Scrutiny Of Export documents

Scrutiny of Export documents

Scrutiny of Export documents

On Completion of shipment, the exporter submits the export documents to the bank which he prepares/obtains from different sources for negotiation/purchase/discount. Before negotiation, the bankers must examine the documents with reasonable care.

Article 14(a) of UCPDC: The issuing bank must examine a presentation to determine, on the basis of the documents alone, whether or not the documents appear on their face to constitute a complying presentation.

Article 5 of UCPDC: Banks deal with documents and not with goods, services or performance to which the documents may relate.

These articles, therefore, binds the concerned bank to exercise prudence in examining the documents.

While examining documents submitted by an exporter, the bank should verify that,

The correct types of documents in the required sets/copies have been submitted.
The documents are properly drawn, signed, endorsed and if required, correctly stamped,
The physical description of the goods mentioned in the documents conform to the description given in the letter of credit,
The draft is drawn according to the terms and conditions stipulated in the credit.
The relative documents should also be scrutinized to ensure that they have been drawn up in conformity with exchange control regulation of the country.

A detailed scrutiny is made thereafter to ensure that the documents are in strict compliance with the credit terms:

Bill of Exchange (Draft)
Whether it is drawn in order and signed by the beneficiary as per L/C term

Whether the tenor and amount are in conformity with the terms of the credit.
Whether the date of the draft within the date of credit.
Amount of bill of exchange differs with that of Invoice.
The amount drawn does exceed the amount available under the credit.
Not drawn on L/C issuing Bank

Commercial Invoice:

Whether the description of goods, price, quantity, quality, marking and other specifications are in conformity with the credit terms.

Whether the amount corresponds with the amount of Bill of Exchange and that of L/C.
Whether requisite number of invoice submitted as asked for.
Whether issued by the beneficiary.
Whether signed by the beneficiary.

iii) Packing List:

Gross wt., Net wt & measurement, numbers of cartons/packages differ with those of B/L.
Not marked “Original”.
Not signed by the beneficiary.

Transport documents (Bill of Lading/Airway Bill/Rail Receipt/Truck receipt etc)

Whether the B/L or AWB have been submitted in full set.
Whether it is clean i.e. there should not bear any extra clauses that do not asked for in the credit.
Whether the date of B/L or AWB is within the last date of shipment as mentioned in the credit.
The B/L or AWB must indicate whether freight prepaid or freight payable as per credit terms.
Particulars of Notify party should conform with credit terms.

In must agree with the invoice as regards quantity and description of goods as well as in respect of ports of shipment and destination.

Whether signed by authorized person and properly stamped.
Whether the Bill of Lading is Short Form, Charter party B/L.

Certificate of origin/GSP, Inspection Certificate:
Whether issued by concerned authority as mentioned in the credit.
Whether signed by the person as mentioned in the credit.

Other Document:

The other documents i.e. packing list, weight/ measurement certificate, survey report, quality control certificate etc. as per credit should be submitted by the exporter and care should be taken while examining these documents that these documents are not the contradiction to the credit terms.

COMMON DISCREPANNCIES CHECKLIST

  1. Claused (unclean) Bill of Lading
  2. Charter party Bill of Lading (unless stipulated in the Letter of Credit)
  3. On Board notation on Bill of Lading undated unauthenticated.
  4. Shipment effected from port other than that stipulated in the credit.
  5. Goods shipped on deck (unless stipulated in L/C).
  6. Full set of Bill of Lading not presented.
  7. Certificate of country of origin not presented.
  8. Certificate notifying insurance company of shipment not presented.
  9. Weighment certificate not presented.
  10. Cuttings/ alternations in documents not authenticated.
  11. Description of goods on invoice differs from that in the credit.
  12. Weights differ between documents.
  13. The amount shown in invoice and Bill of Exchange differ.
  14. Shipping marks and numbers differ between documents.
  15. Credit (L/C) amount exceeded.
  16. Credit (L/C) expired.
  17. Late presentation.
  18. Late Shipment.
  19. Short shipment.
  20. The absence of documents called for in the credit.
  21. Bill of Exchange drawn on a wrong party.
  22. Bill of Lading, Insurance Documents or Bill of Exchange is not endorsed correctly.
  23. The absence of signatures, where required on documents presented.
  24. Bill of Lading does not evidence whether freight is paid or not.
  25. Packing list not submitted.
  26. Part shipment/ transshipment effected not being covered by the L/C terms.
  27. Notify party differs not as per L/C stipulation.
  28. Third party Bill of Lading/ short form Bill of Lading submitted.
  29. Inspection certificate not submitted.
  30. Unit price not mentioned in the invoice.
  31. Description of documents on collection schedule differs with documents presented.
  32. Fumigation/ Health certificate (fit for human consumption) not submitted.
  33. Forwarder’s cargo receipt not acceptable (unless provided in the L/C).

Negotiation of Export bills:
After careful and thorough examination of the documents, the negotiating bank may classify the documents as follows:

  1. With no discrepancy
  2. With minor discrepancy
  3. With major discrepancy

Documents with minor discrepancies that can be removed or corrected by the exporter/ shipper and documents with minor discrepancies that cannot be removed at once may be negotiated on submission of indemnity bond by the exporter.

Documents with major discrepancies that cannot be corrected or removed should be sent on collection basis with the permission of the exporter. These documents should not be negotiated against indemnity bond.

In practice Bank also consider the things in negotiation:

  • The Buyer is bonafide.
  • Party’s past performance is satisfactory

Negotiation of Export Bill:

Passing vouchers:
At the time of negotiation/purchase (Only when CM portion is purchased)
Dr. FDBP account (@ OD sight export)
Cr. CD A/C

Realization of Export Proceeds:

Dr. ID, HO (CM portion @ TT Docs & rest portion @ OD Sight Export)
Cr. FC Held for BTB payment (@ OD Sight Export)
Cr. FBP A/C (@ OD Sight Export)
Cr. I/A Exchange Earning
Cr. Packing Credit/ Others Loan A/C
Cr. Income A/C Com
Cr. S/D Tax
Cr. S/D, Buying house commission

Settlement of BTB L/Cs

After realization of Export proceeds & on the maturity of BTB bills payment is made in USD or BDT.

Passing of vouchers: (after the realization of export proceeds)

In case of payment by USD:

Dr. FC held for BTB payment account (@ OD sight rate)
Cr. ID Head Office (Nostro account)

In case of payment by BDT.

Dr. FC held for BTB payment account (@ Held rate)
Cr. ID Head Office

Dr. ID Head Office
Cr. Payment Order/DD

If export is not done or any non-repatriation of export proceeds:

Dr. Baim Wes Bill @ BC rate
Cr. ID Head Office (Nostro account)/ Payment Order

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