This document provides an overview of the process of negotiating export documents under a letter of credit. It defines negotiation of documents as submitting relevant documents to the advising bank within 21 days of shipment to obtain payment for exported goods. Key documents that may be negotiated include the commercial invoice, packing list, bill of lading, and inspection certificate. The document outlines important steps in examining letters of credit for compliance, scrutinizing documents for errors, presenting documents to the negotiating bank, and the flow of documents and payments between banks after presentation.

1. NEGOTIATION
OF
DOCUMENTS
Arundhati
18MBAIB-19

2. CONTENTS
• Things to know before we begin.
• What is negotiation of documents?
• Negotiable set of documents.
• List of documents
• Examination of letter of credit
• Precautions in Scrutiny of Documents
• Presentation of Documents
• Common Errors in Documents
• After the presentation of documents

3. Before we begin we
must know
• Proforma invoice is sent to the buyer.
• Export order is taken.
• After the goods are manufactured and packed
commercial invoice is made.
• After Inspection by the Export Inspection
Agency an Inspection certificate is issued.
• Goods move out of factory and Custom officials
after we deliver required documents like
shipping bill give us “let export seal”.
• Now the cargo moves to the shipping line.
• Clean Bill of lading is issued as soon as the
exports move out of the port as evidence that
your goods are sent.

4. So what is negotiation of documents?
After shipment or export of goods, exporter has to negotiate the documents
through a bank within a period of 21 days from the date of shipment. Submission of
relevant documents to the advising bank and the process of obtaining payment is
called "Negotiation of Documents".
Its done for getting the payment of the goods under letter of credit or documentary
collection.

5. Negotiable set
of Documents
Documents which are submitted to the advising bank
after the successful shipment of goods to the
consignee’s destination in order to avail the payment
of the export are called "Negotiable set of Documents"
• These depend on the stipulation in the letter of
credit.
• Exporter must present all documents specified in the
letter of credit for negotiation.
• Any missing document or incorrect document
becomes a discrepancy.
• Issuing bank of the L/C has under no circumstances an
obligation to honor the draft and shipping documents
with discrepancies.

6. List of Documents for
Negotiation
• Commercial invoice
• Packing list
• Marine insurance policy or certificate
• Ocean bill of lading
• Inspection Certificate
• Other documents requested by the buyer and
accepted by the seller like certificate of origin

7. Examination of a
Letter of Credit
• When a letter of credit is received, exporter
must:
• (1)Examine the conditions and documents
specified in the L/C and determine whether he
can meet them or not.
• (2) If there are any conditions he cannot meet,
request his buyer to amend the L/C asap before
he starts manufacturing export goods.
• (3) If the L/C calls for a time draft, have the L/C
specify that the discount interest for the time
draft shall be for account of importer, when
agreement was a sight draft but L/C is opened
with a time draft
• (4) Exporter should hold off shipping the order
until he receives amendments to the L/C as
requested.

8. Precautions in Scrutiny of Documents
Commercial Invoice
• Prepared on the standard form
• Properly signed.
• Description of the goods in the
invoice should strictly conform to the
description of goods in L/C.
• Currency of the invoice should be as
per L/C.
Certificate of Origin
• The Chamber of Commerce or other
competent authority as required by
L/C should issue it.
• It should state the country of original
details.
• It should state the description of
goods, invoice number & shipping
marks.

9. Bill of lading
• Should be presented in full set, with sane number of negotiable & nonnegotiable
copies as mentioned in L/C.
• should be marked “ shipped on board” unless L/C permits shipment or combined
transport document.
• It should not contain any adverse clauses as to the condition of goods or packing.
• It should be issued in the name of the shipper & blank endorsed or made out to the
order of the overseas bank, as per the terms of L/C.
• Date of shipment should not be later than the date specified in L/C.
• It should bear the name of the notifying party , if required in L/C.
• Additional condition such as “ stored in refrigerated compartment” should be
incorporated if it is requirement of the L/C.

10. Common Discrepancies in Documents
• The L/C has expired.
• Not all documents required in L/C are presented.
• Draft amount or tenor is different from invoice.
• The Bill of lading is Claused ( unclean or dirty)
• The goods were shipped on dock when it was not permitted as L/C has
required clean on board Bill Of Lading
• Insurance cover was inadequate & expressed in a currency other than that
required in the L/C.
• The description of goods or even the spelling is different from that in the L/C.

11. • The amount in the invoice & bill of exchange differed.
• The drawing was for a value , in excess of the amount of the L/C.
• The Bill of Lading did not evidence whether the freight was paid or not.
• The Bill of Exchange was drawn on wrong party.
• The Bill of Lading , Insurance document & Bill of Exchange were not
endorsed correctly.
• Transshipment / partial shipment made when prohibited under the L/C.
• The facsimile signatures were used when not allowed.
• The Bill of Lading is stale.

12. Presentation of Documents
• Draft and all shipping documents must be presented to a negotiating bank
together with the original letter of credit.
• Presentation must be made within a specified period of time after shipment in the
L/C, but not later than 21 days after shipment.
• A bank must determine whether or not presentation is a complying presentation
in 5 banking days
• If a nominated (negotiating) bank, a confirming bank, if any, or the issuing bank
determines that a presentation does not comply, it may refuse to honor or
negotiate, then it must give a single notice to presenter no later than the close of
the 5th banking days.

13. • The notice must state:
a.The bank is refusing to honor or negotiate: Each discrepancy to be stated
b.The bank’s disposal of shipping documents:
The bank is holding documents pending instructions from the presenter
The issuing bank is holding documents until it receives a waiver from the
applicant & agrees to accept it
The bank is returning documents
The bank is acting according to the previous instructions from the presenter.
• If a bank does not follow these negotiation and notice provisions, the bank cannot claim
that the documents do not constitute a complying presentation.The bank must honor or
negotiate.
• A document presented but not required by the Credit will be disregarded.

14. After the
presentation of
documents
• Exporter presents the documents to a bank that may
be paying/ negotiating bank; whichever one is
appropriate to him.
• The bank checks the documents & effects the payment
if the documents are in order.
• After payment to exporter , negotiating bank sends
the documents to the issuing bank for reimbursement.
• Issuing bank checks the documents & if they are in
order makes reimbursement to the negotiating bank.
• Issuing bank sends advice to importer to retire
documents under the L/C opened, at his request.
• Importer retires documents to get possession of
goods.

15. EASY? LETS EXPORT!!
THANKYOU