Final presentation on document checking may 2021

Document Checking– SIMPLIFIED – Zahoor N Dattu
INTRODUCTION
The practices expressed herein are consistent with
UCPDC Publication No.600. However, this
presentation is not intended to be utilised as the
sole point of reference for the examiners.
Examiners should understand their bank internal
policies and procedures. Government regulation
will also define, in many cases, what action must
or must not be taken. Also the examiner should
be familiar with all Articles of UCP 600.

INTRODUCTION
While it is recognised that the presentation such
as this cannot address all situations that the
examiner may encounter, it is the opinion of the
speaker that the principles expressed herein
accurately reflect standard banking practice
regarding document examination

INTRODUCTION
The application of these principles , in conjunction
with each bank’s internal operating policies and
procedures, local law and regulation, and UCP 600
, will enable the examiner to successfully deal with
almost any examination eventuality . Lastly, no
statement of standard practice can, by itself , fully
substitute for the examiner’s good judgment.
Document examination is an art not a science.

 With reference to Letter of credit
 With reference to LC Amendment
 With reference to relevant UCP Articles
 With reference to another
 With reference to ISBP including Generic aspects of
document examination – not specific to any
particular article or document.
 With reference to bank’s practices and setting a
standard.
Examination of documents

 Form of Credit
 Irrevocable – As per UCP 600 all letters of credit are
deemed to be irrevocable unless otherwise
mentioned in the credit. UCP 600 does not
specifically cover revocable credits. Revocable
credits can be issued under UCP 600 but the LC
must show the condition of revocability.
 Transferable
 Standby
With reference to Letter of Credit

 Date of Issue
 What is the swift manual saying for the field 31C – Is
it Mandatory field ? – No - it is not Mandatory.
 So if the date is not shown – then what is the date
of issue of the LC?
 The date of the message is the date of issue of the
credit.
 Does credit prohibit a document dated earlier than
the date of the credit ?

 Applicable Rules – 40E - Mandatory
 UCPLATESTVERSION
 EUCPLATESTVERSION
 UCPURRLATESTVERSION
 EUCPURRLATESTVERSION
 ISPLATESTVERSION
 OTHER - what is the meaning ? Means UCP
600 or ISP 98 does not apply – Hence field 47A
(Additional Conditions) of swift message should
indicate the applicable rules or law applying thereto

 Date and Place of Expiry
 LC is not available after the date of expiry
except where sub-article 29(a) applies
 Documents must be presented at the place
of expiry. Meaning that it must be
presented at the place where it is
available. However, the additional place of
presentation is the place of the Issuing
Bank also. (Art 6(d)(ii))

 Beneficiary
 Beneficiary address
 When the address of the beneficiary appear in any
stipulated document, it need not be the same as
that stated in the credit or in any other stipulated
document, but must be within the same country as
the respective address mentioned in the credit.
Contact details (telefax, telephone, email and the
like) stated as part of the beneficiary's address will
be disregarded (Art 14 (j))

 Credit Amount
 Up to
 Maximum
 Not exceeding
 About or approximately
 Refer article 30 for less than 5% of the credit
amount that is permissible.

 Available with and by
 Is your bank authorised to act as a nominated bank
? and if so, how is the credit available ?
 Sight payment
 Deferred payment
 Sight negotiation credit
 Usance negotiation credit
 Acceptance credit

 Drafts
 Is the draft drawn as per the requirement of the
credit ?
 The amount of the draft should be the invoice value
unless there is a stipulation indicating otherwise .
The draft may be drawn for an amount less than the
invoice amount. See UCP 600, Sub- Article 18 (b).
 Is it enfaced, marked “Drawn under Lc No…”
 Does the amount in words and figure agree ?
 Is it properly endorsed ?
 Do you think that draft should be dated and signed
even if the credit is silent ?

 Partial shipment
 Where partial shipment prohibited, ensure drawings
and full shipment is consistent with that of LC.
 Keep in mind that unless otherwise stipulated in the
credit, the amount and goods should be within the
5 percent tolerance level as this is permissible as per
article 30(b) and 30 (c)

 Transhipment
 Transhipment means unloading from one vessel
and re-loading to another vessel during the carriage
from the port of loading to the port of discharge
stated in the credit
 Where shipment is effected in containers, trailers or
LASH barges, this is not considered to be
transhipment as per art 20 (c) (ii)

 Place of taking in charge/dispatch from/place of
receipt and/or port of loading. Airport of departure
and/or port of discharge/airport of destination
and/or place of final destination/for transportation
to/place of delivery
 Pay attention to the type of document required by
looking at appropriate swift fields also
 Be careful of special treatment for intend vessel and
intended port

 Latest date of shipment
 Ensure that transport document is not dated after
the date stipulated in the credit
 If no date is shown in the credit, the transport
document must not be dated later the expiry date
of the credit.

 Description of goods
 Corresponds in the invoice to that of the credit.
Other documents do not show goods description in
conflict with invoice. Incoterms must be shown in
the invoice if shipment terms are shown in the
documentary credit.

 Documents required
 Read Swift field 46A and also read elsewhere –
possibility would be there that apart from the said
field, documents required would be scattered in any
part of the swift.

 Additional Conditions
 Read Swift field 47A and check whether they are
non-documentary conditions. If no document is
stipulated, the condition must be considered as not
stated and should be disregarded. Refer Sub-Article
14 (h)

 Period for presentation – 21 days if
credit is silent.
 Check field 48 – again this is optional field and not
mandatory. This means that there could be a
possibility that it may be indicated in any part of the
swift.
 Apply sub-art 14 (c) - Keep in mind that
presentation period applies only when one or more
original transport document is called under the LC

 Other important considerations that should
be given when checking the documents are
 Confirmation Instructions
 Reimbursing Bank
 Charges

 Understand when amendment becomes
binding
 Issuing bank – as of the time it issues the
amendment
 Confirming bank –express agreement or express
non-agreement – ability to extend or decline
 Beneficiary – terms and conditions remain in force
until the beneficiary advises by express or implied
manner
With reference to any Amendment

 Can you put pressure on beneficiary to
accept the amendment ?
 No – No deadline can be given
 He does not even have to say that he has accepted
the amendment. If the presentation complies with
the credit and to any not yet accepted amendment
– it will be deemed to be notification of acceptance
by the beneficiary of such amendment. However,
any rejection should be expressly stated.
With reference to any Amendment - contd

 Provisions of UCP 600 must be taken into
account when examining documents
 According to Art 14 (a) banks must examine a
presentation on the basis of documents alone,
whether or not the documents appear on their face
to constitute a complying presentation.
 Two standards :
(a) ‘on the basis of the documents alone” i.e.
without the examination being subject to criteria
ascertained from outside the data on the
documents; and
With reference to UCP

 What if someone tells you that beneficiary
has done fraud, would you pay or you
would rely solely on docs?
 (b)”on their face” i.e. the concept does not
refer to a simple front versus back of a
document, but extends to the review of data
within a document in order to determine
that a presentation complies with
international standard banking practice and
the principles contained in the UCP.
With reference to UCP

 “on their face” also means that the decision as to
whether the documents comply with the terms and
conditions of the credit is based exclusively upon
the bank’s examination of documents and not upon
someone else’s understanding.
With reference to UCP - contd

 International Standard Banking Practice
 It is represented by the content and the provisions
of UCP 600, as amplified by the explanation given in
the ICC Banking Commission Publication
“International Standard Banking Practice for the
Examination of Documents under UCP 600
Publication No.745
With reference to ISBP ?

 International Standard Banking Practice
 It covers the more generic aspects of document
examination practices which are not specific to any
particular article or document.
 ISBP can be applied where local law does not
compel a different practice.
 Generic aspects are abbreviations Ltd, Co.,
certifications and declarations, corrections and
alterations, etc.
With reference to ISBP ? - continued

 Data in documents not to be identical to but
must not be in conflict with:-
 Data appearing on that document
 Any other stipulated document
 Documentary credit
 Refer sub-article 14 (a) and d)
 Also refer to article 2 being definition on complying
presentation
Examination of docs with reference to one another

 What is “need not be identical” ?
 a credit contains a goods description of "Tyres for
Motor Vehicles", the invoice contains the same
description but in the packing list it states "500 Tyres
for Ford Vehicles, 500 Tyres for Audi Vehicles, and
500 Tyres for Hyundai Vehicles, etc", The description
on the packing list is not identical but it is not in
conflict with the description in the invoice or the
credit.

 What is “ in conflict” ?
 A credit requires an analysis certificate to show
potassium content at 5 percent whereas bill of
lading shows potassium content at 8 percent (even
though credit does not require that BL should show
the detail). Yet this would amount to be in conflict
with the credit terms and with that of analysis
certificate.

 Banks will often refer to “major” and “minor”
discrepancies. There is no such thing as
major or minor. A presentation or a
document is either complain or non-
compliant.
 Banks often think and are more conscious of
what the issuing bank will or will not
determine, rather than establish for
themselves as to whether or not the
documents will comply.
Examination of docs with reference to internal bank
practices and setting a standard

 Beneficiaries often find it difficult to obtain
guidance from banks as to the required
content of a document or an interpretation
of a condition, especially where the credit is
not confirmed
 It should be noted that most issues have
been covered by ICC opinions and these can
be referred to.
Examination of docs with reference to internal bank
practices and setting a standard

 The nominated bank acting on its nomination,
the confirming bank, if any, and the issuing
bank must examine the presentation to
determine, on the basis of the documents
alone, whether or not the documents appear on
their face to constitute a complying
presentation.
 These banks have each a maximum of five
banking days following the day of presentation
to determine whether the presentation is
complying.
Banks responsible for examination of documents

 The banks responsible for examination of
documents are always the issuing bank and,
provided that the credit has been confirmed,
the confirming bank.
 If the nominated bank decides to act on its
nomination, pursuant to the mandate from
the issuing bank, then, in that case the
nominated bank examines the documents,
and if they comply with the conditions of the
credit, it is authorised

 by the Issuing Bank to honour or negotiate,
accordingly to the availability of the credit.
The Issuing Bank undertakes to reimburse
the nominated bank in accordance with the
provisions of the credit.
 UCP 600 does not put the liability on the
nominated bank if it does not honour or
negotiate a complying presentation, or if it
does not examine or refuse the

 documents for valid discrepancies within five
banking days, because nominated bank did
not issue the credit nor confirmed it.
Therefore, a nominated has no obligation to
act in accordance with its nomination (unless
it is also the confirming bank or expressly
agrees to such an obligation) as UCP 600
sub-article 12(a) clearly states “ Unless a
nominated bank is the confirming bank

 an authorisation to honour or negotiate
does not impose any obligation on that
nominated bank to honour or negotiate,
except when expressly agreed to by that
nominated bank and so communicated to
the beneficiary.

 The data content UCP 600 does not provide a
specific article that would contain rules for
examination of this document. Therefore, the
following rules based on general UCP 600 rules
and ISBP will provide guidance in examination
of drafts:
 The data evidenced in the draft may not be in
conflict with other documents required by the
credit; and
 The draft must comply with the conditions of
the credit.
Draft – Checklist for Examination.

 The data content of the draft is determined by
its purpose and functions in credit transactions.
Accordingly, the draft will not contain any
description of the goods, unless otherwise
stipulated in the credit. Furthermore, the draft is
to be made out in compliance with a local law
where it has been issued and must comply with
the conditions and availability of the credit.

 According to the 1930 Geneva Convention for
Bills of Exchange and Promissory Notes, the
draft must satisfy the following conditions:-
1. The term “bill of exchange” must be inserted in
the body of the instrument and expressed in the
language employed in drawing up the
instrument. d and must comply with the
conditions and availability of the credit.
2. The draft must contain an unconditional order
to pay a sum of money.

3. The draft must show the name of the party ( a
bank) who is to pay (the drawee) according to
the conditions of credit;
4. The draft must show the name of the drawer –
the beneficiary – which complies with the credit.
5. The draft must be signed by the drawer – the
beneficiary;
6. The draft is to be payable (it shows tenor)
according to the conditions of the credit.

7. The amount must agree with the amount of the
drawing (the amount of drawing equals the
amount of that invoice) ( with the exception of an
invoice which is drawn on a higher amount that
allowed by the credit). The amount of drafts in
words must precisely reflect the amount in figures,
and indicate the currency, as stated in the credit.
The amount may not exceed the amount
available under the credit (within allowed
tolerances and the undrawn amount of the
credit.)

 Where Local law does not compel a different
practice, ISBP paragraphs should be applied
 Abbreviations - Paragraphs A1
"Ltd." instead of "Limited", -“Intl” 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.
Generic aspects of document examination – not
specific to any particular article or document

 Abbreviations - Paragraph A2 a
Virgules (slash marks "/") may have different
meanings, and unless apparent in the context used,
should not be used as a substitute for a word. If,
nevertheless, a virgule is used and no context is
apparent, this will allow the use of one or more of
the options. For example, a condition in a credit
stating "Red/Black/Blue" with no further clarification
will mean only Red or only Black or only Blue or any
combination of them.

 Certificates and Declarations - Para A5
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 - Para A-7
a. i. Any correction of data in a document issued by
the beneficiary, with the exception of drafts (see
paragraph B16)), need not be authenticated

• a.(ii)When a document issued by the beneficiary has
been legalized, visaed, certified, etc., any correction of
data is to be authenticated by at least one of the
entities that legalized, visaed or certified, etc., the
document. Such authentication is to indicate the
name of the entity authenticating the correction either
by use of a stamp incorporating its name, or by the
addition of the name of the authenticating entity
accompanied by its signature or initials.

• b.ii. When a document other than one issued by the
beneficiary has been legalized, visaed, certified, etc., any
correction of data is, in addition to the requirements of
paragraph A7) (b) (i), to be authenticated by at least one
of the entities that legalized, visaed or certified, etc., the
document. Such authentication is to indicate the name
of the entity authenticating the correction either by use
of a stamp incorporating its name, or by the addition of
the name of the authenticating entity accompanied by
its signature or initials.
• c. Any correction of data in a copy document need not
be authenticated.

• b. i. Any correction of data in a document, other than
in a document issued by the beneficiary, is to appear
to have been authenticated by the issuer or an entity
acting as agent, proxy or for [or on behalf of] the
issuer. Such authentication is to indicate the name of
the entity authenticating the correction either by use
of a stamp incorporating its name, or by the addition
of the name of the authenticating entity accompanied
by its signature or initials. In the case of authentication
by an agent or proxy, the capacity of acting as agent
or proxy for [or on behalf of] the issuer is to be stated.

The use of multiple type styles, font sizes or
handwriting within the same document does not, by
itself, signify a correction

 Corrections and alterations - Para 9-12
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.

Final presentation on document checking may 2021

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Final presentation on document checking may 2021

Similar to Final presentation on document checking may 2021 (20)

More from Samraiz Tejani

More from Samraiz Tejani (12)

Recently uploaded

Recently uploaded (20)

Final presentation on document checking may 2021