “Ind” instead of “Industry”, “mfr” instead of “manufacturer” or “mt” instead of “metric tons” - or vice versa - does not make a document discrepant.
7) Virgules (slash marks “/”) may have different meanings, and unless apparent in the context used, should not be used as a substitute for a word.
Certifications and declarations
8) A certification, declaration or the like may either be a separate document or contained within another document as required by the credit. If the certification or declaration appears in another document which is signed and dated, any certification or declaration appearing on that document does not require a separate signature or date if the certification or declaration appears to have been given by the same entity that issued and signed the document.
Corrections and alterations
9) Corrections and alterations of information or data in documents, other than documents created by the beneficiary, must appear to be authenticated by the party who issued the document or by a party authorized by the issuer to do so. Corrections and alterations in documents which have been legalized, visaed, or the like, must appear to be authenticated by the party who legalized, visaed, etc., the document. The authentication must show by whom the authentication has been made and include that party’s signature or initials. If the authentication appears to have been made by a party other than the issuer of the document, the authentication must clearly show in which capacity that party has authenticated the correction or alteration.
10) Corrections and alterations in documents issued by the beneficiary itself, except drafts, which have not been legalized, visaed or the like, need not be authenticated. See also “Drafts and calculation of maturity date”.
11) The use of multiple type styles or font sizes or handwriting in the same document does not, by itself, signify a correction or alteration.
12) Where a document contains more than one correction or alteration, either each correction must be authenticated separately or one authentication must be linked to all corrections in an appropriate way. For example, if the document shows three corrections numbered 1, 2 and 3, one statement such as “Correction numbers 1, 2 and 3 above authorized by XXX” or similar, will satisfy the requirement for authentication.
Dates
13) Drafts, transport documents and insurance documents must be dated even if a credit does not expressly so require. A requirement that a document, other than those mentioned above, be dated, may be satisfied by reference in the document to the date of another document forming part of the same presentation (e.g. where a shipping certificate is issued which states “date as per bill of lading number xxx” or similar terms). Although it is expected that a required certificate or declaration in a separate document be dated, its compliance will depend on the type of certification or declaration that has been requested, its required wording, and the wording that appears within it. Whether other documents require dating will depend on the nature and content of the document in question.
14) Any document, including a certificate of analysis, inspection certificate and pre-shipment inspection certificate, may be dated after the date of shipment. However, if a credit requires a document evidencing a pre-shipment event (e.g. pre-shipment inspection certificate), the document must, either by its title or content, indicate that the event (e.g. inspection) took place prior to or on the date of shipment. A requirement for an “inspection certificate” does not constitute a requirement to evidence a pre-shipment event. Documents must not indicate that they were issued after the date they are presented.
15) A document indicating a date of preparation and a later date of signing is deemed to be issued on the date of signing.
16) The rule for the latest date for presentation in sub-Article 43(a) of UCP applies only to presentations that are required to contain one or more original transport documents. Transport documents are those covered by UCP Articles 23-29. In any event, documents must be presented not later than the expiry date of the Credit.
17) Phrases often used to signify time on either side of a date or event:
a) “within 2 days after” indicates a period from the date of the event until 2 days after the event.
b) “not later than 2 days after” does not indicate a period, only a latest date. If an advice must not be dated prior to a specific date, the credit must so state.
c) “at least 2 days before” indicates that something must take place not later than 2 days before an event. There is no limit as to how early it may take place.
d) “within 2 days of” indicates a period 2 days prior to the event until 2 days after the event.
18) The term “within” when used in connection with a date excludes that date in the calculation of the period.
19) Dates may be expressed in different formats, e.g. the 12th of November 2003 could be expressed as 12 Nov 03, 12Nov03, 12.11.2003, 12.11.03, 2003.11.12, 11.12.03, 121103, etc. Provided that the date intended can be determined from the document or from other documents included in the presentation, any of these formats are acceptable. To avoid confusion it is recommended that the name of the month should be used instead of the number.
Documents to which the UCP Transport Articles do not apply
20) Some documents commonly used in relation to the transportation of goods, e.g. Delivery Order, Forwarder’s Certificate of Receipt, Forwarder’s Certificate of Shipment, Forwarder’s Certificate of Transport, Forwarder’s Cargo Receipt and Mate’s Receipt do not reflect a contract of carriage and are not transport documents as defined in UCP Articles 23 through 29. As such, UCP Article 43 would not apply to these documents. Therefore, these documents will be examined in the same manner as other documents for which there are no specific provisions in the UCP, i.e. under UCP Article 21. In any event, documents must be presented not later than the expiry date of the Credit.
21) Copies of transport documents are not transport documents for the purpose of UCP Articles 23-29 and 43. The UCP Transport Articles apply where there are original transport documents presented. Where a credit allows for the presentation of a copy(ies) rather than an original(s), the credit must explicitly state the details to be shown. Where copies (non-negotiable) are presented, they need not evidence signature, dates, etc.
Expressions not defined in UCP
22) Expressions such as “shipping documents”, “stale documents acceptable”, “third party documents acceptable”, and “exporting country” should not be used as they are not defined in UCP. If used in a credit, their meaning should be made apparent. If not, they have the following meaning under international standard banking practice:
a) “shipping documents” – all documents (not only transport documents), except drafts, required by the credit.
b) “stale documents acceptable” – documents presented later than 21 days after the date of shipment are acceptable as long as they are presented within the validity of the credit.
c) “third party documents acceptable” – all documents, excluding drafts but including invoices, may be issued by a party other than the beneficiary. If the issuing bank’s intent is that the transport document(s) may show a shipper other than the beneficiary, the clause is not necessary because it is already permitted by UCP sub-Article 31(iii).
d) “exporting country” – the country where the beneficiary is domiciled, and/or the country of origin of the goods, and/or the country of receipt by the carrier and/or the country from which shipment or dispatch is made.
23) Words and phrases such as “prompt”, “immediately”, “as soon as possible”, and the like should not be used in any context. If they are used banks will disregard them.
Inconsistency in the documents
24) Documents presented under a credit must not appear to be inconsistent with each other. The requirement is not that the data content be identical, merely that the documents not be inconsistent.
Issuer of documents
25) If a credit indicates that a document is to be issued by a named person or entity, this condition is satisfied if the document appears to be issued by the named person or entity. It may appear to be issued by a named person or entity by use of its letterhead, or, if there is no letterhead, the document appears to have been completed and/or signed by, or on behalf of, the named person or entity.
Language
26) Under international standard banking practice, it is expected that documents issued by the beneficiary will be in the language of the credit. When a credit states that documents in two or more languages are acceptable, a nominated bank may, in its advice of the credit, limit the number of acceptable languages as a condition of its engagement in the credit or confirmation.
Mathematical calculations
27) Detailed mathematical calculations in documents will not be checked by banks. Banks are only obliged to check total values against the credit and other required documents.
Misspellings or typing errors
28) Misspellings or typing errors that do not affect the meaning of a word or the sentence in which it occurs, do not make a document discrepant. For example, a description of the merchandise as “mashine” instead of “machine”, “fountan pen” instead of “fountain pen” or “modle” instead of “model” would not make the document discrepant. However, a description as “model 123” instead of “model 321” would not be regarded as a typing error and would constitute a discrepancy.
Multiple pages and attachments or riders
29) Unless the credit or a document provides otherwise, pages which are physically bound together, sequentially numbered or contain internal cross references, however named or entitled, are to be examined as one document, even if some of the pages are regarded as an attachment. Where a document consists of more than one page, it must be possible to determine that the pages are part of the same document.
30) If a signature and/or endorsement is required to be on a document consisting of more than one page, the signature is normally placed on the first or last page of the document, but unless the credit or the document itself indicates where a signature or endorsement is to appear, the signature or endorsement may appear anywhere on the document.
Originals and copies
31) Documents issued in more than one original may be marked “Original”, “Duplicate”, “Triplicate”, “First Original”, “Second Original”, etc. None of these markings will disqualify a document as an original.
32) Each required document must be presented in at least one original, unless the credit allows for presentation of documents as copies. The number of originals to be presented must be at least the number required by the credit, the UCP, or, where the document itself states how many originals have been issued, the number stated on the document.
33) It can sometimes be difficult to determine from the wording of a credit whether it requires an original or a copy, and to determine whether that requirement is satisfied by an original or a copy.
For example, where the credit requires:
a) “Invoice”, “One Invoice” or “Invoice in 1 copy”, it will be understood to be a requirement for an original invoice.
b) “Invoice in 4 copies”, it will be satisfied by the presentation of at least one original and the remaining number as copies of an invoice.
c) “One copy of Invoice”, it will be satisfied by presentation of a copy of an invoice. However, it is standard banking practice to accept an original instead of a copy in this construction.
34) Where an original would not be accepted in lieu of a copy, the credit must prohibit an original, e.g. “photocopy of invoice – original document not acceptable in lieu of photocopy”, or the like.
35) The ICC Banking Commission Policy Statement, document 470/871(Rev), titled “The determination of an “Original” document in the context of UCP sub-Article 20(b)” is recommended for further guidance on originals versus copies.
Shipping marks
36) The purpose of a shipping mark is to enable identification of a box, bag or package. If a credit specifies the details of a shipping mark, the document(s) mentioning the marks must show these details, but additional information is acceptable provided it is not inconsistent with the credit terms.
37) Shipping marks contained in some documents often include information in excess of what would normally be considered “shipping marks”, and could include information such as the type of goods, warnings as to the handling of fragile goods, net and/or gross weight of the goods, etc. The fact that some documents show such additional information, while others do not, is not a discrepancy.
38) Transport documents covering containerized goods will sometimes only show a container number under the heading “Shipping marks”. Other documents that show a detailed marking will not be considered to be inconsistent for that reason.
Signatures
39) Even if not stated in the credit, drafts, certificates and declarations by their nature require a signature. Transport documents and insurance documents must be signed in accordance with the provisions of the UCP.
40) The fact that a document has a box or space for a signature does not necessarily mean that such box or space must be completed with a signature. For example, banks do not require a signature in the area titled “Signature of shipper or their agent”, or similar phrases, commonly found on transport documents such as air waybills or road transport documents. If a document on its face requires a signature for its validity (e.g. “This document is not valid unless signed”, or similar terms), it must be signed.
41) A signature need not be handwritten. Facsimile signatures, perforated signatures, stamps, symbols (such as chops) or any electronic or mechanical means of authentication are sufficient. However, a photocopy of a signed document does not qualify as a signed original document, nor does a signed document transmitted through a fax-machine, absent an original signature. A requirement for a document to be “signed and stamped”, or a similar requirement, is also fulfilled by a signature and the name of the party typed, or stamped, or handwritten, etc.
42) A signature on a company’s letterhead paper will be taken to be the signature of that company, unless otherwise stated. The company’s name need not be repeated next to the signature.
Title of documents and combined documents
43) Documents may be titled as called for in the credit, bear a similar title, or be untitled. For example, a credit requirement for a “Packing List” may also be satisfied by a document containing packing details whether titled “Packing Note”, “Packing and Weight List”, etc., or an untitled document. The content of a document must appear to fulfill the function of the required document.
44) Documents listed in a credit should be presented as separate documents. If a credit requires a packing list and a weight list, such requirement will be satisfied by presentation of two separate documents, or by presentation of two original copies of a combined packing and weight list, provided such document states both packing and weight details.
DRAFTS AND CALCULATION OF MATURITY DATE
Tenor45) The tenor must be in accordance with the terms of the credit.
a) If a draft is drawn at a tenor other than sight, or other than a certain period after sight, it must be possible to establish the maturity date from the data in the draft itself.
b) As an example of where it is possible to establish a maturity date from the data in the draft, if a credit calls for drafts at a tenor 60 days after the bill of lading date, where the date of the bill of lading is 12 May 2002, the tenor could be indicated on the draft in one of the following ways:
i. “60 days after bill of lading date 12 May 2002”, or
ii. “60 days after 12 May 2002”, or
iii. “60 days after bill of lading date” and elsewhere on the face of the draft state “bill of lading date 12 May 2002”, or
iv. “60 days date” on a draft dated the same day as the date of the bill of lading,or
v. “11 July 2002”, i.e. 60 days after the bill of lading date.
c) If the tenor refers to xxx days after the bill of lading date, the on board date is deemed to be the bill of lading date even if the on board date is prior to or later than the date of issuance of the bill of lading.
d) The UCP provides no guidance where the words “from” and “after” are used to determine maturity dates of drafts. Reference to “from” and “after” in the UCP refers solely to date terminology for periods of shipment. Where the word “from” is used to establish the maturity date, international standard banking practice would exclude the date mentioned, unless the credit specifically provides that “from” is considered to include the date mentioned. Therefore, for the purposes of determining the maturity date of a time draft, the words “from” and “after” have the same effect. Calculation of the maturity commences the day following the date of the document, shipment, or other event, i.e. 10 days after or from March 1 is March 11.
e) If a bill of lading showing more than one on board notation is presented under a credit which requires drafts to be drawn, for example, at 60 days after or from bill of lading date, and the goods according to both or all on board notations were shipped from ports within a permitted geographical area or region, the earliest of these on board dates will be used for calculation of the maturity date. Example: the credit requires shipment from European port and the bill of lading evidences on board vessel “A” from Dublin August 16, and on board vessel “B” from Rotterdam August 18. The draft should reflect 60 days from the earliest on board date in a European port, i.e. August 16.
f) If a credit requires drafts to be drawn, for example, at 60 days after or from bill of lading date, and more than one set of bills of lading are presented under one draft, the date of the last bill of lading will be used for the calculation of the maturity date.
46) While the examples refer to bill of lading dates, the same principles apply to all transport documents.
Maturity date
47) If a draft states a maturity date by using an actual date, the date must have been calculated in accordance with the requirements of the credit.
48) For drafts drawn “at XXX days sight”, the maturity date is established as follows:
a) in the case of complying documents, or in the case of non-complying documents where the drawee bank has not provided a refusal of documents, the maturity date will be XXX days after the date of receipt of documents by the drawee bank.
b) in the case of non-complying documents where the drawee bank has provided a notice of refusal of documents and subsequent approval, at the latest XXX days after the date of acceptance of the draft by the drawee bank. The date of acceptance of the draft must be no later than the date of approval of the documents.
49) In all cases the drawee bank must advise the maturity date to the presenter. The calculation of tenor and maturity dates, as shown above, would also apply to credits designated as being available by deferred payment, i.e. where there is no requirement for a draft to be presented by the beneficiary.
Banking days, grace days, delays in remittance
50) Payment must be available in immediately available funds on the due date at the place where the draft or documents are payable, provided such due date is a banking day in that place. If the due date is a non-banking day, payment will be due on the first banking day following the due date unless the credit states otherwise. Delays in the remittance of funds, such as grace days, the time it takes to remit funds, etc., must not be in addition to the stated or agreed due date as defined by the draft or documents.
Endorsement
51) The draft must be endorsed, if necessary.
Amounts
52) The amount in words must accurately reflect the amount in figures if both are shown, and indicate the currency, as stated in the credit.
53) The amount must agree with that of the invoice, unless otherwise stated in the credit or as a result of UCP sub-Article 37(b).
How the draft is drawn
54) The draft must be drawn on the party stated in the credit.
55) The draft must be drawn by the beneficiary.
Drafts on the applicant
56) Credits should not be issued requiring that drafts be drawn on the applicant. If a credit calls for drafts to be drawn on the applicant, banks must consider such drafts as additional documents to be reviewed in accordance with UCP Article 21.
Corrections and alterations
57) Corrections and alterations on a draft, if any, must appear to have been authenticated by the drawer.
58) In some countries draft(s) showing corrections and alterations are not acceptable even with the drawer’s authentication. Issuing banks in such countries should make a statement in the credit to the effect that no correction or alteration must appear in the draft(s).
INVOICES
Definition of invoice
59) A credit requiring an “invoice” without further definition will be satisfied by any type of invoice presented (commercial invoice, customs invoice, tax invoice, final invoice, consular invoice, etc.). However, invoices identified as “provisional”, “pro-forma”, or the like are not acceptable unless specifically authorized in the credit. When a credit requires presentation of a commercial invoice, a document titled “invoice” will be acceptable.
Name and address
60) An invoice must appear on its face to have been issued by the beneficiary named in the credit. Telex or fax numbers, etc., forming part of the address, need not be present, or, if stated, need not be identical to that in the credit.
61) An invoice must be made out in the name of the applicant. Telex or fax numbers, etc., forming part of the address, need not be present, or, if stated, need not be identical to that in the credit.
Description of the goods and other general issues related to invoices
62) The description of the goods in the invoice must correspond with the description in the credit. There is no requirement for a mirror image. For example, details of the goods may be stated in a number of areas within the invoice which, when collated together, represents a description of the goods corresponding to that in the credit.
63) The goods description in an invoice must reflect what goods have been actually shipped. For example, where there are two types of goods shown in the credit, such as 10 trucks and 5 tractors, an invoice that reflects only shipment of 4 trucks would be acceptable provided the credit does not prohibit partial shipment. An invoice showing the entire goods description as stated in the credit, then stating what has actually been shipped, is also acceptable.
64) An invoice must evidence the value of the goods shipped. Unit price(s), if any, and currency shown in the invoice must agree with that shown in the credit. The invoice must show any discounts or deductions required in the credit. The invoice may also show a deduction covering advance payment, discount, etc., not stated in the credit.
65) If a trade term is part of the goods description in the credit, or stated in connection with the amount, the invoice must state the trade term specified, and if the description provides the source of the trade term, the same source must be identified (e.g. a credit term “CIF Singapore Incoterms 2000” would not be satisfied by “CIF Singapore Incoterms”, etc.). Charges and costs must be included within the value shown against the stated trade term in the credit and invoice. Any charges and costs shown beyond this value are not allowed.
66) Unless required by the credit, an invoice need not be signed or dated.
67) The quantity of merchandise, weights, and measurements shown on the invoice must be not inconsistent with the same quantities appearing on other documents.
68) An invoice must not show:
a) over-shipment (except as provided in UCP sub-Article 39(b)), or
b) merchandise not called for in the credit (including samples, advertising materials, etc.) even if stated to be free of charge.
69) The quantity of the goods required in the credit may vary within a tolerance of +/- 5%. This does not apply if a credit stipulates that the quantity must not be exceeded or reduced, or if a credit stipulates the quantity in terms of a stated number of packing units or individual items. A variance of up to +5% in the goods quantity does not allow the amount of the drawing to exceed the amount of the credit.
70) If partial shipments are prohibited, a tolerance of 5% less in the invoice amount is acceptable, provided that the quantity is shipped in full and that any unit price, if stated in the credit, has not been reduced. If no quantity is stated in the credit the invoice will be considered to cover the full quantity.
71) The required number of originals and copies must be presented.
72) If a credit calls for instalment shipments, each shipment must be in accordance with the instalment schedule.
OCEAN/MARINE BILLS OF LADING
(COVERING PORT-TO-PORT SHIPMENT)
Application of UCP Article 23
73) If a credit requires presentation of a transport document covering a port-to-port shipment, UCP Article 23 is applicable.
74) If a credit requires presentation of a “marine” or “ocean” transport document, UCP Article 23 applies. A transport document need not use the term “marine” or “ocean” in order to comply with UCP Article 23 provided that it covers a port-to-port shipment.
Full set of originals
75) A UCP Article 23 transport document must indicate the number of originals that have been issued. Transport documents marked “First Original”, “Second Original”, “Third Original”, “Original”, “Duplicate”, “Triplicate”, etc., or similar expressions are all originals. Bills of lading need not be marked “original” to be acceptable as an original bill of lading. See section 3.1 of ICC Publication 470/871Rev., 29 July 1999, “The determination of an “Original” document in the context of UCP 500 sub-Article 20(b)”.
Signing of bills of lading
76) Original bills of lading must bear a signature in the form described in UCP sub-Article 20(b) and the name of the carrier must appear on the face of the bill of lading, identified as the carrier.
a) If an agent signs a bill of lading on behalf of a carrier, the agent must be identified as agent, and must identify the carrier on whose behalf it is signing, unless the carrier has been identified elsewhere on the face of the bill of lading.
b) If the master (captain) signs the bill of lading, the signature of the master (captain) must be identified as “master” (“captain”). In this event, the name of the master (captain) need not be stated.
c) If an agent signs the bill of lading on behalf of the master (captain), the agent must be identified as agent and the name of the master (captain) on whose behalf it is signing must be stated.
77) If a credit states “Freight Forwarder’s Bill of Lading is acceptable” or uses a similar phrase, then the bill of lading may be signed by a freight forwarder in the capacity of a freight forwarder, without the need to identify itself as carrier or agent for the named carrier. It is not necessary to show the name of the carrier.
On board notations
78) If a pre-printed “Shipped on board” bill of lading is presented, its issuance date will be deemed to be the date of shipment unless it bears a separate dated on board notation, in which event the date of the on board notation will be deemed to be the date of shipment whether or not the on board date is before or after the issuance date of the bill of lading.
79) “Shipped in apparent good order”, “Laden on board”, “clean on board” or other phrases incorporating words such as “shipped” or “on board” have the same effect as “Shipped on board”.
Ports of loading and ports of discharge
80) While the named port of loading, as required by the credit, should appear in the port of loading field within the bill of lading, it may instead be stated in the field headed “Place of receipt” or the like, if it is clear that the goods were transported from that place of receipt by vessel, and provided there is an on board notation evidencing that the goods were loaded on that vessel at the port stated under “Place of receipt” or like term.
81) While the named port of discharge, as required by the credit, should appear in the port of discharge field within the bill of lading, it may be stated in the field headed “Place of final destination” or the like if it is clear that the goods were to be transported to that place of final destination by vessel, and provided there is a notation evidencing that the port of discharge is that stated under “Place of final destination” or like term.
82) If a Container Yard (CY) or Container Freight Station (CFS) is stated as the place of receipt and that place is the same as the stated port of loading (e.g. Place of Receipt: Hong Kong CY; Port of Loading: Hong Kong), these places are deemed to be the same, and therefore the specification of the port of loading and the name of the vessel in the “on board” notation are not necessary.
83) If a credit gives a geographical area or range of ports of loading and/or discharge (e.g. “Any European Port”), the bill of lading must indicate the actual port of loading and/or discharge, which must be within the geographical area or range quoted.
Consignee, order party, shipper and endorsement, notify party
84) If a credit requires a bill of lading to show that the goods are consigned to a named party, e.g. “consigned to Bank X” (a “straight” consignment), rather than “to order” or “to order of Bank X“, the bill of lading must not contain words such as “to order” or “to order of” that precede the name of that named party, whether typed or pre-printed. Likewise, if a credit requires the goods to be consigned “to order” or “to order of” a named party, the bill of lading must not show the goods are consigned straight to the named party.
85) If a bill of lading is issued to order, or to order of the shipper, it must be endorsed by the shipper. An endorsement indicating that it is made for or on behalf of the shipper is acceptable.
86) If a credit does not state a notify party(ies), the respective field on the bill of lading may be left blank or completed in any manner.
Transhipment and partial shipment
87) Transhipment is the unloading and reloading of goods from one vessel to another during the course of ocean carriage from the port of loading to the port of discharge stipulated in the credit. If it does not occur between these two ports, unloading and reloading is not considered to be transhipment.
88) Although transhipment may be prohibited, UCP sub-Article 23(d) nonetheless permits transhipment under certain circumstances. If, however, a credit prohibits transhipment and excludes UCP sub-Articles 23(d)(i) and (ii), a bill of lading that indicates on its face that transhipment will or may take place will be considered discrepant.
89) If a credit prohibits partial shipments, and more than one set of original bills of lading are presented covering shipment from one or more ports of loading (as specifically allowed, or within a given range, in the credit), such documents are acceptable provided that they cover the shipment of goods on the same vessel and same journey and are destined for the same port of discharge. In the event that more than one set of bills of lading are presented, and incorporate different dates of shipment, the latest of these dates of shipment will be taken for the calculation of any presentation period and must fall on or before the latest shipment date specified in the credit. Shipment on more than one vessel is a partial shipment, even if the vessels leave on the same day for the same destination.
Clean bills of lading
90) Clauses or notations on bills of lading which expressly declare a defective condition of the goods and/or packaging are not acceptable. Clauses or notations which do not expressly declare a defective condition of the goods and/or packaging (e.g. “packaging may not be sufficient for the sea journey”) do not constitute a discrepancy. A statement that the packaging “is not sufficient for the sea journey” would not be acceptable.
91) The word “clean” need not appear on a bill of lading even though the credit may require a “clean on board bill of lading” or one marked “clean on board”.
92) If the word “clean” appears on a bill of lading and has been deleted, the bill of lading will not be deemed to be claused or unclean unless it specifically bears a clause or notation declaring that the goods or packaging are defective.
Goods description
93) A goods description in the bill of lading may be shown in general terms not inconsistent with that stated in the credit.
Corrections and alterations
94) Corrections and alterations on a bill of lading must be authenticated. Such authentication must appear to have been made by the carrier, master (captain), or any of their agents (who may be different from the agent that may have issued or signed it), provided they are identified as an agent of the carrier or the master (captain).
95) Non-negotiable copies of bills of lading do not need to include any signature or authentication to any alterations or corrections that may have been made on the original.
Freight and additional costs
96) If a credit requires that a bill of lading show that freight has been paid or is payable at destination, the bill of lading must be marked accordingly.
97) Applicants and issuing banks should be specific in stating the requirements of documents to show whether freight is to be prepaid or collected.
98) If a credit states that costs additional to freight are not acceptable, a bill of lading must not indicate that costs additional to the freight have been or will be incurred. Such indication may be by express reference to additional costs or by the use of shipment terms which refer to costs associated with the loading or unloading of goods, such as Free In (FI), Free Out (FO), Free In and Out (FIO) and Free In and Out Stowed (FIOS). A reference in the transport document to costs which may be levied as a result of a delay in unloading the goods or after the goods have been unloaded, e.g. costs covering the late return of containers, is not considered to be an indication of additional costs in this context.
Goods covered by more than one bill of lading
99) If a bill of lading states that the goods in a container are covered by that bill of lading plus one or more other bills of lading, and the bill of lading states that all bills of lading must be surrendered, or words of similar effect, this means that all bills of lading related to that container must be presented in order for the container to be released. Such a bill of lading is not acceptable unless all the bills of lading form part of the same presentation under the same credit.
CHARTER PARTY BILLS OF LADING
Application of UCP Article 25100) If a credit requires presentation of a charter party bill of lading covering a port-to-port shipment, UCP Article 25 is applicable. A transport document containing any indication that it is subject to a charter party is a charter party bill of lading under UCP Article 25.
101) If a credit requires presentation of a charter party bill of lading, then a marine transport document presented containing an indication that it is subject to a charter party must fulfill the requirements of UCP Article 25.
Full set of originals
102) A UCP Article 25 transport document must indicate the number of originals that have been issued. Transport documents marked “First Original”, “Second Original”, “Third Original”, “Original”, “Duplicate”, “Triplicate”, etc., or similar expressions are all originals. Charter party bills of lading need not be marked “original” to be acceptable under a credit. See section 3.1 of ICC Publication 470/871 Rev. 29, July 1999, “The determination of an ‘Original’ document in the context of UCP 500 sub-Article 20(b)”.
Signing of charter party bills of lading
103) Original charter party bills of lading must bear a signature in the form described in UCP sub-Article 20(b).
a) If the master (captain) or owner signs the charter party bill of lading, the signature of the master (captain) or owner must be identified as “master” (“captain”) or “owner”.
b) If an agent signs the charter party bill of lading on behalf of the master (captain) or owner, the agent must be identified as agent and the name of the master (captain) or owner on whose behalf it is signing is required to be stated.
On board notations
104) If a pre-printed “Shipped on board” charter party bill of lading is presented, its issuance date will be deemed to be the date of shipment unless it bears an on board notation, in which event the date of the on board notation will be deemed to be the date of shipment whether or not the on board date is before or after the issuance date of the document.
105) “Shipped in apparent good order”, “Laden on board”, “clean on board” or other phrases incorporating words such as “shipped” or “on board” have the same effect as “shipped on board”.
Ports of loading and ports of discharge
106) If a credit gives a geographical area or range of ports of loading and/or discharge (e.g. “Any European Port”), the charter party bill of lading must indicate the actual port(s) of loading, which must be within the geographical area or range indicated but may show the geographical area or range of ports as the port of discharge.
Consignee, order party, shipper and endorsement, notify party
107) If a credit requires a charter party bill of lading be consigned to a named party (e.g. “consigned to Bank X”, rather than “to order” or “to order of Bank X”) (a “straight” consignment), the charter party bill of lading must not contain words such as “to order” or “to order of” that precede the name of that named party, whether typed or pre-printed. Likewise, if a credit requires a charter party bill of lading to be consigned “to order” or “to order of” a named party, the bill of lading must not be consigned straight to the named party.
108) If a charter party bill of lading is issued to order, or to order of the shipper, it must be endorsed by the shipper. An endorsement indicating that it is made for or on behalf of the shipper is acceptable.
109) If a credit does not state a notify party(ies), the respective field on the charter party bill of lading may be left blank or completed in any manner.
Partial shipment
110) If a credit prohibits partial shipments, and more than one set of original charter party bills of lading are presented covering shipment from one or more ports of loading (as specifically allowed, or within a given range, in the credit), such documents are acceptable, provided that they cover the shipment of goods on the same vessel and same journey and are destined for the same port of discharge, range of ports or geographical area. In the event that more than one set of charter party bills of lading are presented, and incorporate different dates of shipment, the latest of these dates of shipment will be taken for the calculation of any presentation period and must fall on or before the latest shipment date specified in the credit. Shipment on more than one vessel is a partial shipment, even if the vessels leave on the same day for the same destination.
Clean charter party bills of lading
111) Clauses or notations on charter party bills of lading, which expressly declare a defective condition of the goods and/or packaging are not acceptable. Clauses or notations that do not expressly declare a defective condition of the goods and/or packaging (e.g. “packaging may not be sufficient for the sea journey”) do not constitute a discrepancy. A statement that the packaging “is not sufficient for the sea journey” would not be acceptable.
112) The word “clean” need not appear on a charter party bill of lading even though the credit may require a “clean on board charter party bill of lading” or one marked “clean on board”.
113) If the word “clean” appears on a charter party bill of lading and is deleted, the charter party bill of lading will not be deemed to be claused or unclean unless it specifically bears a clause or notation declaring that the goods or packaging are defective.
Goods description
114) A goods description in charter party bills of lading may be shown in general terms not inconsistent with that stated in the credit.
Corrections and Alterations
115) Corrections and alterations on charter party bills of lading must be authenticated. Such authentication must appear to have been made by the owner, master (captain), or any of their agents (who may be different from the agent that may have issued or signed it), provided they are identified as an agent of the owner or the master (captain).
116) Non-negotiable copies of charter party bills of lading do not need to include any signature on, or authentication for any alterations or corrections that may have been made on the original.
Freight and additional costs
117) If a credit requires that a charter party bill of lading show that freight has been paid or is payable at destination, the charter party bill of lading must be marked accordingly.
118) Applicants and issuing banks should be specific in stating the requirements of documents to show whether freight is to be prepaid or collected.
119) If a credit states that costs additional to freight are not acceptable, a charter party bill of lading must not indicate that costs additional to the freight have been or will be incurred. Such indication may be by express reference to additional costs or by the use of shipment terms which refer to costs associated with the loading or unloading of goods, such as Free In (FI), Free Out (FO), Free In and Out (FIO) and Free In and Out Stowed (FIOS). A reference in the transport document to costs which may be levied as a result of a delay in unloading the goods, or after the goods have been unloaded, is not considered to be an indication of additional costs in this context.
MULTIMODAL TRANSPORT DOCUMENTS
Application of UCP Article 26120) If a credit requires presentation of a transport document covering transportation utilizing at least two modes of transport, and if the transport document clearly shows that it covers a shipment from the place of taking in charge and/or port, airport or place of loading to the place of final destination mentioned in the credit, UCP Article 26 is applicable. In such circumstances, a multimodal transport document must not indicate that shipment or dispatch has been effected by only one mode of transport, but it may be silent regarding the modes of transport utilized.
121) In all places where the term multimodal transport document is used within this document, it also includes the term combined transport document. A document need not be titled “Multimodal transport document” or “Combined transport document” to be acceptable under UCP Article 26, even if such expressions are used in the credit.
Full set of originals
122) A UCP Article 26 transport document must indicate the number of originals that have been issued. Transport documents marked “First Original”, “Second Original”, “Third Original”, “Original”, “Duplicate”, “Triplicate”, etc., or similar expressions are all originals. Multimodal transport documents need not be marked “original” to be acceptable under a credit. See ICC Banking Commission Decision on Original Documents (section 3.1) dated 12 July 1999.
Signing of multimodal transport documents
123) Original multimodal transport documents must bear a signature in the form described in UCP sub-Article 20(b) and the name of the carrier or multimodal transport operator must appear on the face of the multimodal transport document, identified as the carrier or multimodal transport operator.
a) If an agent signs a multimodal transport document, on behalf of the carrier or multimodal transport operator, the agent must be identified as agent, and must identify on whose behalf it is signing, unless the carrier or multimodal transport operator has been identified elsewhere on the face of the multimodal transport document.
b) If the master (captain) signs the multimodal transport document, the signature of the master (captain) must be identified as “master” (“captain”). In this event, the name of the master (captain) need not be stated.
c) If an agent signs the multimodal transport document, on behalf of the master (captain), the agent must be identified as agent and the name of the master (captain) on whose behalf it is signing must be stated.
124) If a credit states “Freight Forwarder’s Multimodal transport document is acceptable” or uses a similar phrase, then the multimodal transport document may be signed by a freight forwarder in the capacity of a freight forwarder, without the need to identify itself as carrier or multimodal transport operator or their agent. It is not necessary to show the name of the carrier or multimodal transport operator.
On board notations
125) The issuance date of a multimodal transport document will be deemed to be the date of dispatch, taking in charge or loading on board unless it bears a separate dated notation evidencing dispatch, taking in charge or loading on board from the location required by the credit, in which event the date of the notation will be deemed to be the date of shipment whether or not the date is before or after the issuance date of the document.
126) “Shipped in apparent good order”, “Laden on board”, “clean on board” or other phrases incorporating words such as “shipped” or “on board” have the same effect as “Shipped on board”.
Place of taking in charge, dispatch, loading on board and destination
127) If a credit gives a geographical range for the place of taking in charge, dispatch, loading on board and destination (e.g. “Any European Port”), the multimodal transport document must indicate the actual place of taking in charge, dispatch, loading on board and destination, which must be within the geographical area or range quoted.
Consignee, order party, shipper and endorsement, notify party
128) If a credit requires that a multimodal transport document to show that the goods are consigned to a named party, e.g. “consigned to Bank X” (a “straight” consignment), rather than “to order” or “to order of Bank X”, the multimodal transport document must not contain words such as “to order” and “to order of” that precede the name of that named party, whether typed or pre-printed. Likewise, if a credit requires the goods to be consigned “to order” or “to order of” a named party, the multimodal transport document must not show the goods are consigned straight to the named party.
129) If a multimodal transport document is issued to order, or to order of the shipper, it must be endorsed by the shipper. An endorsement indicating that it is made for or on behalf of the shipper is acceptable.
130) If a credit does not stipulate a notify party(ies), the respective field on the multimodal transport document may be left blank or completed in any manner.
Transhipment and partial shipment
131) In a multimodal transport shipment, transhipment will occur, i.e. the unloading and reloading of goods from one mode of transport to another during the course of the journey from the point of taking in charge, dispatch or loading on board, to the final destination stipulated in the credit. Should transhipment be prohibited, banks will accept a multimodal transport document evidencing that transhipment has occurred provided the entire journey is covered by one and the same multimodal transport document
132) If a credit prohibits partial shipments and more than one set of original multimodal transport documents are presented covering shipment, dispatch or taking in charge from one or more points of origin (as specifically allowed or within a given range in the credit), such documents are acceptable provided that they cover the movement of goods on the same means of conveyance and same journey and are destined for the same destination. In the event that more than one set of multimodal transport documents are presented, and if they incorporate different dates of shipment, dispatch or taking in charge, the latest of these dates will be taken for the calculation of any presentation period, and such date must fall on or before any latest date of shipment, dispatch or taking in charge specified in the credit.
133) Shipment on more than one means of conveyance (more than one truck (lorry), vessel, aircraft, etc.) is a partial shipment, even if such means of conveyance leave on the same day for the same destination.
Clean multimodal transport documents
134) Clauses or notations on multimodal transport documents that expressly declare a defective condition of the goods and/or packaging are not acceptable. Clauses or notations that do not expressly declare a defective condition of the goods and/or packaging (e.g. “packaging may not be sufficient for the journey”) do not constitute a discrepancy. A statement that the packaging “is not sufficient for the journey” would not be acceptable.
135) The word “clean” need not appear on a multimodal transport document even though the credit may require a “clean on board multimodal transport document” or one marked “clean on board”.
136) If the word “clean” appears on a multimodal transport document and has been deleted, the multimodal transport document will not be deemed to be claused or unclean unless it specifically bears a clause or notation declaring that the goods or packaging are defective.
Goods description
137) A goods description in the multimodal transport document may be shown in general terms not inconsistent with that stated in the credit.
Corrections and alterations
138) Corrections and alterations on a multimodal transport document must be authenticated. Such authentication must appear to have been made by the carrier, master (captain), multimodal transport operator, or any one of their agents who may be different from the agent that may have issued or signed it, provided they are identified as an agent of the carrier, master (captain) or multimodal transport operator.
139) Copies of multimodal transport documents do not need to include any signature on, or authentication of any alterations or corrections that may have been made on the original.
Freight and additional costs
140) If a credit requires that a multimodal transport document show that freight has been paid or is payable at destination, the multimodal transport document must be marked accordingly.
141) Applicants and issuing banks should be specific in stating the requirements of documents to show whether freight is to be prepaid or collected.
142) If a credit states that costs additional to freight are not acceptable, a multimodal transport document must not indicate that costs additional to the freight have been or will be incurred. Such indication may be by express reference to additional costs or by the use of shipment terms which refer to costs associated with the loading or unloading of goods, such as Free In (FI), Free Out (FO), Free In and Out (FIO) and Free In and Out Stowed (FIOS). A reference in the transport document to costs which may be levied as a result of a delay in unloading the goods or after the goods have been unloaded is not considered to be an indication of additional costs in this context.
Goods covered by more than one multimodal transport document
143) If a multimodal transport document states that the goods in a container are covered by that multimodal transport document plus one or more other multimodal transport documents, and the document states that all multimodal transport documents must be surrendered, or words of similar effect, this means that all multimodal transport documents related to that container must be presented in order for the container to be released. Such a multimodal transport document is not acceptable unless all the multimodal transport documents form part of the same presentation under the same credit.
AIR TRANSPORT DOCUMENTS
Application of UCP Article 27
144) If a credit requires presentation of a transport document covering an airport-to-airport shipment, UCP Article 27 is applicable.
145) If a credit required presentation of an “air waybill” or “air consignment note” or similar, UCP Article 27 applies. An air transport document need not use these terms in order to comply with UCP Article 27 provided that it covers an airport-to-airport shipment.
Original air transport documents
146) The air transport document must appear, from the face of the document, to be the “Original for Consignor/Shipper”. A requirement for a full set of originals is satisfied by the presentation of a document indicating that it is the original for consignor/shipper.
Signing of air transport documents
147) An original air transport document must bear a signature in the form described in UCP sub-Article 20(b) and the name of the carrier must appear on the face of the air transport document, identified as the carrier. If an agent signs an air transport document on behalf of a carrier, the agent must be identified as agent, and must identify the carrier on whose behalf it is signing, unless the carrier has been identified elsewhere on the face of the air transport document.
148) If a credit states “House air waybill is acceptable” or “Freight Forwarder’s air waybill is acceptable” or uses a similar phrase, then the air transport document may be signed by a freight forwarder in the capacity of a freight forwarder, without the need to identify itself as a carrier or agent for a named carrier. It is not necessary to show the name of the carrier.
Goods accepted for carriage, date of shipment, and requirement for an actual date of dispatch
149) An air transport document must indicate that the goods have been accepted for carriage.
150) If a credit indicates that an actual date of dispatch must appear on the air transport document, the document must contain a separate notation that provides this information. This date of dispatch will be considered as the date of shipment. Information contained in the boxes typically titled “For Carrier Use Only” will not be considered for determining the actual date of dispatch.
151) If no actual date of dispatch is required by the credit to be shown on the document, the date of issuance of an air transport document will be deemed to be the date of dispatch, even if the document shows a flight date and/or a flight number in the box marked “For Carrier Use Only” or similar expression. If the actual flight date is shown as a separate notation, but is not required by the credit, it will be disregarded in determining the date of shipment.
Airports of departure and destination
152) Air transport documents must indicate the airport of departure and airport of destination as stated in the credit. The identification of airports by the use of IATA codes instead of writing out the name in full (e.g. LHR instead of London Heathrow) is not a discrepancy.
153) If a credit gives a geographical area or range of airports of departure and/or destination (e.g. ”Any European Airport”), the air transport document must indicate the actual airport of departure and/or destination, which must be within that geographical area or range quoted.
Consignee, order party and notify party
154) Air transport documents should not be issued “to order” or “to order of” a named party because they are not documents of title. Even if a credit calls for an air transport document made out “to order” or “to order of” a named party, a document presented showing goods consigned to that party, without mention of “to order” or “to order of”, is acceptable.
155) If a credit does not state a notify party(ies), the respective field on the air transport document may be left blank or completed in any manner.
Transhipment and partial shipment
156) Transhipment is the unloading and reloading of goods from one aircraft to another during the course of carriage from the airport of departure to the airport of destination stipulated in the credit. If it does not occur between these two airports, unloading and reloading is not considered to be transhipment.
157) Although transhipment may be prohibited, UCP sub-Article 27(c) nonetheless permits transhipment provided the entire carriage is covered by one and the same air transport document.
158) If a credit prohibits partial shipments, and more than one air transport document is presented covering dispatch from one or more airports of departure (as specifically allowed, or within a given range, in the credit), such documents are acceptable, provided that they cover the dispatch of goods on the same aircraft and same flight, and are destined for the same airport of destination. In the event that more than one air transport document is presented incorporating different dates of shipment, the latest of these dates of shipment will be taken for the calculation of any presentation period and such date must fall on or before the latest shipment date specified in the credit.
159) Shipment on more than one aircraft is a partial shipment, even if the aircraft leave on the same day for the same destination.
Clean air transport documents
160) Clauses or notations on an air transport document which expressly declare a defective condition of the goods, and/or packaging are not acceptable. Clauses or notations on the air transport document which do not expressly declare a defective condition of the goods and/or packaging (e.g. “packaging may not be sufficient for the air journey”) do not constitute a discrepancy. Statements that the packaging “is not sufficient for the air journey” would not be acceptable.
161) The word “clean” need not appear on the air transport document even though the credit may require a “clean air waybill” or one marked “clean on board”.
162) If the word “clean” appears on an air transport document and has been deleted, the air transport document will not be deemed to be claused or unclean unless it specifically bears a clause or notation declaring that the goods or packaging are defective.
Goods description
163) A goods description in an air transport document may be shown in general terms not inconsistent with that stated in the credit.
Corrections and alterations
164) Corrections and alterations on air transport documents must be authenticated. Such authentication must appear to have been made by the carrier or any of its agents (who may be different from the agent that may have issued or signed it), provided it is identified as an agent of the carrier.
165) Copies of air transport documents do not need to include any signature of the carrier or agent (or shipper even if required by the credit to appear on the original air transport document), nor any authentication of any alterations or corrections that may have been made on the original.
Freight and additional costs
166) If a credit requires that an air transport document show that freight has been paid or is payable at destination, the air transport document must be marked accordingly.
167) Applicants and issuing banks should be specific in stating the requirements of documents to show whether freight is to be prepaid or collected.
168) If a credit states that costs additional to freight are not acceptable, an air transport document must not indicate that costs additional to the freight have been or will be incurred. Such indication may be by express reference to additional costs or by the use of shipment terms that refer to costs associated with the loading or unloading of goods. A reference in the transport document to costs which may be levied as a result of a delay in unloading the goods or after the goods have been unloaded is not considered an indication of additional costs in this context.
169) Air transport documents often have separate boxes which, by their pre-printed headings, indicate that they are for freight charges “prepaid” and for freight charges “to collect”, respectively. A requirement in a credit for an air transport document to show that freight has been prepaid will be fulfilled by a statement of the freight charges under the heading “Freight Prepaid”, or a similar expression or indication, and a requirement that an air transport document show that freight has to be collected will be fulfilled by a statement of the freight charges under the heading “Freight to Collect”, or a similar expression or indication.
ROAD, RAIL OR INLAND WATERWAY TRANSPORT DOCUMENTS
Application of UCP Article 28
170) If a credit requires presentation of a transport document covering movement by road, rail or inland waterway, UCP Article 28 is applicable.
Original and duplicate of road, rail or inland waterway transport documents
171) If a credit requires a road, rail or inland waterway transport document, the transport document presented will be accepted as an original whether or not it is marked as an original. A road transport document must show that it is the copy meant for the shipper or consignor or bear no marking indicating for whom the document has been prepared. With respect to rail waybills, the practice of many railway companies is to provide the shipper or consignor with only a duplicate (often a carbon copy) duly authenticated by the railway company’s stamp. Such a duplicate will be accepted as an original.
Carrier and signing of road, rail or inland waterway transport documents
172) The term “carrier” need not appear at the signature line provided the transport document appears to be signed by the carrier, or an agent on behalf of the carrier, if the carrier is otherwise identified as the “carrier” on the face of the transport document. International standard banking practice is to accept a railway bill evidencing date stamp by the railway station of departure without showing the name of the carrier or a named agent signing for or on behalf of the carrier. (UCP sub-Article 28(a)(i).
173) The term “carrier” used in UCP Article 28 includes terms in transport documents such as “issuing carrier”, “actual carrier”, “succeeding carrier”, and “contracting carrier”.
174) Any signature, authentication, reception stamp, or other indication of receipt on the transport document must appear to be made either by:
a) the carrier, identified as the carrier, or
b) a named agent signing for or on behalf of the carrier, and indicating the name and capacity of the carrier on whose behalf that agent is signing.
Order party and notify party
175) Transport documents which are not documents of title should not be issued “to order” or “to order of” a named party. Even if a credit calls for a transport document which is not a document of title to be made out “to order” or “to order of” a named party, such a document, showing goods consigned to that party, without mention of “to order” or “to order of”, is acceptable.
176) If a credit does not stipulate a notify party(ies), the respective field on the transport document may be left blank or completed in any manner.
Partial shipment
177) Shipment on more than one means of conveyance (more than one truck (lorry), train, vessel, etc.) is a partial shipment, even if such means of conveyance leave on the same day for the same destination.
Goods description
178) A goods description in the transport document may be shown in general terms not inconsistent with that stated in the credit.
Corrections and alterations
179) Corrections and alterations on an UCP Article 28 transport document must be authenticated. Such authentication must appear to have been made by the carrier, or any one of their named agents, who may be different from the agent that may have issued or signed it, provided they are identified as an agent of the carrier.
180) Copies of UCP Article 28 transport documents do not need to include any signature on, or authentication of any alterations or corrections that may have been made on the original.
Freight and additional costs
181) If a credit requires that a UCP Article 28 transport document show that freight has been paid or is payable at destination, the transport document must be marked accordingly.
182) Applicants and issuing banks should be specific in stating the requirements of documents to show whether freight is to be prepaid or collected.
INSURANCE DOCUMENTS
Application of UCP Articles 34-36
183) If a credit requires presentation of an insurance document, UCP Articles 34 through 36 are applicable.
Issuers of insurance documents
184) Insurance documents must appear on their face to have been issued and signed by insurance companies or underwriters or their agents. If required on the face of the insurance document or in accordance with the credit terms, all originals must appear to have been countersigned.
185) An insurance document is acceptable if issued on an insurance broker’s stationery, provided the insurance document has been signed by the insurance company or its agent, or by the underwriter or its agent. A broker may sign as agent for the named insurance company or the named underwriter.
Risks to be covered
186) The insurance document must cover the risks defined in the credit. If a credit is explicit with regard to risks to be covered, there must be no exclusions referenced in the document with respect to those risks. If a credit requires “all risks” coverage, this is satisfied by the presentation of an insurance document evidencing any “all risks” clause or notation, even if it is stated that certain risks are excluded. An insurance document indicating that it covers Institute Cargo Clauses (A) satisfies a condition in a credit calling for an “all risks” clause or notation.
187) Insurance covering the same risk for the same shipment must be covered under one document unless the insurance documents for partial cover each clearly reflect, by percentage or otherwise, the value of each insurer’s cover and that each insurer will bear their share of the liability severally and without pre-conditions relating to any other insurance cover that may have been effected for that shipment. An insurance document that clearly reflects, by percentage or otherwise, the share of liability that each insurer will bear is acceptable provided joint liability is declared, or the leading insurer states that it bears 100% of the covered risk.
188) The insurance document must show that risks are covered at least between the point of shipment, dispatch or taking in charge and the point of discharge or final destination as required by the credit.
Dates
189) Insurance documents must not bear a date of issuance which is later than the date of loading on board or dispatch or taking in charge of the goods (as applicable) at the place stated in the credit, unless it appears from the insurance document that thethat the cover is effective at the latest from the date of loading on board or dispatch or taking in charge (as applicable) of the goods at the place stated in the credit.
190) An insurance document that incorporates an expiry date must clearly indicate that such expiry date relates to the latest date that loading on board or dispatch or taking in charge of the goods (as applicable) is to occur, as opposed to an expiry date for the presentation of any claims thereunder.
Currency and amount
191) An insurance document must be issued in the currency of and, as a minimum, for the amount required by the credit. If a credit does not state a minimum percentage amount, then the minimum insurance amount must be 110% of the CIF value, or 110% of CIP value, as determined by the amounts reflected on the invoice or any other required document. A requirement for “Insurance for 110%”, or the like, is deemed to be the minimum amount of insurance coverage required. The UCP does not provide for any maximum percentage.
192) If a credit requires the insurance cover to be irrespective of percentage, the insurance document must not contain a clause stating that the insurance cover is subject to a franchise or an excess deductible.
193) If it is apparent from the credit or from the documents that the final invoice amount only represents a certain part of the gross value of the goods (e.g. due to discounts, pre-payments or the like, or because part of the value of the goods is to be paid at a later date), the calculation of insurance cover must be based on the full gross value of the goods.
Insured party and endorsement
194) An insurance document must be in the form as required by the credit and, where necessary, be endorsed by the party to whose order claims are payable. A document issued to bearer is acceptable where the credit requires an insurance document endorsed in blank and vice versa.
195) If a credit is silent as to the insured party, an insurance document evidencing that claims are payable to the order of the shipper or beneficiary would not be acceptable unless endorsed. An insurance document should be issued or endorsed so that the right to receive payment under it passes upon, or prior to, the release of the documents.
CERTIFICATES OF ORIGIN
Basic requirement196) A requirement for a certificate of origin will be satisfied by the presentation of a signed, dated document that certifies to the origin of the goods.
Issuers of certificates of origin
197) A certificate of origin must be issued by the party stated in the credit. However, if a credit requires a certificate of origin to be issued by the beneficiary, the exporter or the manufacturer, a document issued by a chamber of commerce will be deemed acceptable provided it clearly identifies the beneficiary, the exporter or the manufacturer as the case may be. If a credit does not state who is to issue the certificate, then a document issued by any party, including the beneficiary, is acceptable.
Contents of certificates of origin
198) The certificate of origin must appear to relate to the invoiced goods. The goods description in the certificate of origin may be shown in general terms not inconsistent with that stated in the credit or by any other reference indicating a relation to the goods in a required document.
199) Consignee information, if shown, must not be inconsistent with the consignee information in the transport document. However, if a credit requires a transport document to be issued “to order”, “to the order of shipper”, “to order of the issuing bank”, or “consigned to the issuing bank”, the certificate of origin may show the applicant of the credit, or another party named therein, as consignee. If a credit has been transferred, the name of the first beneficiary as consignee would also be acceptable.
200) The certificate of origin may show the consignor or exporter as a party other than the beneficiary of the credit or the shipper on the transport document.
At its May 2000 meeting the Commission on Banking Technique and Practice of the International Chamber of Commerce (ICC Banking Commission) established a task force to document international standard banking practice for the examination of documents presented under documentary credits issued subject to the Uniform Customs and Practice for Documentary Credits, the International Chamber of Commerce’s Publication No. 500 (UCP).
The international standard banking practices documented in this publication are consistent with the UCP and the Opinions and Decisions of the ICC Banking Commission. This document does not amend UCP. It explains how the practices articulated in the UCP are to be applied by documentary practitioners. It is, of course, recognized that the law in some countries may compel a different practice than that stated here.
No single publication can anticipate all the terms or the documents that may be used in connection with documentary credits or their interpretation under the UCP and the standard practice it reflects. However, the task force preparing this publication has endeavoured to cover terms commonly seen on a day-to-day basis and the documents most often presented under documentary credits.
It should be noted that any term in a documentary credit which modifies or affects the applicability of a provision of the UCP may also have an impact on international standard banking practice. Therefore, in considering the practices described in this publication, parties must take into account any term in a documentary credit that expressly excludes or modifies a provision in an article of the UCP. This principle is implicit throughout this publication, whether or not stated, but it is sometimes expressly repeated for purposes of emphasis or for illustration. Where examples are given, these are solely for the purpose of illustration and are not exhaustive.
This publication reflects international standard banking practice for all parties to a documentary credit. Since applicants’ obligations, rights, and remedies depend upon their undertaking with the issuing bank, the performance of the underlying transaction, and the timeliness of any objection under applicable law and practice, applicants should not assume that they may rely on these provisions in order to excuse their obligations to reimburse the issuing bank. The incorporation of this publication into the terms of a documentary credit should be discouraged, as the requirement to follow agreed practices is implicit in the UCP.
Because this publication reflects current documentary credit practice as provided by ICC national committees and individual ICC members, it will be of considerable use in the formulation of any future revision of the UCP.
PRELIMINARY CONSIDERATIONS
The application and issuance of the credit
1) The terms of a credit are independent of the underlying transaction even if a credit expressly refers to that transaction. To avoid unnecessary costs, delays, and disputes in the examination of documents, however, the applicant and beneficiary should carefully consider which documents should be required, by whom they should be produced, and the time frame for presentation.
2) The applicant bears the risk of any ambiguity in its instructions to issue or amend a credit. Unless expressly stated otherwise, a request to issue or amend a credit authorizes an issuer to supplement or develop the terms in a manner necessary or desirable to permit the use of the credit.
3) The applicant should be aware that the UCP contains Articles such as Articles 13, 20, 21, 23, 24, 26, 27, 28, 39, 40, 46 and 47 that define terms in a manner that may produce unexpected results unless the applicant fully acquaints itself with these provisions. For example, a credit requiring presentation of a marine bill of lading and containing a prohibition against transhipment will, in most cases, have to exclude UCP sub-Article 23(d) to make the prohibition against transhipment effective.
4) A credit should not require presentation of documents that are to be issued and/or countersigned by the applicant. If a credit is issued including such terms, the beneficiary must either seek amendment or comply with them and bear the risk of failure to do so.
5) Many of the problems that arise at the examination stage could be avoided or resolved by careful attention to detail in the underlying transaction, the credit application, and issuance of the credit as discussed.
GENERAL PRINCIPLES
Abbreviations
6) The use of generally accepted abbreviations, for example “Ltd.” instead of “Limited”, “Int’l” instead of “International”, “Co.” instead of “Company”, “kgs” or “kos.” instead of “kilos”, “Ind” instead of “Industry”, “mfr” instead of “manufacturer” or “mt” instead of “metric tons” - or vice versa - does not make a document discrepant.
7) Virgules (slash marks “/”) may have different meanings, and unless apparent in the context used, should not be used as a substitute for a word.
Certifications and declarations
8) A certification, declaration or the like may either be a separate document or contained within another document as required by the credit. If the certification or declaration appears in another document which is signed and dated, any certification or declaration appearing on that document does not require a separate signature or date if the certification or declaration appears to have been given by the same entity that issued and signed the document.
Corrections and alterations
9) Corrections and alterations of information or data in documents, other than documents created by the beneficiary, must appear to be authenticated by the party who issued the document or by a party authorized by the issuer to do so. Corrections and alterations in documents which have been legalized, visaed, or the like, must appear to be authenticated by the party who legalized, visaed, etc., the document. The authentication must show by whom the authentication has been made and include that party’s signature or initials. If the authentication appears to have been made by a party other than the issuer of the document, the authentication must clearly show in which capacity that party has authenticated the correction or alteration.
10) Corrections and alterations in documents issued by the beneficiary itself, except drafts, which have not been legalized, visaed or the like, need not be authenticated. See also “Drafts and calculation of maturity date”.
11) The use of multiple type styles or font sizes or handwriting in the same document does not, by itself, signify a correction or alteration.
12) Where a document contains more than one correction or alteration, either each correction must be authenticated separately or one authentication must be linked to all corrections in an appropriate way. For example, if the document shows three corrections numbered 1, 2 and 3, one statement such as “Correction numbers 1, 2 and 3 above authorized by XXX” or similar, will satisfy the requirement for authentication.
Dates
13) Drafts, transport documents and insurance documents must be dated even if a credit does not expressly so require. A requirement that a document, other than those mentioned above, be dated, may be satisfied by reference in the document to the date of another document forming part of the same presentation (e.g. where a shipping certificate is issued which states “date as per bill of lading number xxx” or similar terms). Although it is expected that a required certificate or declaration in a separate document be dated, its compliance will depend on the type of certification or declaration that has been requested, its required wording, and the wording that appears within it. Whether other documents require dating will depend on the nature and content of the document in question.
14) Any document, including a certificate of analysis, inspection certificate and pre-shipment inspection certificate, may be dated after the date of shipment. However, if a credit requires a document evidencing a pre-shipment event (e.g. pre-shipment inspection certificate), the document must, either by its title or content, indicate that the event (e.g. inspection) took place prior to or on the date of shipment. A requirement for an “inspection certificate” does not constitute a requirement to evidence a pre-shipment event. Documents must not indicate that they were issued after the date they are presented.
15) A document indicating a date of preparation and a later date of signing is deemed to be issued on the date of signing.
16) The rule for the latest date for presentation in sub-Article 43(a) of UCP applies only to presentations that are required to contain one or more original transport documents. Transport documents are those covered by UCP Articles 23-29. In any event, documents must be presented not later than the expiry date of the Credit.
17) Phrases often used to signify time on either side of a date or event:
a) “within 2 days after” indicates a period from the date of the event until 2 days after the event.
b) “not later than 2 days after” does not indicate a period, only a latest date. If an advice must not be dated prior to a specific date, the credit must so state.
c) “at least 2 days before” indicates that something must take place not later than 2 days before an event. There is no limit as to how early it may take place.
d) “within 2 days of” indicates a period 2 days prior to the event until 2 days after the event.
18) The term “within” when used in connection with a date excludes that date in the calculation of the period.
19) Dates may be expressed in different formats, e.g. the 12th of November 2003 could be expressed as 12 Nov 03, 12Nov03, 12.11.2003, 12.11.03, 2003.11.12, 11.12.03, 121103, etc. Provided that the date intended can be determined from the document or from other documents included in the presentation, any of these formats are acceptable. To avoid confusion it is recommended that the name of the month should be used instead of the number.
Documents to which the UCP Transport Articles do not apply
20) Some documents commonly used in relation to the transportation of goods, e.g. Delivery Order, Forwarder’s Certificate of Receipt, Forwarder’s Certificate of Shipment, Forwarder’s Certificate of Transport, Forwarder’s Cargo Receipt and Mate’s Receipt do not reflect a contract of carriage and are not transport documents as defined in UCP Articles 23 through 29. As such, UCP Article 43 would not apply to these documents. Therefore, these documents will be examined in the same manner as other documents for which there are no specific provisions in the UCP, i.e. under UCP Article 21. In any event, documents must be presented not later than the expiry date of the Credit.
21) Copies of transport documents are not transport documents for the purpose of UCP Articles 23-29 and 43. The UCP Transport Articles apply where there are original transport documents presented. Where a credit allows for the presentation of a copy(ies) rather than an original(s), the credit must explicitly state the details to be shown. Where copies (non-negotiable) are presented, they need not evidence signature, dates, etc.
Expressions not defined in UCP
22) Expressions such as “shipping documents”, “stale documents acceptable”, “third party documents acceptable”, and “exporting country” should not be used as they are not defined in UCP. If used in a credit, their meaning should be made apparent. If not, they have the following meaning under international standard banking practice:
a) “shipping documents” – all documents (not only transport documents), except drafts, required by the credit.
b) “stale documents acceptable” – documents presented later than 21 days after the date of shipment are acceptable as long as they are presented within the validity of the credit.
c) “third party documents acceptable” – all documents, excluding drafts but including invoices, may be issued by a party other than the beneficiary. If the issuing bank’s intent is that the transport document(s) may show a shipper other than the beneficiary, the clause is not necessary because it is already permitted by UCP sub-Article 31(iii).
d) “exporting country” – the country where the beneficiary is domiciled, and/or the country of origin of the goods, and/or the country of receipt by the carrier and/or the country from which shipment or dispatch is made.
23) Words and phrases such as “prompt”, “immediately”, “as soon as possible”, and the like should not be used in any context. If they are used banks will disregard them.
Inconsistency in the documents
24) Documents presented under a credit must not appear to be inconsistent with each other. The requirement is not that the data content be identical, merely that the documents not be inconsistent.
Issuer of documents
25) If a credit indicates that a document is to be issued by a named person or entity, this condition is satisfied if the document appears to be issued by the named person or entity. It may appear to be issued by a named person or entity by use of its letterhead, or, if there is no letterhead, the document appears to have been completed and/or signed by, or on behalf of, the named person or entity.
Language
26) Under international standard banking practice, it is expected that documents issued by the beneficiary will be in the language of the credit. When a credit states that documents in two or more languages are acceptable, a nominated bank may, in its advice of the credit, limit the number of acceptable languages as a condition of its engagement in the credit or confirmation.
Mathematical calculations
27) Detailed mathematical calculations in documents will not be checked by banks. Banks are only obliged to check total values against the credit and other required documents.
Misspellings or typing errors
28) Misspellings or typing errors that do not affect the meaning of a word or the sentence in which it occurs, do not make a document discrepant. For example, a description of the merchandise as “mashine” instead of “machine”, “fountan pen” instead of “fountain pen” or “modle” instead of “model” would not make the document discrepant. However, a description as “model 123” instead of “model 321” would not be regarded as a typing error and would constitute a discrepancy.
Multiple pages and attachments or riders
29) Unless the credit or a document provides otherwise, pages which are physically bound together, sequentially numbered or contain internal cross references, however named or entitled, are to be examined as one document, even if some of the pages are regarded as an attachment. Where a document consists of more than one page, it must be possible to determine that the pages are part of the same document.
30) If a signature and/or endorsement is required to be on a document consisting of more than one page, the signature is normally placed on the first or last page of the document, but unless the credit or the document itself indicates where a signature or endorsement is to appear, the signature or endorsement may appear anywhere on the document.
Originals and copies
31) Documents issued in more than one original may be marked “Original”, “Duplicate”, “Triplicate”, “First Original”, “Second Original”, etc. None of these markings will disqualify a document as an original.
32) Each required document must be presented in at least one original, unless the credit allows for presentation of documents as copies. The number of originals to be presented must be at least the number required by the credit, the UCP, or, where the document itself states how many originals have been issued, the number stated on the document.
33) It can sometimes be difficult to determine from the wording of a credit whether it requires an original or a copy, and to determine whether that requirement is satisfied by an original or a copy.
For example, where the credit requires:
a) “Invoice”, “One Invoice” or “Invoice in 1 copy”, it will be understood to be a requirement for an original invoice.
b) “Invoice in 4 copies”, it will be satisfied by the presentation of at least one original and the remaining number as copies of an invoice.
c) “One copy of Invoice”, it will be satisfied by presentation of a copy of an invoice. However, it is standard banking practice to accept an original instead of a copy in this construction.
34) Where an original would not be accepted in lieu of a copy, the credit must prohibit an original, e.g. “photocopy of invoice – original document not acceptable in lieu of photocopy”, or the like.
35) The ICC Banking Commission Policy Statement, document 470/871(Rev), titled “The determination of an “Original” document in the context of UCP sub-Article 20(b)” is recommended for further guidance on originals versus copies.
Shipping marks
36) The purpose of a shipping mark is to enable identification of a box, bag or package. If a credit specifies the details of a shipping mark, the document(s) mentioning the marks must show these details, but additional information is acceptable provided it is not inconsistent with the credit terms.
37) Shipping marks contained in some documents often include information in excess of what would normally be considered “shipping marks”, and could include information such as the type of goods, warnings as to the handling of fragile goods, net and/or gross weight of the goods, etc. The fact that some documents show such additional information, while others do not, is not a discrepancy.
38) Transport documents covering containerized goods will sometimes only show a container number under the heading “Shipping marks”. Other documents that show a detailed marking will not be considered to be inconsistent for that reason.
Signatures
39) Even if not stated in the credit, drafts, certificates and declarations by their nature require a signature. Transport documents and insurance documents must be signed in accordance with the provisions of the UCP.
40) The fact that a document has a box or space for a signature does not necessarily mean that such box or space must be completed with a signature. For example, banks do not require a signature in the area titled “Signature of shipper or their agent”, or similar phrases, commonly found on transport documents such as air waybills or road transport documents. If a document on its face requires a signature for its validity (e.g. “This document is not valid unless signed”, or similar terms), it must be signed.
41) A signature need not be handwritten. Facsimile signatures, perforated signatures, stamps, symbols (such as chops) or any electronic or mechanical means of authentication are sufficient. However, a photocopy of a signed document does not qualify as a signed original document, nor does a signed document transmitted through a fax-machine, absent an original signature. A requirement for a document to be “signed and stamped”, or a similar requirement, is also fulfilled by a signature and the name of the party typed, or stamped, or handwritten, etc.
42) A signature on a company’s letterhead paper will be taken to be the signature of that company, unless otherwise stated. The company’s name need not be repeated next to the signature.
Title of documents and combined documents
43) Documents may be titled as called for in the credit, bear a similar title, or be untitled. For example, a credit requirement for a “Packing List” may also be satisfied by a document containing packing details whether titled “Packing Note”, “Packing and Weight List”, etc., or an untitled document. The content of a document must appear to fulfill the function of the required document.
44) Documents listed in a credit should be presented as separate documents. If a credit requires a packing list and a weight list, such requirement will be satisfied by presentation of two separate documents, or by presentation of two original copies of a combined packing and weight list, provided such document states both packing and weight details.
DRAFTS AND CALCULATION OF MATURITY DATE
Tenor45) The tenor must be in accordance with the terms of the credit.
a) If a draft is drawn at a tenor other than sight, or other than a certain period after sight, it must be possible to establish the maturity date from the data in the draft itself.
b) As an example of where it is possible to establish a maturity date from the data in the draft, if a credit calls for drafts at a tenor 60 days after the bill of lading date, where the date of the bill of lading is 12 May 2002, the tenor could be indicated on the draft in one of the following ways:
i. “60 days after bill of lading date 12 May 2002”, or
ii. “60 days after 12 May 2002”, or
iii. “60 days after bill of lading date” and elsewhere on the face of the draft state “bill of lading date 12 May 2002”, or
iv. “60 days date” on a draft dated the same day as the date of the bill of lading,or
v. “11 July 2002”, i.e. 60 days after the bill of lading date.
c) If the tenor refers to xxx days after the bill of lading date, the on board date is deemed to be the bill of lading date even if the on board date is prior to or later than the date of issuance of the bill of lading.
d) The UCP provides no guidance where the words “from” and “after” are used to determine maturity dates of drafts. Reference to “from” and “after” in the UCP refers solely to date terminology for periods of shipment. Where the word “from” is used to establish the maturity date, international standard banking practice would exclude the date mentioned, unless the credit specifically provides that “from” is considered to include the date mentioned. Therefore, for the purposes of determining the maturity date of a time draft, the words “from” and “after” have the same effect. Calculation of the maturity commences the day following the date of the document, shipment, or other event, i.e. 10 days after or from March 1 is March 11.
e) If a bill of lading showing more than one on board notation is presented under a credit which requires drafts to be drawn, for example, at 60 days after or from bill of lading date, and the goods according to both or all on board notations were shipped from ports within a permitted geographical area or region, the earliest of these on board dates will be used for calculation of the maturity date. Example: the credit requires shipment from European port and the bill of lading evidences on board vessel “A” from Dublin August 16, and on board vessel “B” from Rotterdam August 18. The draft should reflect 60 days from the earliest on board date in a European port, i.e. August 16.
f) If a credit requires drafts to be drawn, for example, at 60 days after or from bill of lading date, and more than one set of bills of lading are presented under one draft, the date of the last bill of lading will be used for the calculation of the maturity date.
46) While the examples refer to bill of lading dates, the same principles apply to all transport documents.
Maturity date
47) If a draft states a maturity date by using an actual date, the date must have been calculated in accordance with the requirements of the credit.
48) For drafts drawn “at XXX days sight”, the maturity date is established as follows:
a) in the case of complying documents, or in the case of non-complying documents where the drawee bank has not provided a refusal of documents, the maturity date will be XXX days after the date of receipt of documents by the drawee bank.
b) in the case of non-complying documents where the drawee bank has provided a notice of refusal of documents and subsequent approval, at the latest XXX days after the date of acceptance of the draft by the drawee bank. The date of acceptance of the draft must be no later than the date of approval of the documents.
49) In all cases the drawee bank must advise the maturity date to the presenter. The calculation of tenor and maturity dates, as shown above, would also apply to credits designated as being available by deferred payment, i.e. where there is no requirement for a draft to be presented by the beneficiary.
Banking days, grace days, delays in remittance
50) Payment must be available in immediately available funds on the due date at the place where the draft or documents are payable, provided such due date is a banking day in that place. If the due date is a non-banking day, payment will be due on the first banking day following the due date unless the credit states otherwise. Delays in the remittance of funds, such as grace days, the time it takes to remit funds, etc., must not be in addition to the stated or agreed due date as defined by the draft or documents.
Endorsement
51) The draft must be endorsed, if necessary.
Amounts
52) The amount in words must accurately reflect the amount in figures if both are shown, and indicate the currency, as stated in the credit.
53) The amount must agree with that of the invoice, unless otherwise stated in the credit or as a result of UCP sub-Article 37(b).
How the draft is drawn
54) The draft must be drawn on the party stated in the credit.
55) The draft must be drawn by the beneficiary.
Drafts on the applicant
56) Credits should not be issued requiring that drafts be drawn on the applicant. If a credit calls for drafts to be drawn on the applicant, banks must consider such drafts as additional documents to be reviewed in accordance with UCP Article 21.
Corrections and alterations
57) Corrections and alterations on a draft, if any, must appear to have been authenticated by the drawer.
58) In some countries draft(s) showing corrections and alterations are not acceptable even with the drawer’s authentication. Issuing banks in such countries should make a statement in the credit to the effect that no correction or alteration must appear in the draft(s).
INVOICES
Definition of invoice
59) A credit requiring an “invoice” without further definition will be satisfied by any type of invoice presented (commercial invoice, customs invoice, tax invoice, final invoice, consular invoice, etc.). However, invoices identified as “provisional”, “pro-forma”, or the like are not acceptable unless specifically authorized in the credit. When a credit requires presentation of a commercial invoice, a document titled “invoice” will be acceptable.
Name and address
60) An invoice must appear on its face to have been issued by the beneficiary named in the credit. Telex or fax numbers, etc., forming part of the address, need not be present, or, if stated, need not be identical to that in the credit.
61) An invoice must be made out in the name of the applicant. Telex or fax numbers, etc., forming part of the address, need not be present, or, if stated, need not be identical to that in the credit.
Description of the goods and other general issues related to invoices
62) The description of the goods in the invoice must correspond with the description in the credit. There is no requirement for a mirror image. For example, details of the goods may be stated in a number of areas within the invoice which, when collated together, represents a description of the goods corresponding to that in the credit.
63) The goods description in an invoice must reflect what goods have been actually shipped. For example, where there are two types of goods shown in the credit, such as 10 trucks and 5 tractors, an invoice that reflects only shipment of 4 trucks would be acceptable provided the credit does not prohibit partial shipment. An invoice showing the entire goods description as stated in the credit, then stating what has actually been shipped, is also acceptable.
64) An invoice must evidence the value of the goods shipped. Unit price(s), if any, and currency shown in the invoice must agree with that shown in the credit. The invoice must show any discounts or deductions required in the credit. The invoice may also show a deduction covering advance payment, discount, etc., not stated in the credit.
65) If a trade term is part of the goods description in the credit, or stated in connection with the amount, the invoice must state the trade term specified, and if the description provides the source of the trade term, the same source must be identified (e.g. a credit term “CIF Singapore Incoterms 2000” would not be satisfied by “CIF Singapore Incoterms”, etc.). Charges and costs must be included within the value shown against the stated trade term in the credit and invoice. Any charges and costs shown beyond this value are not allowed.
66) Unless required by the credit, an invoice need not be signed or dated.
67) The quantity of merchandise, weights, and measurements shown on the invoice must be not inconsistent with the same quantities appearing on other documents.
68) An invoice must not show:
a) over-shipment (except as provided in UCP sub-Article 39(b)), or
b) merchandise not called for in the credit (including samples, advertising materials, etc.) even if stated to be free of charge.
69) The quantity of the goods required in the credit may vary within a tolerance of +/- 5%. This does not apply if a credit stipulates that the quantity must not be exceeded or reduced, or if a credit stipulates the quantity in terms of a stated number of packing units or individual items. A variance of up to +5% in the goods quantity does not allow the amount of the drawing to exceed the amount of the credit.
70) If partial shipments are prohibited, a tolerance of 5% less in the invoice amount is acceptable, provided that the quantity is shipped in full and that any unit price, if stated in the credit, has not been reduced. If no quantity is stated in the credit the invoice will be considered to cover the full quantity.
71) The required number of originals and copies must be presented.
72) If a credit calls for instalment shipments, each shipment must be in accordance with the instalment schedule.
OCEAN/MARINE BILLS OF LADING
(COVERING PORT-TO-PORT SHIPMENT)
Application of UCP Article 23
73) If a credit requires presentation of a transport document covering a port-to-port shipment, UCP Article 23 is applicable.
74) If a credit requires presentation of a “marine” or “ocean” transport document, UCP Article 23 applies. A transport document need not use the term “marine” or “ocean” in order to comply with UCP Article 23 provided that it covers a port-to-port shipment.
Full set of originals
75) A UCP Article 23 transport document must indicate the number of originals that have been issued. Transport documents marked “First Original”, “Second Original”, “Third Original”, “Original”, “Duplicate”, “Triplicate”, etc., or similar expressions are all originals. Bills of lading need not be marked “original” to be acceptable as an original bill of lading. See section 3.1 of ICC Publication 470/871Rev., 29 July 1999, “The determination of an “Original” document in the context of UCP 500 sub-Article 20(b)”.
Signing of bills of lading
76) Original bills of lading must bear a signature in the form described in UCP sub-Article 20(b) and the name of the carrier must appear on the face of the bill of lading, identified as the carrier.
a) If an agent signs a bill of lading on behalf of a carrier, the agent must be identified as agent, and must identify the carrier on whose behalf it is signing, unless the carrier has been identified elsewhere on the face of the bill of lading.
b) If the master (captain) signs the bill of lading, the signature of the master (captain) must be identified as “master” (“captain”). In this event, the name of the master (captain) need not be stated.
c) If an agent signs the bill of lading on behalf of the master (captain), the agent must be identified as agent and the name of the master (captain) on whose behalf it is signing must be stated.
77) If a credit states “Freight Forwarder’s Bill of Lading is acceptable” or uses a similar phrase, then the bill of lading may be signed by a freight forwarder in the capacity of a freight forwarder, without the need to identify itself as carrier or agent for the named carrier. It is not necessary to show the name of the carrier.
On board notations
78) If a pre-printed “Shipped on board” bill of lading is presented, its issuance date will be deemed to be the date of shipment unless it bears a separate dated on board notation, in which event the date of the on board notation will be deemed to be the date of shipment whether or not the on board date is before or after the issuance date of the bill of lading.
79) “Shipped in apparent good order”, “Laden on board”, “clean on board” or other phrases incorporating words such as “shipped” or “on board” have the same effect as “Shipped on board”.
Ports of loading and ports of discharge
80) While the named port of loading, as required by the credit, should appear in the port of loading field within the bill of lading, it may instead be stated in the field headed “Place of receipt” or the like, if it is clear that the goods were transported from that place of receipt by vessel, and provided there is an on board notation evidencing that the goods were loaded on that vessel at the port stated under “Place of receipt” or like term.
81) While the named port of discharge, as required by the credit, should appear in the port of discharge field within the bill of lading, it may be stated in the field headed “Place of final destination” or the like if it is clear that the goods were to be transported to that place of final destination by vessel, and provided there is a notation evidencing that the port of discharge is that stated under “Place of final destination” or like term.
82) If a Container Yard (CY) or Container Freight Station (CFS) is stated as the place of receipt and that place is the same as the stated port of loading (e.g. Place of Receipt: Hong Kong CY; Port of Loading: Hong Kong), these places are deemed to be the same, and therefore the specification of the port of loading and the name of the vessel in the “on board” notation are not necessary.
83) If a credit gives a geographical area or range of ports of loading and/or discharge (e.g. “Any European Port”), the bill of lading must indicate the actual port of loading and/or discharge, which must be within the geographical area or range quoted.
Consignee, order party, shipper and endorsement, notify party
84) If a credit requires a bill of lading to show that the goods are consigned to a named party, e.g. “consigned to Bank X” (a “straight” consignment), rather than “to order” or “to order of Bank X“, the bill of lading must not contain words such as “to order” or “to order of” that precede the name of that named party, whether typed or pre-printed. Likewise, if a credit requires the goods to be consigned “to order” or “to order of” a named party, the bill of lading must not show the goods are consigned straight to the named party.
85) If a bill of lading is issued to order, or to order of the shipper, it must be endorsed by the shipper. An endorsement indicating that it is made for or on behalf of the shipper is acceptable.
86) If a credit does not state a notify party(ies), the respective field on the bill of lading may be left blank or completed in any manner.
Transhipment and partial shipment
87) Transhipment is the unloading and reloading of goods from one vessel to another during the course of ocean carriage from the port of loading to the port of discharge stipulated in the credit. If it does not occur between these two ports, unloading and reloading is not considered to be transhipment.
88) Although transhipment may be prohibited, UCP sub-Article 23(d) nonetheless permits transhipment under certain circumstances. If, however, a credit prohibits transhipment and excludes UCP sub-Articles 23(d)(i) and (ii), a bill of lading that indicates on its face that transhipment will or may take place will be considered discrepant.
89) If a credit prohibits partial shipments, and more than one set of original bills of lading are presented covering shipment from one or more ports of loading (as specifically allowed, or within a given range, in the credit), such documents are acceptable provided that they cover the shipment of goods on the same vessel and same journey and are destined for the same port of discharge. In the event that more than one set of bills of lading are presented, and incorporate different dates of shipment, the latest of these dates of shipment will be taken for the calculation of any presentation period and must fall on or before the latest shipment date specified in the credit. Shipment on more than one vessel is a partial shipment, even if the vessels leave on the same day for the same destination.
Clean bills of lading
90) Clauses or notations on bills of lading which expressly declare a defective condition of the goods and/or packaging are not acceptable. Clauses or notations which do not expressly declare a defective condition of the goods and/or packaging (e.g. “packaging may not be sufficient for the sea journey”) do not constitute a discrepancy. A statement that the packaging “is not sufficient for the sea journey” would not be acceptable.
91) The word “clean” need not appear on a bill of lading even though the credit may require a “clean on board bill of lading” or one marked “clean on board”.
92) If the word “clean” appears on a bill of lading and has been deleted, the bill of lading will not be deemed to be claused or unclean unless it specifically bears a clause or notation declaring that the goods or packaging are defective.
Goods description
93) A goods description in the bill of lading may be shown in general terms not inconsistent with that stated in the credit.
Corrections and alterations
94) Corrections and alterations on a bill of lading must be authenticated. Such authentication must appear to have been made by the carrier, master (captain), or any of their agents (who may be different from the agent that may have issued or signed it), provided they are identified as an agent of the carrier or the master (captain).
95) Non-negotiable copies of bills of lading do not need to include any signature or authentication to any alterations or corrections that may have been made on the original.
Freight and additional costs
96) If a credit requires that a bill of lading show that freight has been paid or is payable at destination, the bill of lading must be marked accordingly.
97) Applicants and issuing banks should be specific in stating the requirements of documents to show whether freight is to be prepaid or collected.
98) If a credit states that costs additional to freight are not acceptable, a bill of lading must not indicate that costs additional to the freight have been or will be incurred. Such indication may be by express reference to additional costs or by the use of shipment terms which refer to costs associated with the loading or unloading of goods, such as Free In (FI), Free Out (FO), Free In and Out (FIO) and Free In and Out Stowed (FIOS). A reference in the transport document to costs which may be levied as a result of a delay in unloading the goods or after the goods have been unloaded, e.g. costs covering the late return of containers, is not considered to be an indication of additional costs in this context.
Goods covered by more than one bill of lading
99) If a bill of lading states that the goods in a container are covered by that bill of lading plus one or more other bills of lading, and the bill of lading states that all bills of lading must be surrendered, or words of similar effect, this means that all bills of lading related to that container must be presented in order for the container to be released. Such a bill of lading is not acceptable unless all the bills of lading form part of the same presentation under the same credit.
CHARTER PARTY BILLS OF LADING
Application of UCP Article 25100) If a credit requires presentation of a charter party bill of lading covering a port-to-port shipment, UCP Article 25 is applicable. A transport document containing any indication that it is subject to a charter party is a charter party bill of lading under UCP Article 25.
101) If a credit requires presentation of a charter party bill of lading, then a marine transport document presented containing an indication that it is subject to a charter party must fulfill the requirements of UCP Article 25.
Full set of originals
102) A UCP Article 25 transport document must indicate the number of originals that have been issued. Transport documents marked “First Original”, “Second Original”, “Third Original”, “Original”, “Duplicate”, “Triplicate”, etc., or similar expressions are all originals. Charter party bills of lading need not be marked “original” to be acceptable under a credit. See section 3.1 of ICC Publication 470/871 Rev. 29, July 1999, “The determination of an ‘Original’ document in the context of UCP 500 sub-Article 20(b)”.
Signing of charter party bills of lading
103) Original charter party bills of lading must bear a signature in the form described in UCP sub-Article 20(b).
a) If the master (captain) or owner signs the charter party bill of lading, the signature of the master (captain) or owner must be identified as “master” (“captain”) or “owner”.
b) If an agent signs the charter party bill of lading on behalf of the master (captain) or owner, the agent must be identified as agent and the name of the master (captain) or owner on whose behalf it is signing is required to be stated.
On board notations
104) If a pre-printed “Shipped on board” charter party bill of lading is presented, its issuance date will be deemed to be the date of shipment unless it bears an on board notation, in which event the date of the on board notation will be deemed to be the date of shipment whether or not the on board date is before or after the issuance date of the document.
105) “Shipped in apparent good order”, “Laden on board”, “clean on board” or other phrases incorporating words such as “shipped” or “on board” have the same effect as “shipped on board”.
Ports of loading and ports of discharge
106) If a credit gives a geographical area or range of ports of loading and/or discharge (e.g. “Any European Port”), the charter party bill of lading must indicate the actual port(s) of loading, which must be within the geographical area or range indicated but may show the geographical area or range of ports as the port of discharge.
Consignee, order party, shipper and endorsement, notify party
107) If a credit requires a charter party bill of lading be consigned to a named party (e.g. “consigned to Bank X”, rather than “to order” or “to order of Bank X”) (a “straight” consignment), the charter party bill of lading must not contain words such as “to order” or “to order of” that precede the name of that named party, whether typed or pre-printed. Likewise, if a credit requires a charter party bill of lading to be consigned “to order” or “to order of” a named party, the bill of lading must not be consigned straight to the named party.
108) If a charter party bill of lading is issued to order, or to order of the shipper, it must be endorsed by the shipper. An endorsement indicating that it is made for or on behalf of the shipper is acceptable.
109) If a credit does not state a notify party(ies), the respective field on the charter party bill of lading may be left blank or completed in any manner.
Partial shipment
110) If a credit prohibits partial shipments, and more than one set of original charter party bills of lading are presented covering shipment from one or more ports of loading (as specifically allowed, or within a given range, in the credit), such documents are acceptable, provided that they cover the shipment of goods on the same vessel and same journey and are destined for the same port of discharge, range of ports or geographical area. In the event that more than one set of charter party bills of lading are presented, and incorporate different dates of shipment, the latest of these dates of shipment will be taken for the calculation of any presentation period and must fall on or before the latest shipment date specified in the credit. Shipment on more than one vessel is a partial shipment, even if the vessels leave on the same day for the same destination.
Clean charter party bills of lading
111) Clauses or notations on charter party bills of lading, which expressly declare a defective condition of the goods and/or packaging are not acceptable. Clauses or notations that do not expressly declare a defective condition of the goods and/or packaging (e.g. “packaging may not be sufficient for the sea journey”) do not constitute a discrepancy. A statement that the packaging “is not sufficient for the sea journey” would not be acceptable.
112) The word “clean” need not appear on a charter party bill of lading even though the credit may require a “clean on board charter party bill of lading” or one marked “clean on board”.
113) If the word “clean” appears on a charter party bill of lading and is deleted, the charter party bill of lading will not be deemed to be claused or unclean unless it specifically bears a clause or notation declaring that the goods or packaging are defective.
Goods description
114) A goods description in charter party bills of lading may be shown in general terms not inconsistent with that stated in the credit.
Corrections and Alterations
115) Corrections and alterations on charter party bills of lading must be authenticated. Such authentication must appear to have been made by the owner, master (captain), or any of their agents (who may be different from the agent that may have issued or signed it), provided they are identified as an agent of the owner or the master (captain).
116) Non-negotiable copies of charter party bills of lading do not need to include any signature on, or authentication for any alterations or corrections that may have been made on the original.
Freight and additional costs
117) If a credit requires that a charter party bill of lading show that freight has been paid or is payable at destination, the charter party bill of lading must be marked accordingly.
118) Applicants and issuing banks should be specific in stating the requirements of documents to show whether freight is to be prepaid or collected.
119) If a credit states that costs additional to freight are not acceptable, a charter party bill of lading must not indicate that costs additional to the freight have been or will be incurred. Such indication may be by express reference to additional costs or by the use of shipment terms which refer to costs associated with the loading or unloading of goods, such as Free In (FI), Free Out (FO), Free In and Out (FIO) and Free In and Out Stowed (FIOS). A reference in the transport document to costs which may be levied as a result of a delay in unloading the goods, or after the goods have been unloaded, is not considered to be an indication of additional costs in this context.
MULTIMODAL TRANSPORT DOCUMENTS
Application of UCP Article 26120) If a credit requires presentation of a transport document covering transportation utilizing at least two modes of transport, and if the transport document clearly shows that it covers a shipment from the place of taking in charge and/or port, airport or place of loading to the place of final destination mentioned in the credit, UCP Article 26 is applicable. In such circumstances, a multimodal transport document must not indicate that shipment or dispatch has been effected by only one mode of transport, but it may be silent regarding the modes of transport utilized.
121) In all places where the term multimodal transport document is used within this document, it also includes the term combined transport document. A document need not be titled “Multimodal transport document” or “Combined transport document” to be acceptable under UCP Article 26, even if such expressions are used in the credit.
Full set of originals
122) A UCP Article 26 transport document must indicate the number of originals that have been issued. Transport documents marked “First Original”, “Second Original”, “Third Original”, “Original”, “Duplicate”, “Triplicate”, etc., or similar expressions are all originals. Multimodal transport documents need not be marked “original” to be acceptable under a credit. See ICC Banking Commission Decision on Original Documents (section 3.1) dated 12 July 1999.
Signing of multimodal transport documents
123) Original multimodal transport documents must bear a signature in the form described in UCP sub-Article 20(b) and the name of the carrier or multimodal transport operator must appear on the face of the multimodal transport document, identified as the carrier or multimodal transport operator.
a) If an agent signs a multimodal transport document, on behalf of the carrier or multimodal transport operator, the agent must be identified as agent, and must identify on whose behalf it is signing, unless the carrier or multimodal transport operator has been identified elsewhere on the face of the multimodal transport document.
b) If the master (captain) signs the multimodal transport document, the signature of the master (captain) must be identified as “master” (“captain”). In this event, the name of the master (captain) need not be stated.
c) If an agent signs the multimodal transport document, on behalf of the master (captain), the agent must be identified as agent and the name of the master (captain) on whose behalf it is signing must be stated.
124) If a credit states “Freight Forwarder’s Multimodal transport document is acceptable” or uses a similar phrase, then the multimodal transport document may be signed by a freight forwarder in the capacity of a freight forwarder, without the need to identify itself as carrier or multimodal transport operator or their agent. It is not necessary to show the name of the carrier or multimodal transport operator.
On board notations
125) The issuance date of a multimodal transport document will be deemed to be the date of dispatch, taking in charge or loading on board unless it bears a separate dated notation evidencing dispatch, taking in charge or loading on board from the location required by the credit, in which event the date of the notation will be deemed to be the date of shipment whether or not the date is before or after the issuance date of the document.
126) “Shipped in apparent good order”, “Laden on board”, “clean on board” or other phrases incorporating words such as “shipped” or “on board” have the same effect as “Shipped on board”.
Place of taking in charge, dispatch, loading on board and destination
127) If a credit gives a geographical range for the place of taking in charge, dispatch, loading on board and destination (e.g. “Any European Port”), the multimodal transport document must indicate the actual place of taking in charge, dispatch, loading on board and destination, which must be within the geographical area or range quoted.
Consignee, order party, shipper and endorsement, notify party
128) If a credit requires that a multimodal transport document to show that the goods are consigned to a named party, e.g. “consigned to Bank X” (a “straight” consignment), rather than “to order” or “to order of Bank X”, the multimodal transport document must not contain words such as “to order” and “to order of” that precede the name of that named party, whether typed or pre-printed. Likewise, if a credit requires the goods to be consigned “to order” or “to order of” a named party, the multimodal transport document must not show the goods are consigned straight to the named party.
129) If a multimodal transport document is issued to order, or to order of the shipper, it must be endorsed by the shipper. An endorsement indicating that it is made for or on behalf of the shipper is acceptable.
130) If a credit does not stipulate a notify party(ies), the respective field on the multimodal transport document may be left blank or completed in any manner.
Transhipment and partial shipment
131) In a multimodal transport shipment, transhipment will occur, i.e. the unloading and reloading of goods from one mode of transport to another during the course of the journey from the point of taking in charge, dispatch or loading on board, to the final destination stipulated in the credit. Should transhipment be prohibited, banks will accept a multimodal transport document evidencing that transhipment has occurred provided the entire journey is covered by one and the same multimodal transport document
132) If a credit prohibits partial shipments and more than one set of original multimodal transport documents are presented covering shipment, dispatch or taking in charge from one or more points of origin (as specifically allowed or within a given range in the credit), such documents are acceptable provided that they cover the movement of goods on the same means of conveyance and same journey and are destined for the same destination. In the event that more than one set of multimodal transport documents are presented, and if they incorporate different dates of shipment, dispatch or taking in charge, the latest of these dates will be taken for the calculation of any presentation period, and such date must fall on or before any latest date of shipment, dispatch or taking in charge specified in the credit.
133) Shipment on more than one means of conveyance (more than one truck (lorry), vessel, aircraft, etc.) is a partial shipment, even if such means of conveyance leave on the same day for the same destination.
Clean multimodal transport documents
134) Clauses or notations on multimodal transport documents that expressly declare a defective condition of the goods and/or packaging are not acceptable. Clauses or notations that do not expressly declare a defective condition of the goods and/or packaging (e.g. “packaging may not be sufficient for the journey”) do not constitute a discrepancy. A statement that the packaging “is not sufficient for the journey” would not be acceptable.
135) The word “clean” need not appear on a multimodal transport document even though the credit may require a “clean on board multimodal transport document” or one marked “clean on board”.
136) If the word “clean” appears on a multimodal transport document and has been deleted, the multimodal transport document will not be deemed to be claused or unclean unless it specifically bears a clause or notation declaring that the goods or packaging are defective.
Goods description
137) A goods description in the multimodal transport document may be shown in general terms not inconsistent with that stated in the credit.
Corrections and alterations
138) Corrections and alterations on a multimodal transport document must be authenticated. Such authentication must appear to have been made by the carrier, master (captain), multimodal transport operator, or any one of their agents who may be different from the agent that may have issued or signed it, provided they are identified as an agent of the carrier, master (captain) or multimodal transport operator.
139) Copies of multimodal transport documents do not need to include any signature on, or authentication of any alterations or corrections that may have been made on the original.
Freight and additional costs
140) If a credit requires that a multimodal transport document show that freight has been paid or is payable at destination, the multimodal transport document must be marked accordingly.
141) Applicants and issuing banks should be specific in stating the requirements of documents to show whether freight is to be prepaid or collected.
142) If a credit states that costs additional to freight are not acceptable, a multimodal transport document must not indicate that costs additional to the freight have been or will be incurred. Such indication may be by express reference to additional costs or by the use of shipment terms which refer to costs associated with the loading or unloading of goods, such as Free In (FI), Free Out (FO), Free In and Out (FIO) and Free In and Out Stowed (FIOS). A reference in the transport document to costs which may be levied as a result of a delay in unloading the goods or after the goods have been unloaded is not considered to be an indication of additional costs in this context.
Goods covered by more than one multimodal transport document
143) If a multimodal transport document states that the goods in a container are covered by that multimodal transport document plus one or more other multimodal transport documents, and the document states that all multimodal transport documents must be surrendered, or words of similar effect, this means that all multimodal transport documents related to that container must be presented in order for the container to be released. Such a multimodal transport document is not acceptable unless all the multimodal transport documents form part of the same presentation under the same credit.
AIR TRANSPORT DOCUMENTS
Application of UCP Article 27
144) If a credit requires presentation of a transport document covering an airport-to-airport shipment, UCP Article 27 is applicable.
145) If a credit required presentation of an “air waybill” or “air consignment note” or similar, UCP Article 27 applies. An air transport document need not use these terms in order to comply with UCP Article 27 provided that it covers an airport-to-airport shipment.
Original air transport documents
146) The air transport document must appear, from the face of the document, to be the “Original for Consignor/Shipper”. A requirement for a full set of originals is satisfied by the presentation of a document indicating that it is the original for consignor/shipper.
Signing of air transport documents
147) An original air transport document must bear a signature in the form described in UCP sub-Article 20(b) and the name of the carrier must appear on the face of the air transport document, identified as the carrier. If an agent signs an air transport document on behalf of a carrier, the agent must be identified as agent, and must identify the carrier on whose behalf it is signing, unless the carrier has been identified elsewhere on the face of the air transport document.
148) If a credit states “House air waybill is acceptable” or “Freight Forwarder’s air waybill is acceptable” or uses a similar phrase, then the air transport document may be signed by a freight forwarder in the capacity of a freight forwarder, without the need to identify itself as a carrier or agent for a named carrier. It is not necessary to show the name of the carrier.
Goods accepted for carriage, date of shipment, and requirement for an actual date of dispatch
149) An air transport document must indicate that the goods have been accepted for carriage.
150) If a credit indicates that an actual date of dispatch must appear on the air transport document, the document must contain a separate notation that provides this information. This date of dispatch will be considered as the date of shipment. Information contained in the boxes typically titled “For Carrier Use Only” will not be considered for determining the actual date of dispatch.
151) If no actual date of dispatch is required by the credit to be shown on the document, the date of issuance of an air transport document will be deemed to be the date of dispatch, even if the document shows a flight date and/or a flight number in the box marked “For Carrier Use Only” or similar expression. If the actual flight date is shown as a separate notation, but is not required by the credit, it will be disregarded in determining the date of shipment.
Airports of departure and destination
152) Air transport documents must indicate the airport of departure and airport of destination as stated in the credit. The identification of airports by the use of IATA codes instead of writing out the name in full (e.g. LHR instead of London Heathrow) is not a discrepancy.
153) If a credit gives a geographical area or range of airports of departure and/or destination (e.g. ”Any European Airport”), the air transport document must indicate the actual airport of departure and/or destination, which must be within that geographical area or range quoted.
Consignee, order party and notify party
154) Air transport documents should not be issued “to order” or “to order of” a named party because they are not documents of title. Even if a credit calls for an air transport document made out “to order” or “to order of” a named party, a document presented showing goods consigned to that party, without mention of “to order” or “to order of”, is acceptable.
155) If a credit does not state a notify party(ies), the respective field on the air transport document may be left blank or completed in any manner.
Transhipment and partial shipment
156) Transhipment is the unloading and reloading of goods from one aircraft to another during the course of carriage from the airport of departure to the airport of destination stipulated in the credit. If it does not occur between these two airports, unloading and reloading is not considered to be transhipment.
157) Although transhipment may be prohibited, UCP sub-Article 27(c) nonetheless permits transhipment provided the entire carriage is covered by one and the same air transport document.
158) If a credit prohibits partial shipments, and more than one air transport document is presented covering dispatch from one or more airports of departure (as specifically allowed, or within a given range, in the credit), such documents are acceptable, provided that they cover the dispatch of goods on the same aircraft and same flight, and are destined for the same airport of destination. In the event that more than one air transport document is presented incorporating different dates of shipment, the latest of these dates of shipment will be taken for the calculation of any presentation period and such date must fall on or before the latest shipment date specified in the credit.
159) Shipment on more than one aircraft is a partial shipment, even if the aircraft leave on the same day for the same destination.
Clean air transport documents
160) Clauses or notations on an air transport document which expressly declare a defective condition of the goods, and/or packaging are not acceptable. Clauses or notations on the air transport document which do not expressly declare a defective condition of the goods and/or packaging (e.g. “packaging may not be sufficient for the air journey”) do not constitute a discrepancy. Statements that the packaging “is not sufficient for the air journey” would not be acceptable.
161) The word “clean” need not appear on the air transport document even though the credit may require a “clean air waybill” or one marked “clean on board”.
162) If the word “clean” appears on an air transport document and has been deleted, the air transport document will not be deemed to be claused or unclean unless it specifically bears a clause or notation declaring that the goods or packaging are defective.
Goods description
163) A goods description in an air transport document may be shown in general terms not inconsistent with that stated in the credit.
Corrections and alterations
164) Corrections and alterations on air transport documents must be authenticated. Such authentication must appear to have been made by the carrier or any of its agents (who may be different from the agent that may have issued or signed it), provided it is identified as an agent of the carrier.
165) Copies of air transport documents do not need to include any signature of the carrier or agent (or shipper even if required by the credit to appear on the original air transport document), nor any authentication of any alterations or corrections that may have been made on the original.
Freight and additional costs
166) If a credit requires that an air transport document show that freight has been paid or is payable at destination, the air transport document must be marked accordingly.
167) Applicants and issuing banks should be specific in stating the requirements of documents to show whether freight is to be prepaid or collected.
168) If a credit states that costs additional to freight are not acceptable, an air transport document must not indicate that costs additional to the freight have been or will be incurred. Such indication may be by express reference to additional costs or by the use of shipment terms that refer to costs associated with the loading or unloading of goods. A reference in the transport document to costs which may be levied as a result of a delay in unloading the goods or after the goods have been unloaded is not considered an indication of additional costs in this context.
169) Air transport documents often have separate boxes which, by their pre-printed headings, indicate that they are for freight charges “prepaid” and for freight charges “to collect”, respectively. A requirement in a credit for an air transport document to show that freight has been prepaid will be fulfilled by a statement of the freight charges under the heading “Freight Prepaid”, or a similar expression or indication, and a requirement that an air transport document show that freight has to be collected will be fulfilled by a statement of the freight charges under the heading “Freight to Collect”, or a similar expression or indication.
ROAD, RAIL OR INLAND WATERWAY TRANSPORT DOCUMENTS
Application of UCP Article 28
170) If a credit requires presentation of a transport document covering movement by road, rail or inland waterway, UCP Article 28 is applicable.
Original and duplicate of road, rail or inland waterway transport documents
171) If a credit requires a road, rail or inland waterway transport document, the transport document presented will be accepted as an original whether or not it is marked as an original. A road transport document must show that it is the copy meant for the shipper or consignor or bear no marking indicating for whom the document has been prepared. With respect to rail waybills, the practice of many railway companies is to provide the shipper or consignor with only a duplicate (often a carbon copy) duly authenticated by the railway company’s stamp. Such a duplicate will be accepted as an original.
Carrier and signing of road, rail or inland waterway transport documents
172) The term “carrier” need not appear at the signature line provided the transport document appears to be signed by the carrier, or an agent on behalf of the carrier, if the carrier is otherwise identified as the “carrier” on the face of the transport document. International standard banking practice is to accept a railway bill evidencing date stamp by the railway station of departure without showing the name of the carrier or a named agent signing for or on behalf of the carrier. (UCP sub-Article 28(a)(i).
173) The term “carrier” used in UCP Article 28 includes terms in transport documents such as “issuing carrier”, “actual carrier”, “succeeding carrier”, and “contracting carrier”.
174) Any signature, authentication, reception stamp, or other indication of receipt on the transport document must appear to be made either by:
a) the carrier, identified as the carrier, or
b) a named agent signing for or on behalf of the carrier, and indicating the name and capacity of the carrier on whose behalf that agent is signing.
Order party and notify party
175) Transport documents which are not documents of title should not be issued “to order” or “to order of” a named party. Even if a credit calls for a transport document which is not a document of title to be made out “to order” or “to order of” a named party, such a document, showing goods consigned to that party, without mention of “to order” or “to order of”, is acceptable.
176) If a credit does not stipulate a notify party(ies), the respective field on the transport document may be left blank or completed in any manner.
Partial shipment
177) Shipment on more than one means of conveyance (more than one truck (lorry), train, vessel, etc.) is a partial shipment, even if such means of conveyance leave on the same day for the same destination.
Goods description
178) A goods description in the transport document may be shown in general terms not inconsistent with that stated in the credit.
Corrections and alterations
179) Corrections and alterations on an UCP Article 28 transport document must be authenticated. Such authentication must appear to have been made by the carrier, or any one of their named agents, who may be different from the agent that may have issued or signed it, provided they are identified as an agent of the carrier.
180) Copies of UCP Article 28 transport documents do not need to include any signature on, or authentication of any alterations or corrections that may have been made on the original.
Freight and additional costs
181) If a credit requires that a UCP Article 28 transport document show that freight has been paid or is payable at destination, the transport document must be marked accordingly.
182) Applicants and issuing banks should be specific in stating the requirements of documents to show whether freight is to be prepaid or collected.
INSURANCE DOCUMENTS
Application of UCP Articles 34-36
183) If a credit requires presentation of an insurance document, UCP Articles 34 through 36 are applicable.
Issuers of insurance documents
184) Insurance documents must appear on their face to have been issued and signed by insurance companies or underwriters or their agents. If required on the face of the insurance document or in accordance with the credit terms, all originals must appear to have been countersigned.
185) An insurance document is acceptable if issued on an insurance broker’s stationery, provided the insurance document has been signed by the insurance company or its agent, or by the underwriter or its agent. A broker may sign as agent for the named insurance company or the named underwriter.
Risks to be covered
186) The insurance document must cover the risks defined in the credit. If a credit is explicit with regard to risks to be covered, there must be no exclusions referenced in the document with respect to those risks. If a credit requires “all risks” coverage, this is satisfied by the presentation of an insurance document evidencing any “all risks” clause or notation, even if it is stated that certain risks are excluded. An insurance document indicating that it covers Institute Cargo Clauses (A) satisfies a condition in a credit calling for an “all risks” clause or notation.
187) Insurance covering the same risk for the same shipment must be covered under one document unless the insurance documents for partial cover each clearly reflect, by percentage or otherwise, the value of each insurer’s cover and that each insurer will bear their share of the liability severally and without pre-conditions relating to any other insurance cover that may have been effected for that shipment. An insurance document that clearly reflects, by percentage or otherwise, the share of liability that each insurer will bear is acceptable provided joint liability is declared, or the leading insurer states that it bears 100% of the covered risk.
188) The insurance document must show that risks are covered at least between the point of shipment, dispatch or taking in charge and the point of discharge or final destination as required by the credit.
Dates
189) Insurance documents must not bear a date of issuance which is later than the date of loading on board or dispatch or taking in charge of the goods (as applicable) at the place stated in the credit, unless it appears from the insurance document that thethat the cover is effective at the latest from the date of loading on board or dispatch or taking in charge (as applicable) of the goods at the place stated in the credit.
190) An insurance document that incorporates an expiry date must clearly indicate that such expiry date relates to the latest date that loading on board or dispatch or taking in charge of the goods (as applicable) is to occur, as opposed to an expiry date for the presentation of any claims thereunder.
Currency and amount
191) An insurance document must be issued in the currency of and, as a minimum, for the amount required by the credit. If a credit does not state a minimum percentage amount, then the minimum insurance amount must be 110% of the CIF value, or 110% of CIP value, as determined by the amounts reflected on the invoice or any other required document. A requirement for “Insurance for 110%”, or the like, is deemed to be the minimum amount of insurance coverage required. The UCP does not provide for any maximum percentage.
192) If a credit requires the insurance cover to be irrespective of percentage, the insurance document must not contain a clause stating that the insurance cover is subject to a franchise or an excess deductible.
193) If it is apparent from the credit or from the documents that the final invoice amount only represents a certain part of the gross value of the goods (e.g. due to discounts, pre-payments or the like, or because part of the value of the goods is to be paid at a later date), the calculation of insurance cover must be based on the full gross value of the goods.
Insured party and endorsement
194) An insurance document must be in the form as required by the credit and, where necessary, be endorsed by the party to whose order claims are payable. A document issued to bearer is acceptable where the credit requires an insurance document endorsed in blank and vice versa.
195) If a credit is silent as to the insured party, an insurance document evidencing that claims are payable to the order of the shipper or beneficiary would not be acceptable unless endorsed. An insurance document should be issued or endorsed so that the right to receive payment under it passes upon, or prior to, the release of the documents.
CERTIFICATES OF ORIGIN
Basic requirement196) A requirement for a certificate of origin will be satisfied by the presentation of a signed, dated document that certifies to the origin of the goods.
Issuers of certificates of origin
197) A certificate of origin must be issued by the party stated in the credit. However, if a credit requires a certificate of origin to be issued by the beneficiary, the exporter or the manufacturer, a document issued by a chamber of commerce will be deemed acceptable provided it clearly identifies the beneficiary, the exporter or the manufacturer as the case may be. If a credit does not state who is to issue the certificate, then a document issued by any party, including the beneficiary, is acceptable.
Contents of certificates of origin
198) The certificate of origin must appear to relate to the invoiced goods. The goods description in the certificate of origin may be shown in general terms not inconsistent with that stated in the credit or by any other reference indicating a relation to the goods in a required document.
199) Consignee information, if shown, must not be inconsistent with the consignee information in the transport document. However, if a credit requires a transport document to be issued “to order”, “to the order of shipper”, “to order of the issuing bank”, or “consigned to the issuing bank”, the certificate of origin may show the applicant of the credit, or another party named therein, as consignee. If a credit has been transferred, the name of the first beneficiary as consignee would also be acceptable.
200) The certificate of origin may show the consignor or exporter as a party other than the beneficiary of the credit or the shipper on the transport document.
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