The document discusses the history and key aspects of the Uniform Customs and Practice (UCP) for documentary credits, specifically UCP 500 and the upcoming UCP 600. UCP 500 was published in 1993 by the International Chamber of Commerce and is the global standard for letters of credit. UCP 600 will take effect on June 1, 2007 and contains some changes from UCP 500, such as reducing the number of articles from 49 to 39 and shortening the time banks have to examine documents from seven to five days. The document also provides background on the development of the UCP over time and examines some of the substantive changes between the two versions.
The document discusses several articles from UCP 500 that were not carried over to UCP 600. It provides rationale for why certain articles like those covering revocable credits, unclear instructions, discrepant documents notices, freight payable/prepaid transport documents, other documents, and expiry dates were removed. The key points are that many of the old articles stated obvious points or were no longer necessary given advances in technology and practices. However, the absence of specific rules does not remove the duty of care of banks to properly create credits and amendments.
The document provides an overview of key parties involved in letters of credit (LC) transactions and summarizes important aspects of the Uniform Customs and Practice for Documentary Credits (UCP 600). It discusses the history and revision process of the UCP, compares UCP 600 to UCP 500, and provides high-level summaries of selected articles from UCP 600 including definitions, interpretations, credits vs contracts, examination of documents, and discrepant documents. The document is intended to educate readers on the UCP 600 rules governing international trade transactions involving letters of credit.
This document provides definitions and guidelines for understanding and applying the Uniform Customs and Practice for Documentary Credits (UCP600). It begins with definitions of key terms like applicant, beneficiary, complying presentation, credit, issuing bank, and nominated bank. It then outlines guidelines for credit requirements, standard examination of documents, complying and discrepant presentations, transport documents, insurance documents, and other issues commonly addressed in documentary credit transactions. The overall purpose is to establish a common framework and shared understanding for parties involved in credits subject to UCP600 rules.
This document contains information about UCP 600, which are the latest revision of the Uniform Customs and Practice that govern letters of credit. Some key points:
- UCP 600 came into effect on July 1, 2007 and contain 39 comprehensive articles that apply to documentary credits.
- The articles define terms like applicant, beneficiary, issuing bank, confirming bank, nominated bank, and outline the undertakings and obligations of these parties.
- The articles also cover topics like the application and interpretation of credits, the relationship between credits and contracts, documents versus goods, credit requirements, amendments, advising and more.
- The goal of UCP 600 is to provide clear, practical rules for the operation
The document discusses the process of lodging and retiring shipping documents for import bills under a letter of credit. It describes how an issuing bank will scrutinize documents for completeness, consistency, compliance with standards, and conformity with credit terms. Documents found to comply will be paid, while non-compliant documents will not be paid and the procedure for handling discrepancies will be followed, including providing notice of refusal. It also briefly discusses settlement of foreign payments, including through the Asian Clearing Union, which facilitates payments between member country central banks.
This presentation is prepared by Ozgur Eker - CDCS. You can find more articles about international trade finance at www.letterofcredit.biz. keep reading...
A letter of credit is a letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. If the buyer is unable to pay, the bank will cover the remaining amount. Letters of credit are important for international trade due to distance between parties and differing laws. There are two main types of letters of credit - sight credits where payment is made immediately upon document presentation, and usance credits where payment is made on a future date. Standby letters of credit are used to secure loans and allow payment if the applicant fails to perform. Letters of credit reduce risks for sellers and transfer credit risk from buyers to banks.
- There are several types of letters of credit including revocable, irrevocable, unconfirmed, confirmed, transferable, and assignment of proceeds. Letters of credit can also be revolving or standby.
- The export letter of credit cycle involves the buyer and seller agreeing to a letter of credit, the applicant (importer) applying to their bank, the letter of credit being issued, the exporter shipping goods and presenting documents, and the documents being paid.
- The confirmed letter of credit cycle is similar but also involves a confirming bank confirming the letter of credit.
- A transferable letter of credit allows the original beneficiary to transfer the full or partial value to a second beneficiary, in this
The document discusses several articles from UCP 500 that were not carried over to UCP 600. It provides rationale for why certain articles like those covering revocable credits, unclear instructions, discrepant documents notices, freight payable/prepaid transport documents, other documents, and expiry dates were removed. The key points are that many of the old articles stated obvious points or were no longer necessary given advances in technology and practices. However, the absence of specific rules does not remove the duty of care of banks to properly create credits and amendments.
The document provides an overview of key parties involved in letters of credit (LC) transactions and summarizes important aspects of the Uniform Customs and Practice for Documentary Credits (UCP 600). It discusses the history and revision process of the UCP, compares UCP 600 to UCP 500, and provides high-level summaries of selected articles from UCP 600 including definitions, interpretations, credits vs contracts, examination of documents, and discrepant documents. The document is intended to educate readers on the UCP 600 rules governing international trade transactions involving letters of credit.
This document provides definitions and guidelines for understanding and applying the Uniform Customs and Practice for Documentary Credits (UCP600). It begins with definitions of key terms like applicant, beneficiary, complying presentation, credit, issuing bank, and nominated bank. It then outlines guidelines for credit requirements, standard examination of documents, complying and discrepant presentations, transport documents, insurance documents, and other issues commonly addressed in documentary credit transactions. The overall purpose is to establish a common framework and shared understanding for parties involved in credits subject to UCP600 rules.
This document contains information about UCP 600, which are the latest revision of the Uniform Customs and Practice that govern letters of credit. Some key points:
- UCP 600 came into effect on July 1, 2007 and contain 39 comprehensive articles that apply to documentary credits.
- The articles define terms like applicant, beneficiary, issuing bank, confirming bank, nominated bank, and outline the undertakings and obligations of these parties.
- The articles also cover topics like the application and interpretation of credits, the relationship between credits and contracts, documents versus goods, credit requirements, amendments, advising and more.
- The goal of UCP 600 is to provide clear, practical rules for the operation
The document discusses the process of lodging and retiring shipping documents for import bills under a letter of credit. It describes how an issuing bank will scrutinize documents for completeness, consistency, compliance with standards, and conformity with credit terms. Documents found to comply will be paid, while non-compliant documents will not be paid and the procedure for handling discrepancies will be followed, including providing notice of refusal. It also briefly discusses settlement of foreign payments, including through the Asian Clearing Union, which facilitates payments between member country central banks.
This presentation is prepared by Ozgur Eker - CDCS. You can find more articles about international trade finance at www.letterofcredit.biz. keep reading...
A letter of credit is a letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. If the buyer is unable to pay, the bank will cover the remaining amount. Letters of credit are important for international trade due to distance between parties and differing laws. There are two main types of letters of credit - sight credits where payment is made immediately upon document presentation, and usance credits where payment is made on a future date. Standby letters of credit are used to secure loans and allow payment if the applicant fails to perform. Letters of credit reduce risks for sellers and transfer credit risk from buyers to banks.
- There are several types of letters of credit including revocable, irrevocable, unconfirmed, confirmed, transferable, and assignment of proceeds. Letters of credit can also be revolving or standby.
- The export letter of credit cycle involves the buyer and seller agreeing to a letter of credit, the applicant (importer) applying to their bank, the letter of credit being issued, the exporter shipping goods and presenting documents, and the documents being paid.
- The confirmed letter of credit cycle is similar but also involves a confirming bank confirming the letter of credit.
- A transferable letter of credit allows the original beneficiary to transfer the full or partial value to a second beneficiary, in this
This document discusses non-fund based credit facilities provided by banks. It begins by defining non-fund based facilities as facilities extended by banks that do not immediately involve an outflow of funds, but may later result in financial liability if commitments are not honored. Examples provided include letters of credit and bank guarantees. The advantages of non-fund based facilities for banks are then outlined, such as no immediate funds outlay and future risk exposure. Various types of non-fund facilities are also defined, with bank guarantees explained in further detail including definition, parties involved, types, and operational procedures.
This irrevocable letter of credit was issued by Reliable Bank and Trust Company to the Georgetown-Scott County Planning Commission on December 10, 2006 for $10,300 to guarantee the completion of landscaping for 100 Wisteria Lane. The letter of credit expires on December 10, 2007. Drafts against the letter can only be made if accompanied by a certificate from the Planning Commission that the required improvements were not completed by the expiration date along with an engineer's estimate of costs to finish any unfinished work, not to exceed the original $10,300 amount. Partial releases of the letter of credit are allowed at the Planning Commission's discretion as work progresses.
The document discusses the relationship between bankers and customers. It defines key terms like banker, customer, and the various types of relationships that can exist between them such as creditor-debtor, debtor-creditor, beneficiary-trustee, and principal-agent. It also outlines the obligations of banks, rights of bankers, special types of customers like minors and partnerships, and principles of lending.
Cash credit is a short-term loan that allows businesses to withdraw funds from their account even if there are insufficient funds. It is determined based on the value of securities provided. Overdraft is a credit facility that allows individuals to continue withdrawing funds even if their account balance is zero, up to a set limit. Bank guarantees ensure that a debtor's liabilities will be paid if they default, with three parties involved: the surety (guarantor), principal debtor, and creditor/beneficiary. Common types of guarantees include advance payment, payment, credit security, rental, and performance guarantees. Cash credit and overdraft both finance working capital and allow credit withdrawals up to a limit, but cash credit is longer-term
Types of letter of credits on 11 09 2012Sanjeev Patel
This document discusses different types of letters of credit (LCs). It begins by defining an LC as a written instrument issued by a bank at a customer's request to pay an exporter for goods or services provided the exporter presents the required documents.
The document then outlines various types of LCs: revocable LCs can be amended or cancelled at any time; irrevocable LCs constitute a definite undertaking by the issuing bank to pay provided documents are presented; confirmed LCs add the confirmation of the confirming bank; LCs can be with or without recourse for the bank; acceptance credits require drafts to be accepted; transferable LCs allow transfer of payments to other parties; back-to-back L
The document provides information on opening letter of credit procedures, including:
- Defining key parties in an LC transaction such as the issuing bank, beneficiary, applicant, and advising bank.
- Describing the 5 major steps in an LC transaction: issuing, advising, amendment, presentation, and settlement.
- Explaining types of LCs like revolving, back-to-back, transferable, and standby credits.
- Listing documents required for opening an LC like the application form, proforma invoice, insurance cover note, and import registration.
- Noting banks must check applicant signature, proforma invoice acceptance, importer entitlement, and restricted items
The document outlines the 10 step process for opening a letter of credit. It begins with the importer selecting a legal product and supplier. They then negotiate an agreement and apply to an issuing bank, providing documents like a contract and purchase order. If approved, the bank issues the letter of credit to an advising bank. The supplier then ships goods if the terms are met and presents documents to receive payment from the issuing bank once verified. The letter of credit must contain essential details like amounts, dates, parties and transport terms to legally facilitate international trade payments.
The document discusses various types of relationships that can exist between banks and their customers. It defines a banker as someone who receives money and handles financial transactions for customers, and a customer as someone who has an account with the bank.
The relationships are categorized as general relationships and special relationships. General relationships include debtor-creditor, agent-principal, trustee-beneficiary, bailee-bailor, and pawnee-pawner. Special relationships address guarantees, indemnifiers, and specific types of customers like minors, married women, illiterate persons, and joint Hindu families. Duties and legal aspects are discussed for each relationship type.
This infographic presented by Bronze Wing Trading L.L.C. talks about the steps to get Bid Bond Guarantee – Tender Bond Guarantee to sign new projects and trade deals. If you’re going to submit your tender quote for an upcoming project or trade deal, you can get Bid Bond Guarantee from us! Submit your requirements to us now: https://importletterofcredit.com/bid-bond/
For More Info:
Email us: support@importletterofcredit.com
Call Us: +971-4-5519699
Call/WhatsApp/BOTIM: +971-50-4648761
This document defines key terms related to banking relationships. It states that while the Banking Regulations Act does not define "banker", it is generally considered to be someone who receives money and processes transactions for customers. A customer is defined as someone who has an account with a bank. The relationship between a banker and customer can be general, involving roles like creditor-debtor, or special, involving roles like trustee, bailee, agent, or custodian. Duties of bankers include maintaining secrecy, honoring transactions, and submitting statements. Rights of bankers include general lien, pledge, set-off, appropriation, and charging interest.
The relationship between bankers and customers is important. Bankers are dealers in capital who borrow from depositors and lend to borrowers, acting as intermediaries. Customers maintain accounts with banks. The general relationship is one of debtor and creditor, with banks owing safekeeping of deposits. There are also special relationships, like principal and agent when banks perform services on customers' behalf, or bailee and bailer for safekeeping of valuables. Customers have rights like accessing accounts, while banks have duties like honoring checks according to terms of accounts and loans. Both parties also have obligations regarding secrecy of accounts.
Chapter two final bank and custom clearance operation hand outAsnake Gulelat
This document discusses letters of credit (L/Cs), which are payment mechanisms used in international trade that involve banks. It covers:
- The key parties in an L/C transaction are the buyer (applicant), seller (beneficiary), issuing bank, and advising/confirming bank. Each party has specific responsibilities.
- An L/C is a payment undertaking from an issuing bank to a beneficiary, on behalf of an applicant/buyer, to pay a specified amount if the beneficiary presents complying documents by a deadline.
- L/Cs have characteristics like negotiability, meaning the issuing bank is obligated to pay not just the beneficiary but banks nominated by them. They
Axis Bank has sanctioned a cash credit limit of Rs. 25 lakhs to Kon Chern India Pvt Ltd to meet their working capital requirements. The loan is secured by a first charge on the company's current assets and carries an interest rate of 12.25% payable monthly. Kon Chern must submit quarterly stock statements and renewal documents at least 45 days before the expiry of the 12-month term, or else penal interest of 2% will apply. The company must also accept additional terms regarding insurance of assets, prior approval for major changes, and information disclosure.
Relationhip between banker and customerPinkey Rana
The relationship between a banker and customer depends on the type of activities and services provided by the bank. The Banking Regulation Act 1949 defines banking as accepting deposits from the public that are repayable on demand and allowing withdrawals by cheque. Customers can be existing customers with accounts, former customers, potential customers, or those who visit a branch but don't have accounts. The relationship is based on a contract and terms and conditions, and can take various forms like debtor-creditor for deposits, creditor-debtor for loans, trustee for safekeeping assets, bailee-bailor for safe deposit lockers, or lessor-lessee for rented property.
This document provides an overview of letters of credit from the perspectives of importers and exporters. It defines the key parties involved, such as the issuing bank, advising bank, importer, and exporter. It then outlines the basic steps of a letter of credit transaction, including the importer applying for a letter of credit, the issuing bank providing the letter of credit to the advising bank, the exporter reviewing the terms and shipping goods once approved documentation is received. The document aims to help importers and exporters understand how letters of credit can facilitate international trade transactions.
The Negotiable Instruments Act was passed in 1881 and regulates commercial transactions through negotiable instruments like promissory notes, bills of exchange, and cheques. Some key points:
- It defines negotiable instruments and establishes rules around their creation, transfer, liability of parties, and dispute resolution.
- Provisions have been updated over time to accommodate changes in business and technology, like allowing electronic cheque processing.
- Core principles of free negotiability and a holder in due course gaining better title than the transferor remain important to facilitating commerce.
Letter of Credit - Complete Presentation - (Bcom-Mcom-BBA-MBA-BS)Millat Afridi
A letter of credit (LC), also known as a documentary credit or bankers commercial credit, is a payment mechanism used in international trade to provide an economic guarantee from a creditworthy bank to an exporter of goods. A letter of credit is extremely common within international trade and goods delivery, where the reliability of contracting parties cannot be readily and easily determined. Its economic effect is to introduce a bank as underwriting the credit risk of the buyer paying the seller for goods.
This document discusses the various legal relationships that can exist between a banker and a customer. It defines key terms like banker, banking, customer and explores different types of relationships such as:
1. Debtor-creditor relationship - when a customer deposits money, the bank is the debtor and customer is the creditor. When a bank grants a loan, the roles reverse.
2. Principal-agent relationship - when a bank acts on behalf of a customer, such as by collecting checks or buying/selling securities, it takes on the role of the customer's agent.
3. Bailor-bailee relationship - this can arise when a customer avails safe deposit services or pledges stocks/
The document provides an overview of the University of Central Punjab (UCP) presented by "Shining Stars" to Professor Waseem. It discusses the history, objectives, vision, mission, facilities, departments, and role of Management Information Systems (MIS) at UCP. Some key points include:
- UCP was established in 2002 and has campuses in Lahore and Gujranwala. It offers undergraduate, graduate, and postgraduate programs.
- The vision is to create institutions committed to academic excellence through community engagement. The mission is to provide quality education to prepare students for future challenges.
- MIS helps make management more efficient by allowing online access to student records, attendance tracking
This document discusses non-fund based credit facilities provided by banks. It begins by defining non-fund based facilities as facilities extended by banks that do not immediately involve an outflow of funds, but may later result in financial liability if commitments are not honored. Examples provided include letters of credit and bank guarantees. The advantages of non-fund based facilities for banks are then outlined, such as no immediate funds outlay and future risk exposure. Various types of non-fund facilities are also defined, with bank guarantees explained in further detail including definition, parties involved, types, and operational procedures.
This irrevocable letter of credit was issued by Reliable Bank and Trust Company to the Georgetown-Scott County Planning Commission on December 10, 2006 for $10,300 to guarantee the completion of landscaping for 100 Wisteria Lane. The letter of credit expires on December 10, 2007. Drafts against the letter can only be made if accompanied by a certificate from the Planning Commission that the required improvements were not completed by the expiration date along with an engineer's estimate of costs to finish any unfinished work, not to exceed the original $10,300 amount. Partial releases of the letter of credit are allowed at the Planning Commission's discretion as work progresses.
The document discusses the relationship between bankers and customers. It defines key terms like banker, customer, and the various types of relationships that can exist between them such as creditor-debtor, debtor-creditor, beneficiary-trustee, and principal-agent. It also outlines the obligations of banks, rights of bankers, special types of customers like minors and partnerships, and principles of lending.
Cash credit is a short-term loan that allows businesses to withdraw funds from their account even if there are insufficient funds. It is determined based on the value of securities provided. Overdraft is a credit facility that allows individuals to continue withdrawing funds even if their account balance is zero, up to a set limit. Bank guarantees ensure that a debtor's liabilities will be paid if they default, with three parties involved: the surety (guarantor), principal debtor, and creditor/beneficiary. Common types of guarantees include advance payment, payment, credit security, rental, and performance guarantees. Cash credit and overdraft both finance working capital and allow credit withdrawals up to a limit, but cash credit is longer-term
Types of letter of credits on 11 09 2012Sanjeev Patel
This document discusses different types of letters of credit (LCs). It begins by defining an LC as a written instrument issued by a bank at a customer's request to pay an exporter for goods or services provided the exporter presents the required documents.
The document then outlines various types of LCs: revocable LCs can be amended or cancelled at any time; irrevocable LCs constitute a definite undertaking by the issuing bank to pay provided documents are presented; confirmed LCs add the confirmation of the confirming bank; LCs can be with or without recourse for the bank; acceptance credits require drafts to be accepted; transferable LCs allow transfer of payments to other parties; back-to-back L
The document provides information on opening letter of credit procedures, including:
- Defining key parties in an LC transaction such as the issuing bank, beneficiary, applicant, and advising bank.
- Describing the 5 major steps in an LC transaction: issuing, advising, amendment, presentation, and settlement.
- Explaining types of LCs like revolving, back-to-back, transferable, and standby credits.
- Listing documents required for opening an LC like the application form, proforma invoice, insurance cover note, and import registration.
- Noting banks must check applicant signature, proforma invoice acceptance, importer entitlement, and restricted items
The document outlines the 10 step process for opening a letter of credit. It begins with the importer selecting a legal product and supplier. They then negotiate an agreement and apply to an issuing bank, providing documents like a contract and purchase order. If approved, the bank issues the letter of credit to an advising bank. The supplier then ships goods if the terms are met and presents documents to receive payment from the issuing bank once verified. The letter of credit must contain essential details like amounts, dates, parties and transport terms to legally facilitate international trade payments.
The document discusses various types of relationships that can exist between banks and their customers. It defines a banker as someone who receives money and handles financial transactions for customers, and a customer as someone who has an account with the bank.
The relationships are categorized as general relationships and special relationships. General relationships include debtor-creditor, agent-principal, trustee-beneficiary, bailee-bailor, and pawnee-pawner. Special relationships address guarantees, indemnifiers, and specific types of customers like minors, married women, illiterate persons, and joint Hindu families. Duties and legal aspects are discussed for each relationship type.
This infographic presented by Bronze Wing Trading L.L.C. talks about the steps to get Bid Bond Guarantee – Tender Bond Guarantee to sign new projects and trade deals. If you’re going to submit your tender quote for an upcoming project or trade deal, you can get Bid Bond Guarantee from us! Submit your requirements to us now: https://importletterofcredit.com/bid-bond/
For More Info:
Email us: support@importletterofcredit.com
Call Us: +971-4-5519699
Call/WhatsApp/BOTIM: +971-50-4648761
This document defines key terms related to banking relationships. It states that while the Banking Regulations Act does not define "banker", it is generally considered to be someone who receives money and processes transactions for customers. A customer is defined as someone who has an account with a bank. The relationship between a banker and customer can be general, involving roles like creditor-debtor, or special, involving roles like trustee, bailee, agent, or custodian. Duties of bankers include maintaining secrecy, honoring transactions, and submitting statements. Rights of bankers include general lien, pledge, set-off, appropriation, and charging interest.
The relationship between bankers and customers is important. Bankers are dealers in capital who borrow from depositors and lend to borrowers, acting as intermediaries. Customers maintain accounts with banks. The general relationship is one of debtor and creditor, with banks owing safekeeping of deposits. There are also special relationships, like principal and agent when banks perform services on customers' behalf, or bailee and bailer for safekeeping of valuables. Customers have rights like accessing accounts, while banks have duties like honoring checks according to terms of accounts and loans. Both parties also have obligations regarding secrecy of accounts.
Chapter two final bank and custom clearance operation hand outAsnake Gulelat
This document discusses letters of credit (L/Cs), which are payment mechanisms used in international trade that involve banks. It covers:
- The key parties in an L/C transaction are the buyer (applicant), seller (beneficiary), issuing bank, and advising/confirming bank. Each party has specific responsibilities.
- An L/C is a payment undertaking from an issuing bank to a beneficiary, on behalf of an applicant/buyer, to pay a specified amount if the beneficiary presents complying documents by a deadline.
- L/Cs have characteristics like negotiability, meaning the issuing bank is obligated to pay not just the beneficiary but banks nominated by them. They
Axis Bank has sanctioned a cash credit limit of Rs. 25 lakhs to Kon Chern India Pvt Ltd to meet their working capital requirements. The loan is secured by a first charge on the company's current assets and carries an interest rate of 12.25% payable monthly. Kon Chern must submit quarterly stock statements and renewal documents at least 45 days before the expiry of the 12-month term, or else penal interest of 2% will apply. The company must also accept additional terms regarding insurance of assets, prior approval for major changes, and information disclosure.
Relationhip between banker and customerPinkey Rana
The relationship between a banker and customer depends on the type of activities and services provided by the bank. The Banking Regulation Act 1949 defines banking as accepting deposits from the public that are repayable on demand and allowing withdrawals by cheque. Customers can be existing customers with accounts, former customers, potential customers, or those who visit a branch but don't have accounts. The relationship is based on a contract and terms and conditions, and can take various forms like debtor-creditor for deposits, creditor-debtor for loans, trustee for safekeeping assets, bailee-bailor for safe deposit lockers, or lessor-lessee for rented property.
This document provides an overview of letters of credit from the perspectives of importers and exporters. It defines the key parties involved, such as the issuing bank, advising bank, importer, and exporter. It then outlines the basic steps of a letter of credit transaction, including the importer applying for a letter of credit, the issuing bank providing the letter of credit to the advising bank, the exporter reviewing the terms and shipping goods once approved documentation is received. The document aims to help importers and exporters understand how letters of credit can facilitate international trade transactions.
The Negotiable Instruments Act was passed in 1881 and regulates commercial transactions through negotiable instruments like promissory notes, bills of exchange, and cheques. Some key points:
- It defines negotiable instruments and establishes rules around their creation, transfer, liability of parties, and dispute resolution.
- Provisions have been updated over time to accommodate changes in business and technology, like allowing electronic cheque processing.
- Core principles of free negotiability and a holder in due course gaining better title than the transferor remain important to facilitating commerce.
Letter of Credit - Complete Presentation - (Bcom-Mcom-BBA-MBA-BS)Millat Afridi
A letter of credit (LC), also known as a documentary credit or bankers commercial credit, is a payment mechanism used in international trade to provide an economic guarantee from a creditworthy bank to an exporter of goods. A letter of credit is extremely common within international trade and goods delivery, where the reliability of contracting parties cannot be readily and easily determined. Its economic effect is to introduce a bank as underwriting the credit risk of the buyer paying the seller for goods.
This document discusses the various legal relationships that can exist between a banker and a customer. It defines key terms like banker, banking, customer and explores different types of relationships such as:
1. Debtor-creditor relationship - when a customer deposits money, the bank is the debtor and customer is the creditor. When a bank grants a loan, the roles reverse.
2. Principal-agent relationship - when a bank acts on behalf of a customer, such as by collecting checks or buying/selling securities, it takes on the role of the customer's agent.
3. Bailor-bailee relationship - this can arise when a customer avails safe deposit services or pledges stocks/
The document provides an overview of the University of Central Punjab (UCP) presented by "Shining Stars" to Professor Waseem. It discusses the history, objectives, vision, mission, facilities, departments, and role of Management Information Systems (MIS) at UCP. Some key points include:
- UCP was established in 2002 and has campuses in Lahore and Gujranwala. It offers undergraduate, graduate, and postgraduate programs.
- The vision is to create institutions committed to academic excellence through community engagement. The mission is to provide quality education to prepare students for future challenges.
- MIS helps make management more efficient by allowing online access to student records, attendance tracking
This document provides an overview and summary of the Uniform Customs and Practices for Documentary Credits (UCPDC600). It defines the UCPDC as the internationally recognized set of rules governing letters of credit. The document notes that the UCPDC is written into virtually every letter of credit and accepted worldwide. It then summarizes the history and purpose of the UCPDC, including that it is revised regularly by the ICC to reflect changes in banking and trade practices. Finally, it lists the 39 articles that are included in the UCPDC600.
A letter of credit involves multiple parties: the applicant/buyer, issuing bank, beneficiary/seller, advising bank, confirming bank, negotiating bank, and reimbursing bank. The issuing bank guarantees payment to the beneficiary if certain conditions are met. UCP 600 is the latest set of rules governing letters of credit, reducing the number of articles and clarifying key terms compared to prior version UCP 500.
The document discusses letters of credit as a method of payment in international trade. It defines a letter of credit as a bank's contractual obligation to make a payment when certain documents that comply with specified terms are received. The document outlines the roles of the issuing bank, advising bank, exporter, and importer. It also describes types of letters of credit and relevant international regulations. Finally, it discusses documents that may be required under letters of credit and the process of document presentation and handling discrepancies.
Documentary collection letters of creditjadayoub01
The document discusses various methods for reducing credit risk in international sales transactions, including bank collections, trade finance, and letters of credit. It provides definitions and explanations of bank collections, trade finance, documentary drafts, letters of credit, and related concepts. The focus is on how these methods work to transfer credit risk from the seller to a bank by having the bank guarantee payment to the seller upon presentation of required documents.
Basel III is a global regulatory standard that aims to strengthen bank capital requirements and introduce new regulatory requirements on bank liquidity and leverage. It was implemented in response to deficiencies in the previous Basel II framework that were exposed by the global financial crisis. The goals of Basel III include improving the banking sector's ability to absorb shocks, reducing systemic risk, and increasing transparency. It establishes stricter capital standards, introduces capital buffers, and imposes new liquidity measures including the liquidity coverage ratio and net stable funding ratio.
Brain Death and Preparation for Organ DonationRanjith Thampi
This document discusses brain death, including definitions, causes, mechanisms, diagnostic criteria and confirmatory tests. It provides details on:
- Loss of brainstem and cortical function constituting brain death
- Common causes like stroke, trauma, hypoxia
- Mechanism of increased intracranial pressure leading to circulatory arrest
- Clinical criteria including apnea testing over multiple examinations
- Confirmatory tests like EEG, evoked potentials, angiography and imaging to demonstrate lack of cerebral blood flow
This presentation is the one stop point to learn about Basel Norms in the Banking
This is the most comprehensive presentation on Risk Management in Banks and Basel Norms. It presents in details the evolution of Basel Norms right form Pre Basel area till implementation of Basel III in 2019 along with factors and reason for shifting of Basel I to II and finally to III.
Links to Video's in the presentation
Risk Management in Banks
https://www.youtube.com/watch?v=fZ5_V4RW5pE
Tier 1 Capital
http://www.investopedia.com/terms/t/tier1capital.asp
Tier 2 Capital
http://www.investopedia.com/terms/t/tier2capital.asp
Basel I
http://www.investopedia.com/terms/b/basel_i.asp
Capital Adequacy Ratio
http://www.investopedia.com/terms/c/capitaladequacyratio.asp
Basel II
http://www.investopedia.com/video/play/what-basel-ii/?header_alt=c
Basel III
http://www.investopedia.com/terms/b/basell-iii.asp
RBI Governor - Raghuram G Rajan on the importance if Basel III regulations
https://youtu.be/EN27ZRe_28A
This document discusses documentary collections, which involve banks carrying out instructions to pay for goods under financial and commercial documents. There are two main types: documentary against payment (D/P), where the buyer does not get goods until paying, and documentary against acceptance (D/A), which allows a credit period. For exporters, documentary collections ensure payment before releasing goods, though buyers could refuse documents and banks assume no risk. For importers, they ensure shipment of goods before requiring payment. The process involves instructions between remitting, collecting, and presenting banks according to international rules.
This document describes the evolution of 2G and 3G mobile network architectures. It shows:
1) The separation of the control plane and user plane in 3GPP Release 4, with the MSC Server handling signaling and Media Gateways handling transmission.
2) How the MSC Server system provides operational expenditure savings by moving voice and signaling transmission to IP networks and separating equipment for more flexible siting.
3) How the MSC Server system allows investment protection by supporting existing services on GSM, EDGE, 3G and TDM, IP, and ATM transmission networks.
The document provides an overview of letters of credit (LC), including:
- Definition of an LC as a written instrument from a bank promising payment to an exporter for goods if documents are presented as stipulated.
- Key parties in an LC transaction including applicant, beneficiary, issuing bank, advising bank, confirming bank, and negotiating bank.
- The basic mechanism of an LC transaction with 9 steps from contract to goods delivery and payment.
- Additional details on confirmed LCs and how the LC process works in practice.
Made by Ranjith R Thampi. A decent powerpoint on Bronchial Asthma, a short summary on various presentations and treatment options starting at Primary health level. Was made mainly for Primary Health setup. I've also added options at higher centres and also a few references for latest drug modalities and use.
The document provides an overview of the Uniform Customs and Practice for Documentary Credits (UCP 600). It defines key terms related to letters of credit and outlines the main provisions and articles of UCP 600. Specifically, it discusses what UCP 600 is, definitions for terms like issuing bank and beneficiary, the obligations of issuing and confirming banks to honor presentations, requirements for credits like availability and expiration dates, and rules around amendments and advising credits. The document serves as a high-level introduction to UCP 600, the standards that govern international letters of credit.
The document discusses key aspects of letters of credit (LCs) and documentary credits, as governed by the Uniform Customs and Practice for Documentary Credits (UCP 600) published by the International Chamber of Commerce. It defines important terms related to LCs, describes the roles and obligations of parties involved in LCs, and outlines various types of LCs including transferable credits and back-to-back credits. The document also provides an overview of key articles within UCP 600 covering general provisions, liabilities, document examination, document requirements, and other LC processes.
Default Identification and Prevention of Frauds in International BusinessJIMS Rohini Sector 5
Expanding international business offers fantastic business opportunities for all-including fraudsters. Many times the default/fraud succeeds because of the unawareness of parties involved in the trade transaction. This unawareness can be on account of inherent weakness in a document involved in the transaction or may be due to myths related to a specific payment system as proposed by the counter party . For example, many exporters consider a letter of credit as a police to the commercial transaction which is not true .
It is therefore of ultimate importance for banks , traders and all other parties to be aware of associated risks, pitfalls and the red flags etc while handling the international trade transactions.
FIEO in association with JIMS, Rohini is organizing a one day workshop to impart knowledge on all dimensions of a trade transaction so as to be able to take necessary preventive precautions. Extensive coverage will be given on technical aspects of trade transactions, alternative possibilities , applicable rules , inherent strength or weakness of a particular type of document etc. The various topics covered in the workshop will be highlighted through case studies. It also covers further the legal and practical aspects; in particular the means of asset recovery post-fraud will be dealt with.
The workshop was led by Dr.(Prof.) Ashok Bhagat Ex. Head Sales – Trade&VP Societe Generale, ICC India nominee for ICC Banking Commission Paris –India Chapter & Ex-Officio Member ICC INDIA Executive Committee and currently Dean -IB , JIMS, Rohini. Delhi.
The document discusses upcoming changes to UCC Article 9 including clarifying rules around control of electronic chattel paper, location of debtor provisions, and continued perfection following a change in governing law. It also covers creating a security interest, such as how attachment works for future advances and automatic attachment for certain collateral types. The presentation provides an overview of the revisions and important concepts in secured transactions.
The document discusses non-fund based credit facilities provided by banks, including letters of credit, guarantees, and co-acceptance of bills. It provides details on:
1) How these facilities work and the parties involved, including the applicant, issuing bank, beneficiary, advising/confirming/negotiating banks.
2) Guidelines from the Reserve Bank of India for these facilities, focusing on eligibility criteria for customers and banks' obligations.
3) Specific requirements for letters of credit, guarantees, and co-acceptance of bills.
Import export guide - Letter of Creditpratikasnani
This document provides an overview of letters of credit from the perspectives of importers and exporters. It defines the key parties involved, such as the issuing bank, advising bank, exporter, and importer. It explains that a letter of credit is a payment mechanism where a bank guarantees payment to the exporter if they present documents that meet the terms outlined in the letter of credit. The document then walks through the step-by-step process of a typical letter of credit transaction and highlights some of the advantages and disadvantages for importers and exporters.
This document provides an overview and instructions for importers and exporters using letters of credit for international trade. It defines the key parties involved, describes the basic process of how a letter of credit transaction works, and highlights advantages and disadvantages for both importers and exporters. The second half provides detailed instructions for importers on completing a letter of credit application form, including explanations of each field. It also covers common questions around amendments, documents required, and other letter of credit types.
This document provides notes on methods of payment in international trade, including payment on open account, payment by bills of exchange, collection arrangements, documentary credits, and bank guarantees. It discusses key concepts like the autonomy principle, where the credit is independent from the underlying sales contract, and the strict compliance doctrine, where banks must strictly adhere to credit terms. Documentary credits are described as the most secure payment method, offering protection to buyers and sellers through the bank system. The types of credits - revocable/irrevocable and confirmed/unconfirmed - are also outlined.
This document provides an overview of letters of credit (LCs), including:
1) LCs originated from French and Latin words related to trust and guaranteeing payment.
2) An LC is an arrangement where a bank guarantees payment to a seller upon presenting specified documents to the issuing bank.
3) Key elements of an LC include a payment undertaking by a bank on behalf of a buyer to pay a seller a specified amount upon presenting conforming documents within set time limits.
A letter of credit is a document issued by a bank guaranteeing payment to a seller when they provide stipulated documents to the issuing bank. There are two main types - irrevocable letters of credit cannot be amended or cancelled without consent, while revocable letters can be cancelled at any time. The letter of credit transaction involves an applicant (buyer), beneficiary (seller), issuing bank, advising bank, and sometimes a confirming bank. It guarantees payment to the seller when they provide the required documents such as a commercial invoice, bill of lading, and certificate of origin to the advising or confirming bank.
Insolvency and bankruptcy code analysis of a selected few ordersShruti Jadhav
The document provides an introduction and overview of key provisions of the Insolvency and Bankruptcy Code of India relating to corporate insolvency resolution processes. It discusses who can initiate insolvency proceedings under the Code, including financial creditors owed financial debt, operational creditors owed operational debt, and corporate debtors themselves. It also summarizes relevant definitions from the Code, such as what constitutes a debt and default. The document aims to analyze select orders from National Company Law Tribunals and the National Company Law Appellate Tribunal to understand how provisions of the Code have been interpreted in practice.
Section 5 of the securitisation and reconstruction ofUjjwal 'Shanu'
The document discusses securitization and asset reconstruction in India. It explains that under Section 5 of the Securitisation and Reconstruction of Financial Assets and Enforcement Security Interest Act,2002, only banks and financial institutions can securitize their financial assets. It provides an example of how a bank XYZ securitizes its loan assets by transferring them to a special purpose vehicle (SPV) to free up its blocked funds. The SPV then issues securities to investors to raise funds that are passed back to the bank. This allows the bank to raise cheaper funds than through corporate debt.
Banks play a crucial role in international trade by providing financial services and advice. They facilitate various payment methods between importers and exporters, including letters of credit, wire transfers, and banker's drafts. Letters of credit are one of the most widely used payment mechanisms, where the importer's bank provides a letter of credit to the exporter guaranteeing payment upon presentation of shipping documents. The key parties involved in a letter of credit transaction are the applicant/importer, issuing bank, beneficiary/exporter, advising bank, confirming bank, negotiating bank, and reimbursing bank. Banks help reduce risk and ensure secure payment for both parties in international trade transactions.
The document summarizes key changes made by the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 to the Consumer Credit Act 1974 provisions. It provides tables comparing CCA provisions to corresponding provisions in the RAO, noting changes such as replaced terminology and exemptions now dealt with by the Financial Conduct Authority. It also discusses the CONC sourcebook, which sets out conduct of business obligations for credit-related activities, and principles for business and consequences for contravening FSMA rules. Finally, it summarizes some key sections of CONC, including the responsible lending requirements in CONC 5 which replaced CCA section 55B on creditworthiness assessments.
How import Finance works in daily life and its usessharjilbiki4
Letter of credit is a conditional guarantee issued by a bank on behalf of an importer to make payment to an exporter for shipped goods. It minimizes risks in international trade where parties may not know each other. Letters of credit provide protection to importers and exporters and are one of the most common and secure import financing methods. They involve an importer, exporter, issuing bank, advising bank, and sometimes a confirming or negotiating bank, with each party playing a defined role in the transaction process and documentation requirements.
This document is a dissertation submitted by Priyanshi Gurung for the partial fulfillment of a Bachelor of Business Administration degree from Shri Guru Ram Rai University. It discusses letter of credit and includes an introduction describing letter of credit, its mechanism and parties involved. It also provides an example of how a letter of credit transaction works between an Indian exporter and a US importer. The dissertation is certified as Priyanshi Gurung's original work and includes acknowledgments, table of contents, and the beginning of the first chapter which provides further details about letter of credit.
Non-fund based facilities provided by banks do not involve an immediate outflow of funds from the bank. These facilities may crystallize into a financial liability for the customer later if they fail to meet their commitments. Common non-fund based facilities provided by banks include letters of credit and guarantees. Letters of credit are used in international trade to ensure payment between importers and exporters, while guarantees are used to secure payments or performance of contracts. Banks earn fees and commissions from providing these non-fund based facilities.
The document discusses various export promotion schemes and fiscal incentives in India. It outlines schemes that provide duty exemptions or remissions on imports of inputs for export production, including Advance Authorizations, Duty Free Import Authorizations, and Duty Entitlement Passbook schemes. It also discusses duty drawback schemes that provide refunds of import duties on raw materials. Other topics covered include Export Promotion Capital Goods scheme, excise duty refunds, income tax exemptions, and marketing assistance available to exporters in India.
This document discusses various types of risks involved in import-export businesses and how to manage them. It covers political risks, foreign exchange risks, currency risks, cargo risks, commercial risks, and legal risks of operating in foreign countries. Some key strategies mentioned for managing risks include monitoring political developments, using letters of credit, shifting risks to other parties through contracts, and purchasing various types of insurance. The document also provides examples of specific risks like theft, water damage, and total or partial cargo losses, and discusses managing these risks.
The document discusses the process of an export order from beginning to end. It explains that an export order communicates the importer's decision to purchase items from the exporter, and represents an offer and acceptance between the two parties. The document then outlines each step of securing and processing an export order, including developing logistics, arranging for materials, production, shipment, and negotiating shipping documents.
North America is a continent located in the Northern Hemisphere. It is bordered by the Arctic Ocean to the north, the Atlantic Ocean to the east and west, and the Pacific Ocean and South America to the west and south. North America covers about 9.5 million square miles and is home to countries like the United States, Canada, Mexico, and Caribbean island nations. The population of North America is concentrated mainly in the United States, Mexico, and Canada, with major cities including Mexico City, New York City, Los Angeles, and Toronto.
This document discusses various methods of payment for export bills, including letters of credit. It provides instructions for opening a letter of credit, examining one, common discrepancies, negotiating with discrepancies, required documents, and presenting documents. Key points covered include what information needs to be included when opening an L/C, common issues that can cause discrepancies in documents, the process for negotiating documents and addressing discrepancies, and documentation typically required for negotiation.
This document defines various categories of exporters and importers and provides explanations of key export and import documentation terms. It discusses the different types of exporters such as manufacturer exporter, merchant exporter, AEZ, BTP, EOU, and service provider. It also defines categories of importers. The document then provides details on various export documents including commercial invoices, packing lists, bills of lading, certificates of inspection and origin, and regulatory documents. It explains types of bills of lading and transport documents used in export and import transactions.
Mib 3.6 on 13 th aug 2012 charac and types of exim docsSanjeev Patel
The document discusses various types of export documentation used in international trade. It begins by explaining the objectives and advantages of an Aligned Documentation System (ADS) which standardizes forms to make them easier to complete.
It then describes the two main types of export documents - commercial documents and regulatory documents. Commercial documents include invoices, certificates, bills of lading/air waybills used to facilitate the trade transaction. Regulatory documents are required by government authorities for customs clearance and compliance.
The document provides details on key commercial documents like commercial invoices, packing lists, certificates of origin. It also explains transport documents like bills of lading and describes their various types. Regulatory documents mentioned include shipping bills and exchange control forms
Mib 3.6 on 13 th aug 2012 charac and types of exim docs copySanjeev Patel
The document discusses the objectives and advantages of an Aligned Documentation System (ADS) for export documentation. It then explains key concepts in ADS including:
- Common items of information like shipper details occupying the same relative positions on forms, making them easier to complete and process.
- Master documents can be used to produce a range of documents using photocopies and overlays, further simplifying documentation.
- ADS standardizes paper size and specifications for forms.
It then provides an overview of the types of commercial documents used in export documentation, dividing them into principal documents used for key functions like invoicing and transportation, and auxiliary documents used to support the principal documents. Regulatory documents
Mib 3.6 marine insurance on 09 10 12 copySanjeev Patel
Marine insurance protects against losses to ships, cargo, freight and other associated interests during marine adventures. There are various types of marine insurance policies that can be taken out, including hull insurance, cargo insurance, and liability insurances. Cargo insurance specifically protects physical damage or loss of goods during transit by land, sea or air. It is usually provided through Institute Cargo Clauses which determine the scope of coverage. Other types include open or voyage policies tailored for individual shipments, and contingency policies that protect the seller's interests.
This document discusses export financing options available to exporters in India. It describes pre-shipment financing, which provides working capital to purchase raw materials, process goods, and prepare for export. Post-shipment financing is also described, which provides credit after goods have been shipped until payment is received. Specific financing products like packing credit, clean packing credit, and running account facilities are explained. Requirements, periods of advance, and liquidation of pre-shipment credit are outlined. Financing of service exports is also briefly covered.
INCOTERMS are standard international trade definitions published by the International Chamber of Commerce for common terms used in international commercial transactions. The document outlines the history and revisions of INCOTERMS, including the introduction of the first version in 1936 and subsequent updates in 2000 and 2010. It also summarizes key aspects of INCOTERMS, such as the classifications of different trade terms, responsibilities of buyers and sellers, and important considerations for correctly using INCOTERMS in international sales contracts.
The document summarizes the key institutions related to India's export-import policy and controls. It discusses four main categories of institutions - policy and decision making organizations, autonomous bodies, advisory bodies, and attached/subordinate offices. Under each category, it outlines some of the main organizations such as the Ministry of Commerce, commodity boards, export promotion councils, the Board of Trade, and export credit guarantee corporation.
This document provides information about export contracts and terms. It discusses:
- What exporting is and why companies export
- The process of generating export orders, from initial inquiries to finalizing contracts
- Key terms and conditions that are typically included in export contracts, such as product description, price, payment terms, shipping details, claims processes, and force majeure clauses
- It also provides an example of how force majeure laws may be applied in contractual disputes regarding payment obligations.
This document celebrates Teacher's Day and honors teachers at Kirori Mal College in New Delhi, India. It contains greetings for Teacher's Day, names and photos of teachers from the Computer Science and Mathematics departments, and short quotes about the importance of teachers and learning. The document encourages togetherness between teachers and students now and in the future.
Register transfer language is used to describe micro-operation transfers between registers. It represents the sequence of micro-operations performed on binary information stored in registers and the control that initiates the sequences. A register is a group of flip-flops that store binary information. Information can be transferred between registers using replacement operators and control functions. Common bus systems using multiplexers or three-state buffers allow efficient information transfer between multiple registers by selecting one register at a time to connect to the shared bus lines. Memory transfers are represented by specifying the memory word selected by the address in a register and the data register involved in the transfer.
The document discusses memory reference instructions in a processor. It explains that bits 12-14 in the instruction register determine the memory reference instruction type, which can be AND to AC, ADD to AC, LDA, STA, BUN, BSA, or ISZ. It then describes the operation of each instruction type, including which decoder line is activated and the timing signals used to access memory and update registers.
Logic microoperations specify binary operations that are performed on individual bits in registers. There are sixteen common logic microoperations including selective set, selective complement, selective clear, and masking. Shift microoperations serially transfer data within a register to the left or right. There are three types of shifts: logical, circular, and arithmetic. Arithmetic shifts preserve the sign bit when shifting a signed binary number left or right.
The document discusses digital computers and their basic components. It introduces the concepts of bits, binary digits that can have the values of 0 or 1. It describes the major hardware components of a computer including the CPU, memory, and input/output devices. It also explains some fundamental concepts in digital logic like Boolean algebra, logic gates, flip-flops and sequential circuits.
An instruction format specifies an operation code and operands. There are three main types of instruction formats: three address instructions specify memory addresses for two operands and one destination; two address instructions specify two memory locations or registers with the destination assumed to be the first operand; and one address instructions use a single accumulator register for all data manipulation. Addressing modes further specify how the address field of an instruction is interpreted to determine the effective address of an operand. Common addressing modes include immediate, register, register indirect, auto-increment/decrement, direct, indirect, relative, indexed, and base register addressing.
Instruction codes and computer registersSanjeev Patel
The document discusses instruction codes and computer registers. Instruction codes are made up of an opcode and address that tell the computer what operation to perform. Computer registers store important data and instructions, including the program counter, address register, instruction register, temporary register, data register, accumulator, input register, and output register. These registers perform functions like holding memory operands, instructions, temporary data, addresses, and input/output characters.
2. What's that UCP all about ????
The UCP is the work of the ICC
(International Chamber of Commerce),
a private international organization
founded in 1919 and is formulated
entirely by experts in the private
sector.
To date, it remains the most successful
set of private rules for trade ever
developed.
3. • On June 1, 2007 the new Uniform Customs and
Practices for Documentary Credits, published as
International Chamber of Commerce publication No
600, will take effect. The first version of the UCP was
drafted at the ICC congress in Vienna in 1933 (ICC-
Publication No. 82). After the first revision in 1951,
the UCP were again revised in 1962, latter revision
being of particular significance, since for the first
time Great Britain and the Commonwealth accepted
the UCP. The UCP were again revised in 1974 and
1993; the 1993 revision obtained the blessing of the
UNCITRAL (United Nations Commission on
International Trade Law) which recommended that
the UCP be applied to all documentary credits
4. The stated goal of the current revision has been
identical to previous ones, i.e. - take into account
developments in banking, transportation and
insurance - review the wording of the UCP to avoid
differing interpretations and applications [2]. In a
note to its members and the national committees
the ICC itself labeled the new revision as "the most
comprehensive in the entire history of the rules."
Comprehensiveness however did not lead to
substantive changes.
The ICC has shortened the number of articles from 49
to 38(39)!!. This change is mostly cosmetic however,
since substantive changes are barely noticeable. An
exception to the foregoing is the shortening of the
time to examine documents from seven to five
working days.
5. Previous publications
UCP Publication Number 500, 1993 Revision.
UCP Publication Number 400, 1983 revision
UCP Publication Number 290, 1974 revision
UCP Publication Number 222, 1962 revision.
UCP Publication number 151, 1951 revision.
UCP Publication number 82 created in 1933.
6. Lets see what's existing now in UCP
600 and we can go and enquire about
UCP 500 ?
And also we need to study deeper
about the changes between UCP 500
and UCP 600
And also the necessity for alteration
and reducing from 49 to 39 articles ???
7. Article 1- 5
Article 1 - 5
Definition,
Interpretation,
independence of credits
and underlying contracts.
8. Article 6 - 10
Article 6 - 10
Availability,
expiry date
and place, obligations of issuing
and confirming bank,
advising credits
and amendments.
9. Article 11 - 17
Article 11 - 17
Pre-Advised Credits,
nominated bank,
reimbursement arrangements,
complying presentations
and discrepant documents,
waiver,
original documents and notices
10. Article 18 Commercial invoice
Article 19 - 27 Transport
Documents Article 28 Insurance
documents Article 29 - 37
Extension of Expiry Date,
tolerances, partial drawings and
partial shipments, Disclaimers
11. Article 38 - 39 Transferability of Credits and
Assignment of Proceeds. The most important
substantive changes are: The criterion that
documents have to appear to comply "on their
face" is only mentioned in Article 14 a UCP 600.
This leaves open that one has to consult the back
side of the document. The criterion of
inconsistency (Article 13 a UCP 500 "Documents
which appear on their face to be inconsistent
with one another") was watered down to read
now (see Article 14 d UCP 600): "Data in a
document, when read in context ... need not be
identical to, but must not conflict with...
12. UCP 500UCP 500
Uniform Customs and Practice for
Documentary Credits,
International Chamber of Commerce,
Paris, France
Publication No. 500.
13. 13
UCP 500
Buyer /
Applicant
Seller /
Beneficiary
Advising
Bank
Issuing
Bank
UCP 500
Uniform Customs and Procedures
for Documentary Letters of Credit.
The UCP 500 Letter of Credit - Concept
14. 14
UCP 500
Uniform Customs and Practice for Documentary Credits,
International Chamber of Commerce Publication No. 500.
Article 1: Application of UCP
This article states that all Letters of Credit, including Standby Credits, are issued
subject to UCP 500 provided that the Letter of Credit specifically indicates this to
be the case.
Article 2: Meaning of Credit
This article is saying that a Letter of Credit is any instrument issued by a
financial institution subject to UCP 500 that contains a conditional undertaking to
effect payment provided that its terms and conditions have been complied with.
Article 3: Credits vs Contracts
Credits, by their nature are separate transactions from the sales or other
contract(s) on which they may be based.
15. 15
UCP 500
UCP 500
Article 4: Documents vs. Goods / Services / Performance
In Credit operations all parties concerned deal with documents, and not with
goods, services and/or other performances to which the documents may relate.
Article 5: Instructions to Issue / Amend Credits
• Instructions for the issuance of a Credit must be complete and precise.
• In order to avoid confusion, Credit should not include excessive detail,
• The Credit must state precisely the documents that are to be presented.
Article 6: Revocable v. Irrevocable Credits
A Credit may be either (i) revocable or (ii) irrevocable.
Article 7: Advising Bank’s Liability
A Credit may be advised to a beneficiary through another bank (the Advising
Bank) without engagement on the part of the Advising Bank…
16. 16
UCP 500
Article 8: Revocation of a Credit
A revocable Credit may be amended or cancelled by the issuing bank at
any moment and without prior notice to the beneficiary.
Article 9: Liability of Issuing and Confirming Banks
An irrevocable Credit constitutes a definite undertaking of the Issuing
Bank.
Article 10: Types of Credit
All Credits must clearly indicate whether they are available by sight
payment, by deferred payment, by acceptance or by negotiation.
Article 11: Teletransmitted and Pre-Advised Credits
When an Issuing Bank instructs an Advising Bank by an authenticated
teletransmission to advise a Credit or an amendment to a Credit, the
teletransmission will be deemed to be the operative Credit instrument.
17. 17
UCP 500
Article 12: Incomplete or Unclear Instructions
If incomplete or unclear instructions are received to advise, confirm or amend a
Credit, the bank requested to act on such instructions may give preliminary
notification to the Beneficiary only and without responsibility.
Article 13: Standard for Examination of Documents
Banks must examine all documents stipulated in the Credit with reasonable care, to
ascertain whether or not they appear, on their face, to be in compliance with the
terms and conditions of the Credit… Documents not stipulated in the Credit will not
be examined by banks.
Article 14: Discrepant Documents and Notice
When the issuing bank authorizes another bank to pay, incur a deferred payment
undertaking, accept Draft(s), or negotiate against documents which appear on their
face to be in compliance with the terms and conditions of the Credit, the issuing bank
and the confirming bank, if any, are bound:
18. 18
UCP 500
Article 15: Disclaimer on Effectiveness of Documents
“Banks assume no liability of responsibility for the form, sufficiency, accuracy,
genuineness, falsification or legal effect of any document’s…
Article 16: Disclaimer on the Teletransmission of Documents
Banks assume no liability or responsibility for errors in translation and/or
interpretation of technical terms, and reserve the right to transmit Credit without
translating them.
Article 17: Force Majeure
Banks accept no liability or responsibility for consequences arising out of the
interruption of their business by Acts of God…
Article 18: Disclaimer for Acts of an Instructed Party
When a bank requests one of its correspondent banks to “give effect to the
instructions of the applicant” they do so “for the account of and at the risk of
such applicant.
19. 19
UCP 500
Article 19: Band-to-Bank Reimbursement Arrangements
When an issuing bank transmits a Credit through a correspondent bank
with which they do not have an account…
Documents
Article 20: Ambiguity as to Issuers of Documents
Terms such as ’first class,’ ‘well known,’ ‘qualified,’ independent’, ‘official,’
‘competent,’ ‘local,’ and the like shall not be used to describe the issuers of
any document’s to be presented under a Credit.
Article 21: Unspecified Issuers of Contents of Documents
When documents other than transport documents, insurance documents
and commercial invoices are called for, the Credit should stipulate by whom
they are to be issued and their wording or data content.
20. 20
UCP 500
Article 22: Issuance Date on Documents v. Credit Date
Documents may be presented showing an issuance date prior to the issuance date of the
Credit unless the Credit stipulates otherwise.
Article 23: Transport Documents
A Bill of Lading services three purposes; a contract between the shipper and carrier to
transport goods; a receipt by the carrier for the goods being shipped; and it normally
transfers title of the goods represented by it.
Article 24: Non-Negotiable Sea Waybill
The main difference between a negotiable bill of lading and non-negotiable document is the
way the bill of lading is consigned. A negotiable bill of lading is consigned “to order of” a
named party. Title is passed by surrender of an endorsed original bill of lading. A non-
negotiable bill of lading has a direct consignment to a named party. Title is passed by
surrender of either an original or non-negotiable copy of the B/L or Waybill.
21. 21
UCP 500
Article 25: Charter Party Bill of Lading
A charter party bill of lading is one where a shipper has contracted with a
shipping line to charter a vessel for the movement of cargo. The Credit
must stipulate that charter party bills of lading are acceptable.
Article 26: Multimodal Transport Document
A multimodal transport document is one that covers more than one kind of
conveyance.
Article 27: Air Transport Document
Air transport documents are issued in the form of an Air Waybill. A
significant difference between an Air Waybill and Ocean Bill of Lading is that
the former are always straight consignments whereas Ocean Bills of Lading
may be either straight or negotiable
22. 22
UCP 500
Article 28: Road, Rail or Inland Waterway Transport Documents
Frequently letters of credit issued for the purpose of accommodating shipments within
North America will call for some type of “domestic” transport document.
Article 29: Courier and Postal Receipts
Small or lightweight shipments are frequently sent via courier such as Airborne, Federal
Express, DHL, etc.
Article 30: Transport Document Issued by Freight Forwarders
Sometime a freight forwarder receives cargo from several different shippers and
consolidates them into a single container shipment.
Article 31: On deck,” “Shipper’s Load and Count,” Name of Consignor
Transport documents which do indicate that the goods may be carried “on deck”; bear a
clause such as “shippers load and count”; or indicate a consignor other than the
beneficiary.
23. 23
UCP 500
Article 32: Clean Transport Documents
A clean transport document is one that does not indicate any defect in the goods
such as “damaged.”
Article 33: Freight Payable/Prepaid Transport Documents
All Letters of Credit that require presentation of a transport document must
indicate whether the freight has been prepaid or is being sent “freight collect”.
Article 34: Insurance Documents
Insurance is a contract between the insurance company and the shipper,
consignee or party having an insurable interest in the merchandise
Article 35: Type of Insurance Cover
Credits should stipulate the type of insurance required and, if any, the additional
risks which are to be covered.
24. 24
UCP 500
Article 36: All Risk Insurance Cover
Frequently a Credit requires that the insurance document cover “all risks.”
Banks will accept an insurance document that bears an “all risks” clause or
notation even though the insurance document contains wording elsewhere
that certain risks are excluded.
Article 37: Commercial Invoice
This is the only document where the merchandise description must
correspond exactly with that indicated in the Credit. Must appear on their
face to be issued by the Beneficiary named in the Credit, and must be made
out in the name of the Applicant.
Article 38: Other Documents
This article covers weight certificates on transport documents other than by
sea.
25. 25
UCP 500
Article 39: Miscellaneous Documents
Allowances in Credit Amount, Quantity and Unit Price. Banks will accept
documents which show that the quantity of goods being shipped has a
variance of 5% more or less than that stipulated in the Credit.
Article 40: Partial Shipments/Drawings
Partial shipments are allowed, unless the Credit stipulates otherwise.
Sometimes a shipper may load goods on the same carrier at different times or
even different ports. So long as the transport documents indicate that the
goods were all shipped on the same carrier, for the same journey, show the
same destination, then a bank may not treat thee as partial shipments.
Article 41: Installment Shipments/Drawings
If a shipper (beneficiary) fails to make a drawings and/or shipment within a
specified time frame then the entire Letter of Credit ceases to be available for
any future drawings.
26. 26
UCP 500
Article 42: Expiry Date and Place for Presentation of Documents
All Credits must stipulate an expiry date and a place for presentation of
documents for payment.
Article 43: Limitation on the Expiry Date
every Credit which calls for a transport document should also stipulate a
specified period of time after the date of shipment during which presentation
must be made… If no such period of time is stipulated banks will not accept
documents presented to them later than 21 (calendar) days after the date of
shipment
Article 44: Extension of Expiry Date
If the expiry date of the Credit and/or last day of the period of time for
presentation of documents falls on a day on which the bank… is closed the
stipulated expiry date shall be extended to the first following day on which such
27. 27
UCP 500
Article 45: Hours of Presentation
Banks are under no obligation to accept presentation of documents outside their banking
hours.
Article 46: General Expressions as to Dates
Unless otherwise stipulated in the Credit, the expression ‘shipment’ used in stipulating an
earliest and/or latest date for shipment will be understood to include the expressions such
as ‘loading on board,’ ‘dispatch,’ ‘accepted for carriage, and the like.
Article 47: Date Terminology for Periods of Shipment
When Credits refer to dates such as “from X date to Y date” and the like, then banks will
interpret that to mean that both “X” and “Y” dates are included.
28. 28
UCP 500
Article 48: Transferable Credit
A transferable Credit is one under which the beneficiary may request that the
Credit be made available to a third party. A Credit is considered transferable
only if it is expressly designated as “transferable” by the issuing bank.
Article 49: Assignment of Proceeds
The beneficiary may request the paying/negotiating bank to “assign” all or
part of the proceeds to a third party. Unlike a transferee, an assignee is
entirely dependent on the beneficiary to perform in order to receive payment.
In addition, an assignee is not entitled to receive any notification of
amendments or even cancellation of the Credit. The main advantage to an
assignee is that it will be assured that payment will be made directly to them
instead of to the first beneficiary.
29. The UCP 500 is the global standard for
issuing, advising, presenting documents,
and negotiating Commercial Letters of
Credit in over 200 countries. It is the “gold
standard” for international transaction
settlement.
30. UCP500 Articles not incorporated into
UCP600 text:
Article 5[Instructions to Issue/Advise Credits]
Article 6 [Revocable v. Irrevocable Credits]
Article 8 [Revocation of a Credit]
Article 12[Incomplete or Unclear
Instructions]
Article 38[Other Documents]
31. Who is Affected?
LC Operations
Sales
Legal
Trainers
Applicants, Beneficiaries, Freight
Forwarders and Carriers
32. Fewer articles. UCP600 contains 39 articles. The
UCP 500 has 49.
The term "reasonable time" replaced with a
definite number of days (5) for examining and
determining compliance of documents;
A new provision concerning addresses of the
beneficiary and the applicant;
An expanded discussion of "original documents“;
Re-drafted transport articles aimed at resolving
confusion over the identification of carriers and
agents
33. A new section of “definitions”, containing terms such as
“honour”and “negotiation.”
Honour means:
i) to pay at sight if the credit is available by sight payment
ii) to incur a deferred payment undertaking and pay at maturity
if the credit is available by deferred payment,
(iii) to accept a bill of exchange (“draft”) drawn by the
beneficiary and pay at maturity if the credit is available by
acceptance.
Negotiation means the purchase by the nominated bank of drafts
(drawn on a bank other than the nominated bank) and/or
documents under a complying presentation, by advancing or
agreeing to advance funds to the beneficiary on or before the
banking day on which reimbursement is due to the nominated
bank.
34. Kindly Look at it !!!!
UCP500 Articles not incorporated into UCP600
text:
Article 5[Instructions to Issue/Advise Credits]
Article 6 [Revocable v. Irrevocable Credits]
Article 8 [Revocation of a Credit]
Article 12[Incomplete or Unclear Instructions]
Article 38[Other Documents]
Content of Articles 2, 6, 9, 10, 20, 21, 22, 30, 31,
33, 35, 36,46 and 47 were merged or otherwise
incorporated in other ways within the text of
the UCP 600.
35. The phrase "reasonable time" for acceptance or refusal
of documents has been replaced by a firm period of five
banking days.
The number of articles reduced to 39.
New provisions allow for the discounting of deferred
payment credits.
Banks can now accept an insurance document that
contains reference to any exclusion clause.
New sections on "definitions" and "interpretations"
have been added to clarify the meaning of ambiguous
terms.
Credit must state if reimbursement is subject to the ICC
rules for bank to bank reimbursements.
36. • An applicant or beneficiary address appearing in any
stipulated document need not be the same but must be
within the same country as the address stated in the
credit and contact details such as fax, phone, email and
the like, when stated as a part of the applicant or
beneficiary address will be disregarded…unless the
address and contact details appear as part of the
consignee or notify party details on a transport
document subject to the transport document articles of
the UCP 600. In that case they must appear as stated in
the credit.
• The word "clean“ need not appear on a transport
document even if a credit has a requirement for that
transport document to be “clean on board”.
37. The flight stamp shown on an airway bill will be
considered as the date of shipment, whether requested in
the credit or not.
The turndown notice has two new options: (i) to hold
documents pending applicant waiver or receipt of
additional instructions from the presenter or (ii) that the
bank is acting in accordance with instructions previously
received from presenter.
At least one original of each document stipulated in a
credit must be presented.
The concept of a revocable credit was removed from
UCP.
38. What is affected?
Import letters of Credit
Export Letters of credit
Standby Letters of Credit
LC Applications and Agreements
LC Systems and Standard Letters
Impact on SWIFT messages (notices of
refusal, subject to URR 525?)
39. Who is affected?
LC Operations
Work Procedures/Standard of Care
Staff Training in Multiple Locations
LC Systems and Standard Letters
What to do with existing LC’s after July 1, 2007?
Sales
Training of Sales Team Members
Legal
Learning the new rules
LC applications, documents and agreements
40. Trainers
Must learn new rules
Design and prepare training materials
Identify trainees, schedule and conduct
training.
Applicants/Beneficiaries/Freight
Forwarders & Carriers
Revocable credits not covered by UCP
Cannot set time limits for acceptance of
amendments by beneficiary
41. Applicants, Beneficiaries, Freight Forwarders &
Carriers
Issuing Bank must pay for credit complying documents,
if lost in transit.
At least one original of each document must be
presented.
Fewer Discrepancies? a document may be considered an
original if it appears to be on the document issuer’s
original stationery.
Applicant and/or beneficiary address may be different than
shown in the credit provided it is within the same country
as stated in the credit.
42. Applicants, Beneficiaries, Freight Forwarders & Carriers
The word “clean” not required to appear on Bill of
Lading, even if a “clean” transport document is
required in the LC.
An original document may be used to fulfill a
requirement for a “copy” even if a copy of a document
was required in the credit.
Transport document articles re-written to make it
easier to understand requirement to identify the
capacity of the signer of a Bill of Lading (agent, carrier
or master).
Banks allowed to discount or “prepay” an acceptance
or deferred payment obligation before maturity.
43. – Contact details such as Telefax, telephone, email and
the like, used as part of an applicant or beneficiary
address can be disregarded, unless used as part of
consignee or notify party details on a transport
document.
– A flight stamp or notation shown on an air waybill may
now be considered the date of shipment, whether
requested in the credit or not.
--Insurance documents containing references to any
exclusion clauses are now acceptable.
-- Faster Payment? Number of days required to notify
presenter of discrepancies hasbeen reduced from
seven (7) banking days following day of presentation
of documents to five (5) banking days.
44. Notable Changes!!!!!
New to UCP -Article 2 Definitions:
Advising bank, Applicant, Banking Day, Beneficiary,
Complying Presentation, Confirmation, Confirming bank,
Credit, Honour, Issuing bank, Negotiation, Nominated
bank, Presentation and Presenter.
New to UCP - Article 3 Interpretations:
Mainly conditions taken from UCP 500 Articles 20, 46 and
47
Plus wider application of terminology i.e., "Unless required
to be used in a document, words such as "prompt",
"immediately" or "as soon as possible" will be
disregarded" as opposed to its limited application under
UCP 500 sub-Article 46(b).
45. Article 6 Availability, Expiry Date and Place for
Presentation(includes):
(a) A credit must state the bank with which it is available or whether it
is available with any bank. A credit available with a nominated
bank is also available with the issuing bank.
(d) (i) A credit must stipulate an expiry date for presentation. An
expiry date stated for honour or negotiation will be deemed to be an
expiry date for presentation.
(d) (ii) The place of the bank with which the credit is available is the
place for presentation. If the credit is available with any bank then
the place for presentation is that of any bank. A place for
presentation other than that of the issuing bank is in addition to the
place of the issuing bank.
46. Article 7 Issuing Bank Undertaking (includes):
An issuing bank undertakes to reimburse a nominated bank that
has honoured or negotiated a complying presentation and
forwarded the documents to the issuing bank.
Reimbursement for the amount of a complying presentation
under acredit available by acceptance or deferred payment is
due at maturity, whether or not the nominated bank prepaid
or purchased before maturity. An issuing bank's undertaking
to reimburse a nominated bank is independent of the issuing
bank's undertaking to the beneficiary.
Article 8 Confirming Bank Undertaking (includes):A
confirming bank undertakes to reimburse another
nominated bankthat has honoured or negotiated a
complying presentation and forwarded the documents to
the confirming bank.
Reimbursement for the amount of a complying presentation
under a credit available by acceptance or deferred payment is
due at maturity, whether or not another nominated bank
prepaid or purchased before maturity. A confirming bank's
undertaking to reimburse another nominated bank is
47. Article 9 Advising of Credits and Amendments (includes):
An advising bank may utilize the services of another bank ("second
advising bank") to advise the credit and any amendment to the
beneficiary.
Article 10 Amendments (includes):
The terms and conditions of the original credit (or a credit incorporating previously
accepted amendments) will remain in force for the beneficiary until the
beneficiary communicates its acceptance of the amendment to the bank that
advised such amendment. The beneficiary should give notification of acceptance
or rejection of an amendment. If the beneficiary fails to give such notification, a
presentation that complies with the credit and to any not yet accepted amendment
will be deemed to be notification of acceptance by the beneficiary of such
amendment. As of that moment the credit will be amended.
A provision in an amendment to the effect that the amendment shall
become valid unless rejected by the beneficiary within a certain
time shall be disregarded.
48. Article 12 Nomination (includes):
By nominating a bank to accept a draft or incur a deferred
payment undertaking, an issuing bank authorizes that
nominated bank to prepay or purchase a draft accepted
or a deferred payment undertaking incurred by that
nominated bank. (See also Articles 7 and 8)
Article 13 Bank-to-Bank Reimbursement Arrangements
(includes):
If a credit states that reimbursement is to be obtained by a
nominated bank ("claiming bank") claiming on another
party ("reimbursing bank"), the credit must state if the
reimbursement is subject to the ICC rules for bank-to-
bank reimbursements in effect on the date of issuance
of the credit.
49. Article 14 Standard for Examination of Documentation (includes):
A nominated bank acting on its nomination, a 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.
A nominated bank acting on its nomination, a confirming bank, if any,
and the issuing bank shall each have a maximum of five banking
days following the day of presentation to determine if a
presentation is complying. This period does not depend on any
upcoming expiry date or last day for presentation.
A document may be dated prior to the issuance date of the credit, but
must not be dated later than the date of its presentation.
The shipper or consignor of the goods indicated on any document
need not be the beneficiary of the credit.
50. Article 14 Standard for Examination of Documentation (Con’t):
Data in a document, when read in context with the credit, the document itself
and international standard banking practice, need not be identical to, but
must not conflict with, data in that document, any other stipulated
document or the credit.
The addresses of the beneficiary and the applicant appearing in any stipulated
document, need not be the same as those stated in the credit or in any
other stipulated document, but must be within the same country as the
addresses mentioned in the credit.
Contact details (telefax, telephone, email and the like) stated as part of the
beneficiary’s and the applicant’s address will be disregarded. However,
when the address and contact details of the applicant appear as part of the
consignee or notify party details on a transport document that is subject to
the transport document articles (19, 20, 21, 22, 23, 24 or 25), they must be
as stated exactly as in the credit.
51. Article 16 Discrepant Documents, Waiver and Notice (Includes):
The notice of discrepancy must state that the bank is
refusing to honor or negotiate, must cite each
discrepancy found and one other of the following
options:
That the bank is holding the documents pending further
instructions from the presenter, or
That this issuing bank is holding the documents until it
receives a waiver from the applicant and agrees to
accept it, or receives further instructions from presenter
prior to agreeing to accept a waiver, or
That the bank is returning the documents; or
That the bank is acting in accordance with instructions
previously received from the presenter.
52. Article 17 Original Documents and Copies:
This article follows the principles of the ICC Decision for determination of an
original document.
Article 18 Commercial Invoice (includes):
"... must be made out in the same currency as the credit; ...”
Articles 19-25 represent the new Transport Articles of the UCP (main
changes):First transport article is "Transport Document Covering at Least Two
Different Modes of Transport" and replaces UCP500 Article 26 "Multimodal Transport
Document".
Further alignment of the signing and identification of capacity;> Refined 'on board'
notation requirements;
Re-definition of transshipment i.e., "unloading from one vessel and reloading to
another vessel during the carriage from the port of loading to the port of discharge
stated in the credit".
For air transport, the flight stamp shown on the air waybill will now be considered the
date of shipment whether requested in the credit or not.
53. Article 27 Clean Transport Document (includes):
The word "clean" need not appear on a transport document even if
a credit has a requirement for that transport document to be
“clean on board”.
Article 28 Insurance Document and Coverage (includes):
Cover notes will not be accepted.
"... that risks are covered at least between the place of taking in
charge or shipment and the place of discharge or final destination
as stated in the credit“
An insurance document may contain reference to any exclusion
clause .
Note: the change to the position in ISBP paragraph 186.
54. Article 35 Disclaimer on Transmission and
Translation (includes):
If a nominated bank determines that a presentation
is complying and forwards the documents to the
issuing bank or confirming bank, whether or not
the nominated bank has honoured or negotiated,
an issuing bank or confirming bank must honour
or negotiate, or reimburse that nominated bank,
even when the documents have been lost in
transit between the nominated bank and the
issuing bank or confirming
55. Article 36 Force Majeure:
A bank assumes no liability or responsibility for the
consequences arising out of the interruption of
its business by Acts or God, riots, civil
commotions, insurrections, wars, acts of
terrorism** or by any strikes or lockouts, or any
other causes beyond its control.
A bank will not, upon resumption of its business,
honour or negotiate under a credit that expired
during such interruption of its business.
** Note: addition of the coverage for "acts of
terrorism"
56. Article 38 Transferable Credits (includes):
a. A bank is under no obligation to transfer a credit
except to the extent and in the manner expressly
consented to by that bank.
b. This section contains definitions for
"Transferable credit", "Second beneficiary",
“First beneficiary", "Transferring bank" and
"Transferred credit.”
k. Presentation of documents by or on behalf of a
second beneficiary must be made to the
transferring bank.
58. Export Financing
Exporters naturally want to get paid as quickly as
possible, while importers usually prefer to
delay payment until they have received the
goods. Because of the intense competition for
export markets, being able to offer attractive
payment terms customary in the trade is often
necessary to make a sale. Exporters should be
aware of the many financing options open to
them so that they choose the most acceptable
one to both the buyer and the seller.
59. Export credit can be broadly classified into
• Pre-shipment finance and
• post shipment finance.
• Preshipment
finance refers to finance extended to
purchase, processing or packing of goods
meant for exports
• Financial
assistance extended after the shipment of
exports falls within the scope of post
shipment finance
60. PACKING CREDIT
• As loan or cash credit against pledge or hypothecation.
• Verification of Exporter-Importer Code No. issued by
DGFT.
• Party should not be in the RBI Caution
list or ECGC Special Approval List.
• Export is not to a listed country
• Verify order/LC
• Up-to date knowledge of export policy
• Commodity should not be in the negative list.
• Commodity should have a good market
• Terms of contract
• No FEMA violation
• Borrower should be credit worthy.
61. • Working capital may be defined as funds required
to carry the required level of Current
assets to enable the industry to carry
on its operations at the expected levels
uninterruptedly..
• The guidelines set by Nayak Committee for
computation of WC finance quantum for
village, tiny and other SSI industries
to a minimum extent of 20% of Projected/ Accepted
Turnover to continue Guidelines
with regard to specific activities / industries / situations
to continue (Sugar / tea
industries, Rehabilitation cases, Export Financing etc.)
Banks may consider Cash Flow approach of financing
in order to close the gap between
the sanctioned limits and the utilization levels …
62. Quantum of finance:
• FOB value of goods minus profit and credit
margin
Cost of production less margin (can be
more if the domestic cost is more
than the FOB value and the difference
is accounted as incentives like duty draw-back
etc. subject to export production finance
guarantee of ECGC).
• In the case of exports on CIF value basis PC
can be granted towards insurance and freight also
• Period of finance: to coincide
with the date for shipment and normally up
to 180 days
63. Clean Packing Credit
• Granted to credit worthy parties where advance
payment is required to be made to the supplier.
• Quantum determined based on the likely purchase
pattern of the exporter with their suppliers.
• Period of CPC is determined based on the
facts of each case (but not later
than the period of contract /LC.
• A higher margin of say 25% should be stipulated,
collected each time and remitted along with PC to
the supplier.
• CPC should be converted as PC or Bills
64. EXPORT FINANCE
• PRE SHIPMENT finance : Deals with the
finance schemes available before the
shipment has been made.
• POST SHIPMENT finance : on the
contrary deals with credit available after
the goods have shipped.
Both stages are crucial for the exporter
65. Pre-shipment finance
• PSF.. Offer liquidity to the
exporter to produce raw
materials, carry out
processing, packing,
transporting and warehousing
of the goods to be exported.
66. • Pre-Export Finance: provision of funds to
cover the period between signing of purchase
orders and payment (short-term, working
capital)
• –Pre-export finance typically covers:
• Cost of inland transport to port
• Purchase of raw materials for processing
• Cost of processing
• Storage costs
67. Illustrative procedure (commodities)
• Exporter provides title to or pledges products to bank
• –Products that have yet to be produced
• –Products that have been produced (warehouse
receipt)
• Bank provides credit facility
• Payment
• –Trader takes delivery
• –Bank receives payment directly from buyer
• »Escrow account
• »Evidence account
68. Methods of Pre-Export Finance
• Open Account: –Exporter ships goods without any guarantee of
payment, thereby financing importer
–Risk of transaction dependent on relationship/importer integrity.
• Documentary letter of credit (see UCC Art. 5 and UCP 500): Letter
from bank, addressed to exporter, in which bank promises to pay or accept
drafts if exporter conforms 100% to conditions within the letter.
• Three parties:
• –Issuer: the issuing bank
• –Account party (importer)
• –Beneficiary (exporter)
• •Three agreements
• –Trade contract between importer and exporter
• –Documentary credit between bank and exporter
• –Reimbursement agreement between bank and importer
69. Documentary Letter of credit
Revocable/Irrevocable
• –A revocable letter of credit can be cancelled or amended by the issuing
bank; the bank does not need the exporter/beneficiary’s consent.
Confirmed/Unconfirmed
• –Issuing bank forwards letter of credit to exporter’s bank
• –Exporter’s bank promises to pay exporter (confirms l/c)
• –In an unconfirmed transaction, the advising bank acts as the issuing
bank’s agent and bears no obligation to exporter
Back-to-back
• –Typically used by brokers, the letter of credit allows the beneficiary to
assign its rights in one letter of credit to the issuer of a second letter of
credit
• –Both letters of credit must require identical documents
Transferable
• –The original beneficiary can transfer the letter of credit to third parties
70. Documentary Letter of credit
• Revolving
• –Typically used in construction contracts
• –Allows beneficiary to draw on the letter of credit, up to a certain
amount, usually without presentation of documents
• –The account party replenishes the account
“Red clause” letter of credit
• –Exporter can use to obtain pre-shipment finance by providing either (i)
a statement of purpose or (ii) an undertaking to provide specified
documents.
• –Issuing bank provides exporter with a percentage of the L/C amount
• –Advising bank guarantees reimbursement
“Green clause” letter of credit
• –Similar to “red clause” letters of credit, but pre-shipment finance is
contingent upon the production of warehouse receipts…
71. Letter of credit Settlement
Sight payment (sight draft)
• –Exporter presents documents and receives payment
Deferred payment (dated draft)
• –Exporter presents documents and receives payment at some
specified future time
Acceptance (time draft)
• –Exporter (i) presents documents and (ii) draws a usance draft
• –Bank accepts bill of exchange for payment on a future date
Negotiation
• –Exporter may choose a bank and negotiate the payment of a
sight or usance draft
• –Bank will either:
• »Advance payment with recourse to the exporter
• »Advance payment less a fee (discount)
• »Pay exporter when issuing bank provides payment
72. Post shipment Finance
• Provides credit facility from the date
shipment of the goods to the time
export payment is realized
( expenses between period of
shipment dispatch and payment
realisation…
73. Export Finance –Post-Export
Post-Export Finance (medium/long-term)
• –Post-Export finance typically covers:
• •Account receivables
• •Equipment
• •Other fixed assets
–Methods of Post-Export Finance
• •Revolving line of credit
• •Term loan
• •Finance accounts receivable
74. Methods of Post-Export Finance
Finance account receivables
–Typically used in two instances
• •Undercapitalized company with permanent financing
need
• •Temporary insufficient cashflow
–Banks provide loan secured by:
• •Assignment of receivables
• •Assignment of commodity inventory
–Loan
• •Made on a revolving basis against a pool of receivables
–Borrower
• •Responsible for collecting from customers
• •Responsible for 100% loan repayment despite inability to
collect from customers
75. Export Finance –Forms of Risk
Commercial risk
•The risk that either party will not fulfill its
obligations
Transportation risk
•The risk that goods become damaged or destroyed
during transport
Exchange risk
• •The risk that currency fluctuations will affect the
value of the transaction
Political risk
• •The risk that government policy changes, wars,
embargoes, etc., will prevent the conclusion or
affect the value of the transaction
76. Indian Case study ; RBI sources !
• PRE-SHIPMENT EXPORT CREDIT, Definition:
…any loan or advance granted or any other credit provided by a
bank to an exporter for financing the purchase, processing,
manufacturing or packing of goods prior to shipment / working
capital expenses towards rendering of services on the basis of
letter of credit opened in his favour or in favour of some other
person, by an overseas buyer or a confirmed and irrevocable
order for the export of goods / services from India or any other
evidence of an order for export from India having been placed on
the exporter or some other person, unless lodgement of export
orders or letter of credit with the bank has been waived.
77. Period of Advance
The period for which a packing credit advance may be
given by a bank will depend upon the circumstances
of the individual case, such as the time required for
procuring, manufacturing or processing (where
necessary) and shipping the relative goods /
rendering of services.
It is primarily for the banks to decide the period for which a
packing credit advance may be given, having regard to the
various relevant factors so that the period is sufficient to
enable the exporter to ship the goods / render the services
78. • If pre-shipment advances are not adjusted by
submission of export documents within 360
days from the date of advance, the advances
will cease to qualify for concessive rate of
interest to the exporter ab initio.
• RBI would provide refinance only for a
period not exceeding 180 days.
79. Disbursement of Packing Credit
Banks may also maintain different
accounts at various stages of processing,
manufacturing, etc. depending on the
types of goods / services to be exported,
e.g. hypothecation, pledge, etc.,
accounts and may ensure that the
outstanding balance in accounts are
adjusted by transfer from one account to
the other and finally by proceeds of
relative export documents on purchase,
80. Banks should continue to keep a close
watch on the end-use of the funds
and ensure that credit at lower rates
of interest is used for genuine
requirements of exports. Banks
should also monitor the progress
made by the exporters in timely
fulfillment of export orders.
81. Liquidation of Packing Credit
The packing credit / pre-shipment credit granted
to an exporter may be liquidated out of
proceeds of bills drawn for the exported
commodities on its purchase, discount etc.,
thereby converting pre-shipment credit into
post-shipment credit. Further, subject to
mutual agreement between the exporter and
the banker it can also be repaid / prepaid out
of balances in Exchange Earners Foreign
Currency A/c ( EEFC A/c ) as also from rupee
resources of the exporter to the extent
82. Running Account' Facility
In many cases, the exporters have to procure raw
material, manufacture the export product and
keep the same ready for shipment, in anticipation
of receipt of letters of credit / firm export orders
from the overseas buyers. Having regard to
difficulties being faced by the exporters in availing
of adequate pre-shipment credit in such cases,
banks have been authorized to extend Pre-
shipment Credit ‘Running Account’ facility in
respect of any commodity, without insisting on
prior lodgment of letters of credit / firm export
orders, depending on the bank’s judgment
regarding the need to extend such a facility and
subject to the following conditions:
83. a) Banks may extend the ‘Running Account’ facility only to those
exporters whose track record has been good as also to Export
Oriented Units (EOUs) / Units in Free Trade Zones / Export
Processing Zones (EPZs) and Special Economic Zones (SEZs)
(b) In all cases where Pre-shipment Credit ‘Running Account’ facility has
been extended, letters of credit / firm orders should be produced
within a reasonable period of time to be decided by the banks.
(c) Banks should mark off individual export bills, as and when they are
received for negotiation / collection, against the earliest outstanding
pre-shipment credit on 'First In First Out' (FIFO) basis. Needless to
add that, while marking off the preshipment credit in the manner
indicated above, banks should ensure that concessive credit available
in respect of individual pre-shipment credit does not go beyond the
period of sanction or 360 days from the date of advance, whichever
is earlier.
(d) Packing credit can also be marked-off with proceeds of export
documents against which no packing credit has been drawn by the
exporter.
84. Export Credit against Proceeds of Cheques, Drafts, etc.
Representing Advance
Payment for Exports
Where exporters receive direct remittances
from abroad by means of cheques, drafts, etc.
in payment for exports, banks may grant
export credit at concessive interest rate to
exporters of good track record till the
realization of proceeds of the cheque, draft
etc. received from abroad, after satisfying
themselves that it is against an export order,
is as per trade practices in respect of the
goods in question and is an approved method
of realization of export proceeds as per extant
85. Rupee Export Packing Credit to Manufacturer Suppliers for
Exports Routed through STC/MMTC/Other Export Houses,
Agencies, etc.
Banks may grant export packing credit
to manufacturer suppliers who do not
have export orders/letters of credit in
their own name, and goods are
exported through the State Trading
Corporation/Minerals and Metal
Trading Corporation or other export
houses, agencies, etc.
86. Requirements
(a) Banks should obtain from the export house a letter
setting out the details of the export order and the portion
thereof to be executed by the supplier and also certifying
that the export house has not obtained and will not ask
for packing credit in respect of such portion of the order
as is to be executed by the supplier.
(b) Banks should, after mutual consultations and taking into
account the export requirements of the two parties,
apportion between the two i.e. the Export House and the
Supplier, the period of packing credit for which the
concessionary rate of interest is to be charged. The
concessionary rates of interest on the pre-shipment
credit will be available up to the stipulated periods in
respect of the export house/agency and the supplier put
together.
87. The export house should open inland L/Cs in favour of the supplier
giving relevant particulars of the export L/Cs or orders and the
outstandings in the packing credit account should be extinguished
by negotiation of bills under such inland L/Cs. If it is inconvenient
for the export house to open such inland L/Cs in favour of the
supplier, the latter should draw bills on the export house in
respect of the goods supplied for export and adjust packing credit
advances from the proceeds of such bills. In case the bills drawn
under such arrangement are not accompanied by bills of lading or
other export documents, the bank should obtain through the
supplier a certificate from the export house at the end of every
quarter that the goods supplied under this arrangement have in
fact been exported. The certificate should give particulars of the
relative bills such as date, amount and the name of the bank
through which the bills have been negotiated.
88. Export of Services
In view of the large number of categories of
service exports with varied nature of
business as well as in the environment of
progressive deregulation where the
matters with regard to micromanagement
are left to be decided by the individual
financing banks, the banks may formulate
their own parameters to finance the
service exporters.
89. Exporters of services qualify for working capital export credit
(pre and post shipment) for consumables, wages, supplies etc.
• The proposal is a genuine case of export of services.
• The item of service export is covered under
Appendix – 36 of the Hand Book (Vol.1)
• The exporter is registered with the Export
Promotion Council for services
• There is an Export Contract for the export of the
Service
• There is a time lag between the outlay of working
capital expense and actual receipt of payment from
the service consumer or his principal abroad.
• There is a valid Working Capital gap i.e. service is
provided first while the payment is received some
time after an invoice is raised.
90. • Banks should ensure that there is no double
financing/excess financing.
• The export credit granted does not exceed the
foreign exchange earned less the
• margins if any required, advance
payment/credit received.
• Invoices are raised
• Inward remittance is received in Foreign
Exchange.
• Company will raise the invoice as per the
contract where payment is received from
overseas party, the service exporter would utilize
the funds to repay the export credit availed of
from the bank.
91. India: POST-SHIPMENT EXPORT CREDIT
Post-shipment Credit' means any loan or
advance granted or any other credit provided
by a bank to an exporter of goods / services
from India from the date of extending credit
after shipment of goods / rendering of
services to the date of realization of export
proceeds and includes any loan or advance
granted to an exporter, in consideration of,
or on the security of any duty drawback
allowed by the Government from time to
92. Types of Post-shipment Credits:
(i)Export bills purchased/
discounted/ negotiated.
(ii) Advances against bills for
collection.
(iii) Advances against duty
drawback receivable from
Government
93. Liquidation of Post-shipment Credit:
Post-shipment credit is to be liquidated by the
proceeds of export bills received from abroad in
respect of goods exported / services rendered.
Further, subject to mutual agreement between
the exporter and the banker it can also be
repaid / prepaid out of balances in Exchange
Earners Foreign Currency Account (EEFC A/C) as
also from proceeds of any other unfinanced
(collection) bills. Such adjusted export bills
should however continue to be followed up for
realization of the export proceeds and will
94. Rupee Post-shipment Export
Credit
• the case of demand bills, the period of advance shall be the
Normal Transit Period (NTP) as specified by FEDAI.
• In case of usance bills, credit can be granted for a maximum
duration of 365 days from date of shipment inclusive of Normal
Transit Period (NTP) and grace period, if any. However, banks
should closely monitor the need for extending post shipment credit
up to the permissible period of 365 days and they should influence
the exporters to realize the export proceeds within a shorter
period.
• Normal transit period' means the average period normally
involved from the date of negotiation / purchase / discount till the
receipt of bill proceeds in the Nostro account of the bank
concerned, as prescribed by FEDAI from time to time. It is not to be
confused with the time taken for the arrival of goods at overseas
destination.
95. Post-shipment Advances against Duty
Drawback Entitlements
• Banks may grant post-shipment advances to exporters
against their duty drawback entitlements as provisionally
certified by Customs Authorities pending final sanction
and payment.
• The advance against duty drawback receivables can also
be made available to exporters against export promotion
copy of the shipping bill containing the EGM Number
issued by the Customs Department. Where necessary,
the financing bank may have its lien noted with the
designated bank and arrangements may be made with
the designated bank to transfer funds to the financing
bank as and when duty drawback is credited by the
Customs
96. ECGC Whole Turnover Post-shipment
Guarantee Scheme
The Whole Turnover Post-shipment
Guarantee Scheme of the Export Credit
Guarantee Corporation of India Ltd. (ECGC)
provides protection to banks against non-
payment of post-shipment credit by
exporters. Banks may, in the interest of
export promotion, consider opting for the
Whole Turnover Post-shipment Policy. The
salient features of the scheme may be
obtained from ECGC.
97. DEEMED EXPORTS - CONCESSIVE RUPEE EXPORT
CREDIT
Banks are permitted to extend rupee pre-
shipment and post-supply rupee export credit at
concessional rate of interest to parties against
orders for supplies in respect of projects
aided/financed by bilateral or multilateral
agencies/funds (including World Bank, IBRD,
IDA), as notified from time to time by
Department of Economic Affairs, Ministry of
Finance under the Chapter "Deemed Exports" in
Foreign Trade Policy, which are eligible for grant
of normal export benefits by Government of
98. INTEREST ON EXPORT CREDIT
• A ceiling rate has been prescribed for rupee export credit
linked to Benchmark Prime Lending Rates (BPLRs) of
individual banks available to their domestic borrowers.
Banks have, therefore, freedom to decide the actual
rates to be charged within the specified ceilings. Further,
the ceiling interest rates for different time buckets under
any category of export credit should be on the basis of
the BPLR relevant for the entire tenor of export credit.
• ECNOS: ECNOS means Export Credit Not Otherwise
Specified in the Interest Rate structure for which banks
are free to decide the rate of interest keeping in view the
BPLR and spread guidelines. Banks should not charge
penal interest in respect of ECNOS.
99. Interest Rate Structure
• Pre-shipment Credit (from the date of advance) : (a) Up to 180
days / (b)Against incentives receivable from Government covered
by ECGC Guarantee up to 90 days.
• Post-shipment Credit (from the date of advance) : a) On demand
bills for transit period (as specified by FEDAI) (b) Usance bills (for
total period comprising usance period of export bills, transit
period as specified by FEDAI, and grace period, wherever
applicable)
Up to 90 days
Up to 365 days for exporters under the Gold Card Scheme.
(c) Against incentives receivable from Govt. (covered by ECGC
Guarantee) up to 90 days
(d) Against undrawn balances (up to 90 days)
(e) Against retention money (for supplies portion only) payable
100. EXPORT CREDIT IN FOREIGN CURRENCY
• Pre-shipment Credit in Foreign Currency (PCFC): The
scheme is an additional window for
providing pre-shipment credit to Indian
exporters at internationally competitive
rates of interest. It will be applicable to
only cash exports. The instructions with
regard to Rupee Export Credit apply to
export credit in foreign currency also
mutatis mutandis, unless otherwise
specified.
101. Source of Funds for Banks
• The foreign currency balances available with the bank in
Exchange Earners Foreign Currency (EEFC) Accounts,
Resident Foreign Currency Accounts RFC(D) and Foreign
Currency (Non-Resident) Accounts (Banks) Scheme
could be utilized for financing the pre-shipment credit in
foreign currency.
• Banks are also permitted to utilise the foreign currency
balances available under Escrow Accounts and Exporters
Foreign Currency Accounts for the purpose, subject to
ensuring that the requirements of funds by the account
holders for permissible transactions are met and the
limit prescribed for maintaining maximum balance in
the account under broad based facility is not exceeded.
102. Post-shipment Export Credit in Foreign
Currency
• Banks may utilise the foreign exchange
resources available with them in Exchange
Earners Foreign Currency Accounts (EEFC),
Resident Foreign Currency Accounts (RFC),
Foreign Currency (Non-Resident) Accounts
(Banks) Scheme, to discount usance bills and
retain them in their portfolio without resorting
to rediscounting. Banks are also allowed to
rediscount export bills abroad at rates linked to
international interest rates at post-shipment
stage.
Editor's Notes
UCP 500
UCP 500 stands for Uniform Customs and Practice for Documentary Credits,International Chamber of Commerce, Paris, France, Publication No. 500.
The UCP 500 is the international standard for Documentary and Standby Letters of Credit.
The UCP 500 Letter of Credit concept is quite simple. It is the global standard for managing trade transactions using Documentary Letters of Credits. It is used by buyers and their LC issuing banks, and sellers and their LC advising banks.
The UCP 500 is organized into 49 Articles with subsections, that each deal with a particular aspect of bank issued Commercial Letters of Credit.
Article 1: Application of UCPThis article states that all Letters of Credit, including Standby Credits, are issued subject to UCP 500 provided that the Letter of Credit specifically indicates this to be the case.
Article 2: Meaning of Credit
This article is saying that a Letter of Credit is any instrument issued by a financial institution subject to UCP 500 that contains a conditional undertaking to effect payment provided that its terms and conditions have been complied with.
Article 3: Credits vs. Contracts
Credits, by their nature are separate transactions from the sales or other contract(s) on which they may be based.
Article 4: Documents vs. Goods / Services / Performance
In Credit operations all parties concerned deal with documents, and not with goods, services and/or other performances to which the documents may relate.
Article 5: Instructions to Issue / Amend Credits
Instructions for the issuance of a Credit must be complete and precise. In order to avoid confusion, Credit should not include excessive detail, The Credit must state precisely the documents that are to be presented.
Article 6: Revocable v. Irrevocable Credits
A Credit may be either (i) revocable or (ii) irrevocable.
Article 7: Advising Bank’s Liability
A Credit may be advised to a beneficiary through another bank (the Advising Bank) without engagement on the part of the Advising Bank…
Article 8: Revocation of a Credit
A revocable Credit may be amended or cancelled by the issuing bank at any moment and without prior notice to the beneficiary.
Article 9: Liability of Issuing and Confirming Banks
An irrevocable Credit constitutes a definite undertaking of the Issuing Bank.
Article 10: Types of Credit
All Credits must clearly indicate whether they are available by sight payment, by deferred payment, by acceptance or by negotiation.
Article 11: Teletransmitted and Pre-Advised Credits
When an Issuing Bank instructs an Advising Bank by an authenticated teletransmission to advise a Credit or an amendment to a Credit, the teletransmission will be deemed to be the operative Credit instrument.
Article 12: Incomplete or Unclear Instructions
If incomplete or unclear instructions are received to advise, confirm or amend a Credit, the bank requested to act on such instructions may give preliminary notification to the Beneficiary only and without responsibility.
Article 13: Standard for Examination of DocumentsBanks must examine all documents stipulated in the Credit with reasonable care, to ascertain whether or not they appear, on their face, to be in compliance with the terms and conditions of the Credit… Documents not stipulated in the Credit will not be examined by banks.
Article 14: Discrepant Documents and Notice
When the issuing bank authorizes another bank to pay, incur a deferred payment undertaking, accept Draft(s), or negotiate against documents which appear on their face to be in compliance with the terms and conditions of the Credit, the issuing bank and the confirming bank, if any, are bound:
Article 15: Disclaimer on Effectiveness of Documents
“Banks assume no liability of responsibility for the form, sufficiency, accuracy, genuineness, falsification or legal effect of any document’s…
Article 16: Disclaimer on the Teletransmission of Documents
Banks assume no liability or responsibility for errors in translation and/or interpretation of technical terms, and reserve the right to transmit Credit without translating them.
Article 17: Force Majeure
Banks accept no liability or responsibility for consequences arising out of the interruption of their business by Acts of God…
Article 18: Disclaimer for Acts of an Instructed Party
When a bank requests one of its correspondent banks to “give effect to the instructions of the applicant” they do so “for the account of and at the risk of such applicant.
Article 19: Band-to-Bank Reimbursement Arrangements
When an issuing bank transmits a Credit through a correspondent bank with which they do not have an account…
Documents
Article 20: Ambiguity as to Issuers of Documents
Terms such as ’first class,’ ‘well known,’ ‘qualified,’ independent’, ‘official,’ ‘competent,’ ‘local,’ and the like shall not be used to describe the issuers of any document’s to be presented under a Credit.
Article 21: Unspecified Issuers of Contents of Documents
When documents other than transport documents, insurance documents and commercial invoices are called for, the Credit should stipulate by whom they are to be issued and their wording or data content.
Article 22: Issuance Date on Documents v. Credit Date
Documents may be presented showing an issuance date prior to the issuance date of the Credit unless the Credit stipulates otherwise.
Article 23: Transport Documents
A Bill of Lading services three purposes; a contract between the shipper and carrier to transport goods; a receipt by the carrier for the goods being shipped; and it normally transfers title of the goods represented by it.
Article 24: Non-Negotiable Sea Waybill
The main difference between a negotiable bill of lading and non-negotiable document is the way the bill of lading is consigned. A negotiable bill of lading is consigned “to order of” a named party. Title is passed by surrender of an endorsed original bill of lading. A non-negotiable bill of lading has a direct consignment to a named party. Title is passed by surrender of either an original or non-negotiable copy of the B/L or Waybill.
Article 25: Charter Party Bill of Lading
A charter party bill of lading is one where a shipper has contracted with a shipping line to charter a vessel for the movement of cargo. The Credit must stipulate that charter party bills of lading are acceptable.
Article 26: Multimodal Transport Document
A multimodal transport document is one that covers more than one kind of conveyance.
Article 27: Air Transport Document
Air transport documents are issued in the form of an Air Waybill. A significant difference between an Air Waybill and Ocean Bill of Lading is that the former are always straight consignments whereas Ocean Bills of Lading may be either straight or negotiable
Article 28: Road, Rail or Inland Waterway Transport Documents
Frequently letters of credit issued for the purpose of accommodating shipments within North America will call for some type of “domestic” transport document.
Article 29: Courier and Postal Receipts
Small or lightweight shipments are frequently sent via courier such as Airborne, Federal Express, DHL, etc.
Article 30: Transport Document Issued by Freight Forwarders
Sometime a freight forwarder receives cargo from several different shippers and consolidates them into a single container shipment.
Article 31: On deck,” “Shipper’s Load and Count,” Name of Consignor
Transport documents which do indicate that the goods may be carried “on deck”; bear a clause such as “shippers load and count”; or indicate a consignor other than the beneficiary.
Article 32: Clean Transport Documents
A clean transport document is one that does not indicate any defect in the goods such as “damaged.”
Article 33: Freight Payable/Prepaid Transport Documents
All Letters of Credit that require presentation of a transport document must indicate whether the freight has been prepaid or is being sent “freight collect”.
Article 34: Insurance Documents
Insurance is a contract between the insurance company and the shipper, consignee or party having an insurable interest in the merchandise
Article 35: Type of Insurance Cover
Credits should stipulate the type of insurance required and, if any, the additional risks which are to be covered.
Article 36: All Risk Insurance Cover
Frequently a Credit requires that the insurance document cover “all risks.” Banks will accept an insurance document that bears an “all risks” clause or notation even though the insurance document contains wording elsewhere that certain risks are excluded.
Article 37: Commercial Invoice
This is the only document where the merchandise description must correspond exactly with that indicated in the Credit. Must appear on their face to be issued by the Beneficiary named in the Credit, and must be made out in the name of the Applicant.
Article 38: Other Documents
This article covers weight certificates on transport documents other than by sea.
Article 39: Miscellaneous Documents
Allowances in Credit Amount, Quantity and Unit Price. Banks will accept documents which show that the quantity of goods being shipped has a variance of 5% more or less than that stipulated in the Credit.
Article 40: Partial Shipments/Drawings
Partial shipments are allowed, unless the Credit stipulates otherwise. Sometimes a shipper may load goods on the same carrier at different times or even different ports. So long as the transport documents indicate that the goods were all shipped on the same carrier, for the same journey, show the same destination, then a bank may not treat thee as partial shipments.
Article 41: Installment Shipments/Drawings
If a shipper (beneficiary) fails to make a drawings and/or shipment within a specified time frame then the entire Letter of Credit ceases to be available for any future drawings.
Article 42: Expiry Date and Place for Presentation of Documents
All Credits must stipulate an expiry date and a place for presentation of documents for payment.
Article 43: Limitation on the Expiry Date
Every Credit which calls for a transport document should also stipulate a specified period of time after the date of shipment during which presentation must be made… If no such period of time is stipulated banks will not accept documents presented to them later than 21 (calendar) days after the date of shipment
Article 44: Extension of Expiry Date
If the expiry date of the Credit and/or last day of the period of time for presentation of documents falls on a day on which the bank… is closed the stipulated expiry date shall be extended to the first following day on which such bank is open.
Article 45: Hours of Presentation
Banks are under no obligation to accept presentation of documents outside their banking hours.
Article 46: General Expressions as to Dates
Unless otherwise stipulated in the Credit, the expression ‘shipment’ used in stipulating an earliest and/or latest date for shipment will be understood to include the expressions such as ‘loading on board,’ ‘dispatch,’ ‘accepted for carriage, and the like.
Article 47: Date Terminology for Periods of Shipment
When Credits refer to dates such as “from X date to Y date” and the like, then banks will interpret that to mean that both “X” and “Y” dates are included.
Article 48: Transferable Credit
A transferable Credit is one under which the beneficiary may request that the Credit be made available to a third party. A Credit is considered transferable only if it is expressly designated as “transferable” by the issuing bank.
Article 49: Assignment of Proceeds
The beneficiary may request the paying/negotiating bank to “assign” all or part of the proceeds to a third party. Unlike a transferee, an assignee is entirely dependent on the beneficiary to perform in order to receive payment. In addition, an assignee is not entitled to receive any notification of amendments or even cancellation of the Credit. The main advantage to an assignee is that it will be assured that payment will be made directly to them instead of to the first beneficiary.
In summary, the UCP 500 is the global standard for issuing, advising, presenting documents, and negotiating Commercial Letters of Credit in over 200 countries. It is the “gold standard” for international transaction settlement.