Does a Partial Quote Between a Description Start Up Again With a Capitol Letter

The Compatible Customs and Practice for Documentary Credits (UCP) is published by the International Bedroom of Commerce and was revised in 1993 and put into use January 1, 1994. The purpose of the UCP is to clarify gray areas that may appear in a letter of credit and to help banks interpret conditions in the letter of credit in a consistent fashion.

Still, as anyone who has ever worked with a alphabetic character of credit knows, at that place is plenty of disagreement betwixt all parties concerned. Banks, account parties, and beneficiaries can all disagree about what complies and what does not comply when the shipping documents are checked confronting the terms of the letter of the alphabet of credit.

Sometimes the UCP just doesn't clarify a state of affairs the way you think information technology should. After all at that place is a huge departure between the words "volition" and "may." For instance: "Banks will have…" versus "Banks may have…." 1 is definite and the other appears to be open up to interpretation. It'south non surprising confusion results.

To aid accost some of this confusion, a task forcefulness of the International Chamber of Commerce Banking Committee created the International Standard Banking Practice (ISBP), which was published past the ICC in Jan 2003.

The International Standard Banking Practice

The ISBP is not intended to meliorate the UCP 500. Instead, information technology is a guide to how the rules should exist applied in a solar day-to-day working environment. The ISBP is laid out in a like manner to the UCP 500; it covers the application, general principals, drafts, invoices, aircraft documents, insurance and certificates of origin. In total the ISBP contains 200 guiding principals.

In reading through the publication, I sometimes thought they included information and so obvious it need non be said and other times I was surprised by their interpretations. In talking with other bankers, I'one thousand finding that I'm non alone, although I don't know that nosotros all feel the aforementioned way about everything that has been written. I've also heard that some banks are slowly accepting the ISBP every bit their standard method of operating.

You may detect banks adopting the ISBP on their import letters of credit simply going a bit more slowly when treatment their export documents for fearfulness that the issuing bank hasn't accepted the ISBP every bit their standard operating procedure. As more and more than banks accept and encompass the ISBP, this double standard volition vanish.

The Application and Issuance of a Alphabetic character of Credit

The first section of the ISBP concerns the application and issuance of the letter of credit. It addresses the importance of completing the application accurately. The commencement section stresses the fact that the underlying transaction and sales contract are a separate transaction from the alphabetic character of credit and that the letter of credit should not incorporate the sales contract.

The heir-apparent and seller should hold what documents are going to be required in the letter of credit and who should exist generating those documents before the awarding is ever submitted to the banking company. If the application for a letter of the alphabet of credit that is presented to a banking company for issuance is unclear or cryptic, the issuing bank has the right to adjust the awarding in order to make the letter of credit workable.

While many banks already have a clause either on their application form or in their security agreement that gives them this correct, now nether ISBP all banks accept the right to brand adjustments to the application.

The applicant is also required to have a full understanding of the UCP 500 to avoid a conflict of terms within the letter of credit.

Additionally, banks should not issue a letter of credit that requires documents to exist either issued or cosigned past the letter of credit applicant. The casher should be able to read a alphabetic character of credit and feel that they can comply with the terms by either producing the documents themselves or past having an contained third party issue the documents.

Requiring an bidder to either consequence or authenticate documents basically turns the letter of credit process into a collection procedure where payment isn't made until the heir-apparent gives their approving. If this is adequate to the seller, they should only utilise a collection method and pay collection bank fees instead of the more than expensive letter of credit fees.

Finally, the first section of the ISBP points out that if everyone spent more time upward front dealing with the underlying transaction, the letter of credit awarding, and how it is going to be issued, the parties will encounter fewer problems at the time of examination, which results in fewer discrepancies.

Believe it or not, this is something that everyone—including the banks—looks forward to.

General Principals of a Letter of Credit

Abbreviations

Every bit stated in the ISBP, the use of generally accustomed abbreviations does not brand a document discrepant. A couple of the examples offered are "LTD" instead of "Limited" or "Co" instead of "Company". If the letter of the alphabet of credit uses the abridgement and the documentation uses the complete discussion, no discrepancy should be called.

Further, if the alphabetic character of credit used the consummate word but the documentation uses the abridgement, again, no discrepancy should exist called. I know that a number of banks require give-and-take-for-word and letter-for-letter agreement when comparing documentation confronting the alphabetic character of credit. A bit of leniency is at present immune, simply be careful that this doesn't lead to a totally relaxed attitude when preparing the documents.

The ISBP points out that slash marks ("/") may have unlike meanings in dissimilar parts of the world and should be avoided. Instead utilize the word or words that are intended.

Certifications and Declarations

Allow's say that a certification or declaration is contained in some other certificate as immune by the alphabetic character of credit, and the certificate is signed and dated. If the political party that is making the certification or declaration is the same political party that issued the certificate, no further signature or dating is required.

Corrections and Alterations

In my 30 years of banking, I saw numerous documents that had been altered or corrected. Some of them were nicely done, others not so nicely washed. With the introduction of the ISBP, certain standards have been implemented.

First, if a document that is issued by someone other than the beneficiary is corrected or altered, either the issuer of the document or a political party designated by the issuer must authenticate the correction or alteration.

If a legalized or visaed document has been contradistinct or corrected, the political party that either legalized or visaed the certificate must authenticate the alter. Corrections or alterations appearing in documents that the casher has issued do not need to be authenticated except for any drafts that the letter of credit may crave.

Documents that have dissimilar fonts or blazon styles or even handwriting on the certificate are non to exist automatically considered a correction or alteration. I tin can imagine that this standard volition generate a bit of discussion from time to time.

Dates

Something so simple as a appointment, or a time frame around the date, has been interrupted differently. The ISBP has eliminated some of that confusion.

Fifty-fifty if the alphabetic character of credit doesn't specifically state that the draft, transport document, or insurance document needs to be dated, it should be dated. If information technology doesn't include a date, a discrepancy tin be called. You might want to date all documents required only to play it rubber.

Documents such equally a pre-shipment inspection certificate or analysis certification tin be dated after the shipment appointment. I can run across how in the by this could have been called a discrepancy. Obviously the inspection or analysis has to happen either earlier or on the date of shipment. The title of the document or a argument in the document should indicate this.

If the word "within" is used regarding a engagement, such equally "within 12 days of the pecker of lading date," the date of the bill of lading is not included in the adding. For example, if the bill of lading is dated November xv, and so the time frame for whatever is beingness required to occur with 12 days is November 3 until November 27.

Finally, in order to avoid confusion and keep things every bit uncomplicated every bit possible, employ the proper noun of the month when identifying a specific date rather than using the number.

Documents Not Covered past the UCP Transport Articles

If you lot are a logistics adept, you probably know that not all documents used in the movement of goods have an underlying contract of carriage.

Documents such as delivery orders, forwarder's certificate of receipt, and mate's receipts are examples of documents that don't incorporate a contract of carriage and, equally a issue, are not considered ship documents as defined past the UCP. Since these documents are considered additional documents instead of transport documents, any article in the UCP making reference to send documents will not apply to them.

For instance, commodity 43 of the UCP 500 states that every credit that calls for a transport document should specify a timeframe from the shipment date for presentation of the documents. If no timeframe is stipulated, the flow for presentation defaults to 21 days after the date of shipment or the expiration date, whichever occurs starting time.

If you are dealing with a letter of credit calling for a forwarder's certificate of receipt and no send document is required, you have until the expiration date to present document.

Expressions Not Divers in the UCP

Having worked with letters of credit for many years, in that location are phrases commonly used that many of u.s. take for granted. Nosotros may take the mistaken idea that everyone defines these phrases the same manner. At present the ISBP defines some of these phrases:

• "Aircraft documents" include all documents required by the letter of the alphabet of credit, not simply the ship documents. The but exception to this is the draft.
• "Stale documents acceptable" means documents presented beyond the 21 days after the engagement of shipment are acceptable provided they are presented before the expiration date of the credit.
• "Tertiary party documents adequate" means that all documents, with the exception of the draft, may be issued by a party other than the beneficiary of the credit.
• "Exporting country" is the state of the casher, and/or the state of origin of the goods, and/or the land where the carrier took receipt of the goods, and/or the land from which shipment is made.
• Phrases such equally "well known," "prompt," "immediately," "as soon equally possible" and like expressions should not be used in letters of credit. If they are used, banks tin can ignore them.

Inconsistency in the Documents

Documents must non be inconsistent with each other. This doesn't hateful that documents take to exist a mirrored image of one another; they simply can't be inconsistent.

For example, if the invoice describes the merchandise every bit "blue and yellowish widgets as per purchase order 2310" and the packing list shows the merchandise equally "blue and yellow widgets," that is acceptable and no discrepancy should be chosen. However, if the packing list shows the trade as "blue and green widgets," the documents are no longer consequent and a discrepancy will exist called.

The Issuer of Documents

Sometimes a letter of credit may stipulate that a specific party is to issue a item document. If this is the case, and the document appears on that political party'due south letterhead, or if the document appears to take been issued and/or signed past or on behalf of that party, the certificate is adequate and no discrepancy will be called.

Language

Documents issued by the beneficiary of the letter of credit should exist issued in the language of the credit. If the letter of credit allows for documents to exist issued in two or more languages, the nominated bank has the right when advising the credit to limit the number of adequate languages as a condition of either its engagement in the credit or its confirmation of the credit.

Mathematical Calculations

When documents are presented, sometimes the invoice is several pages long, consisting of numerous mathematical extensions. For example, the number of units multiplied past the unit toll equals the value charged.

When an invoice includes these calculations, banks volition only be obliged to check the total value confronting the credit and other required documents. This eliminates the time-consuming chore of verifying each and every extension; it also limits the number of discrepancies called.

Misspellings or Typing Errors

If a word has been evidently misspelled or the messages in a discussion have been transposed, a discrepancy should not be called. Examples given include "mashine" instead of "auto" or "modle" instead of "model". However, if the description included a part or purchase order number, and the numbers are transposed or typed incorrectly, a discrepancy will exist called.

I would venture to guess that if the misspelling could be construed as mayhap a unlike type of merchandise, a discrepancy would also exist chosen. An case of this would exist "adding machines" versus "adzing machines", two entirely different types of trade with just one letter different.

Multiple Pages and Attachments

Pages that are bound together and are in numerical order or pages that contain cross references should exist examined as i document. If a document contains more one page, there has to exist a way to decide simply how many pages make up that document.

If the alphabetic character of credit requires a multiple-folio document to be signed or endorsed, the signature or endorsement could be on any of the pages unless specifically required by the letter of credit. It is most common for a signature or endorsement to be either on the first or concluding page.

Originals and Copies

It seems that the more the words "originals" and "copies" are divers, the more give-and-take is generated. If a document is marked original or indistinguishable or beginning original, it should be considered an original certificate. Every certificate presented should include at least one original unless the credit specifically requires that copies of a document exist presented.

The ISBP goes onto analyze where the credit requires:

• "Invoice", "one invoice" or "invoice in one re-create" that volition be understood that one original invoice is to be presented .
• "Invoice in four copies" will mean one original invoice and the remaining number in copies.

Personally, I am a footling surprised past this definition. I would take causeless that if the alphabetic character of credit were request for either an invoice in ane copy or invoice in four copies, that the credit was clearly request for copies and no originals would be required. Apparently because the give-and-take invoice is mentioned earlier the number of copies required, it is requiring an original as well.

"One copy of invoice" is satisfied past the presentation of i copy of the invoice, but if an original is presented, that is also acceptable. If for whatsoever reason an original document is not adequate, it must be clearly stated in the credit that original documents are prohibited.

Hopefully this will finally settle the word of just what an original is versus a copy.

Shipping Marks

Aircraft marks help to identify the location of a specific box, crate or package that has been shipped. If the letter of credit identifies the aircraft marks to exist used, and the documents presented include those shipping marks but have boosted detail, there should be no problem as long as the additional item isn't inconsistent with the credit terms.

It is besides adequate if the shipping marks comprise details that wouldn't typically be idea of as shipping marks such every bit "frail, handle with care," the net or gross weight, or a short description of the goods. If some of the documents show the excess information in the shipping marks while other documents don't, banks should not consider the documents to be inconsistent.

Sometimes when goods accept been containerized, the ship certificate will only bear witness the container number while other documents will show a detailed list of the shipping marks. When this happens, it is not considered inconsistent.

Signatures

When a letter of credit is issued and it requires drafts, certificates and/or declarations but doesn't mention that these documents demand to exist signed, they exercise. By their nature, a signature is required. Transport and insurance documents must also be signed in accordance with the UCP.

Just because a document has a place or a box for a signature, it doesn't necessarily mean that the document must be signed. Even so, if the document makes a declaration such equally "This document is not valid unless signed" or similar words, a signature is so required.

A signature does not take to be handwritten. Facsimile signatures, perforated signatures, chops, symbols, or whatever electronic ways of authentication are considered acceptable. If a photocopy of a signed document is presented as a signed original document, banks volition telephone call a discrepancy. They will also telephone call a discrepancy for any signed document sent through a fax motorcar without an original signature.

If a signature appears on a company's letterhead, the signature will be accepted equally a signature of that visitor, and the name of the visitor doesn't need to announced side by side to the signature.

Title of Documents and Combined Documents

According to the ISBP, document titles may exactly match the document titles described in a letter of credit, have a similar championship, or include no championship at all.

The onetime schoolhouse of idea was that every document had to be titled exactly as called for by the alphabetic character of credit. Now if the credit calls for a packing list, even an untitled document satisfies this requirement as long as it includes packing details.

What is now more than important is the content of the document. If the content of the certificate appears to fulfill the purpose of the required document, it is at present adequate. I tin can encounter where this is going to lead to judgment calls by the banking concern and may create additional problems.

Documents required by the credit should be presented as dissever documents. The instance given by the ISBP is a packing list and a weight list. 2 separate documents should exist presented. Nevertheless, it is also acceptable if two original copies of a combined packing and weight listing are presented provided both documents contain both packing and weight information.

Bank Drafts

Tenor of the Typhoon

When a typhoon is presented with documents against a letter of credit, it is the formal demand for payment. The value of the draft stipulates the corporeality that the beneficiary expects to be paid. The tenor of the typhoon stipulates when that payment should be made. In all cases, the tenor should agree with the terms of the letter of credit.

Examples of acceptable tenors include "at sight," "thirty days later on sight," and "30 days later beak of lading date." If the tenor includes a financing period, as in the terminal two examples, it must always be possible to determine the maturity engagement past looking at the draft itself.

In the instance of 30 days after sight, the date of acceptance volition be shown on the typhoon once the draft has been accepted.

When the credit requires the tenor to be 30 days later the bill of lading date, the draft can show the tenor a number of different ways:

• "30 days after the nib of lading date, Oct fifteen, 2003"
• "xxx days later on October xv, 2003"
• "30 days after the bill of lading date" and somewhere on the draft it would point "nib of lading dated Oct xv, 2003"
• "30 days engagement" and the date on the draft would be October 15, 2003
• "November 15, 2003" which would be thirty days later on the neb of lading engagement

The on board date of the bill of lading is always considered the date of the nib of lading. Sometimes the tenor is stated as X number of days either "from" or "after" an consequence, such as the nib of lading date. In either case, when determining the maturity appointment, the date mentioned is excluded in the adding. For instance, thirty days after or from January ane would be January 31.

If a neb of lading has more than than one on board notation, the earliest on board notation is used for the calculation for the maturity engagement. However, if more than 1 gear up of bills of lading are presented against a single typhoon, the on lath date of the last neb of lading is used to calculate the maturity date.

Maturity Dates

If the draft shows a date as the tenor, the date shown has to take been calculated in accordance with the terms of the credit.

When the tenor of the draft is "X number of days sight" and the documents complied with the credit terms, or in the outcome of discrepant documents that have been waived, the adding for the maturity date uses the date of receipt. In other words, if documents are received on September 1 and are adamant to be in order on September 5, September i is the appointment used to calculate the maturity date.

In all the years I've spent dealing with letters of credit, I've never heard of using the date of receipt when calculating the maturity engagement. This is something that buyers should be aware of going frontwards, as information technology volition shorten the timeframe for financing.

If the documents are non-compliant and the issuing depository financial institution refuses payment, only and then eventually approves payment, the maturity engagement is determined from the appointment of approval. In all cases, the accepting banking concern must notify the presenter of the maturity date.

Cyberbanking Days, Grace Days, Delays in Remittance

On the maturity appointment, payment must exist made in immediately bachelor funds at the place where the draft is payable. If the maturity date falls on a twenty-four hour period that the bank is airtight, payment volition be made on the next banking 24-hour interval.

At that place are no grace days or allowance for delays in the remittance of funds. Payment is due on the maturity appointment.

Amounts

If the draft states the amount in both figures and words, these amounts must be the same, and the amount must agree with the commercial invoice.

How the Draft is Drawn

The draft is to exist drawn by the beneficiary on the party stated in the letter of credit.

Drafts Drawn on the Applicant

As stipulated in the UCP500, letters of credit should not be issued requiring drafts to be drawn on the applicant.

Corrections and Alterations

All corrections or alterations made to a draft must appear to accept been authenticated by the drawer, the party creating the draft. If corrections or alterations to the draft are non acceptable, the issuing bank should make this known in the letter of credit.

Invoices

Definition of Invoice

If a letter of the alphabet of credit (LC) merely requires an invoice, you might be surprised by the type of invoices that are acceptable to present. When the letter of credit requires a commercial invoice, a document titled invoice will meet the terms of the LC. In add-on, tax, community and consular invoices are all acceptable documents.

Conditional and pro-forma invoices are not adequate unless specifically called for in the LC.

Name and Accost

The old rule of thumb required that the name and address of the beneficiary and applicant on the invoice had to exactly match the LC. No difference was acceptable.

Now the invoice needs to be issued by the beneficiary named in the LC and made out in the proper noun of the applicant. If telex or fax numbers appear as part of the address for either political party in the LC, they don't need to be mentioned on the invoice. In fact, those numbers can differ from the LC.

Clarification of Goods and Other General Issues

In the by, virtually banks required that the merchandise description on the invoice be identical to the clarification shown on the LC; no deviation was immune. Now the rules have been eased.

It is no longer necessary to have a mirror image of the description on the invoice. Details of the merchandise tin can appear in multiple areas of the invoice and, when pulled together, correspond to the letter of credit.

If the LC authorizes partial shipments, merely what is actually shipped needs to announced on the invoice. It is as well acceptable if the invoice displays all the merchandise on the LC but identifies what was shipped.

The invoice must clearly country the value of the goods besides as the currency and any unit price shown in the LC. If required by the LC, any discounts or deductions also must announced on the invoice. If the invoice shows a deduction for an accelerate payment, this is considered acceptable even if it'southward non mentioned in the LC.

When the LC describes the goods and incorporates the trade term and the source of the trade term, such as "CIF Hong Kong Incoterms 2000," this entire description must announced on the invoice. Costs related to the term must be included on the invoice and exist within the value of the LC. Costs exceeding the LC value are unacceptable.

Virtually times the LC volition require a signed commercial invoice. However, if the LC only requires a commercial invoice, the invoice does not accept to be signed or dated.

If the invoice shows the merchandise quantity, weight and/or measurements, all the documents presented must be consistent with the invoice. In add-on, the invoice cannot embrace trade non described in the LC, such equally samples.

Banks have always allowed a tolerance of plus or minus five percent for the quantity of the goods. However, the tolerance does not utilise if the LC states that the quantity cannot be exceeded or reduced or if it states a number of units required. Nether no circumstances can the value of the LC be exceeded.

In the case of prohibited partial shipments, the invoice value may contain a tolerance of minus five percent provided that the quantity is shipped in total. If the LC doesn't country a quantity, the invoice will be considered shipped complete.

Installment shipments must follow the schedule outlined in the LC.

Ocean and Multimodal Transportation Documents

The ISBP covers ocean/marine, charter party, and multimodal transport documents separately. Due to a number of similarities, I'm going to combine my coverage of these three transport documents while highlighting differences each may have.

Application of UCP: Commodity 23 Ocean/Marine

Sea and/or marine bills of lading for port-to-port shipments are covered past Article 23 of the UCP 500. The words body of water or marine practise not have to appear on the transport document to make it acceptable, but it must point that a port-to-port shipment has been made.

Article 25 Charter Party

Lease party bills of lading for port-to-port shipments are covered past Article 25. As long every bit the transport document, such equally a marine document, indicates it is subject to a charter party, information technology's considered a charter party bill of lading.

Article 26 Multimodal (Combined Ship Document)

When at to the lowest degree two modes of transportation are used, and if the transport document shows that it covers the shipment from the place of loading to the final destination as called for in the letter of credit (LC), it is considered a multimodal pecker of lading even if information technology isn't titled as such.

Full Fix of Originals

All transport documents need to testify the number of original bills of lading issued. Documents marked "first original" or "duplicate" or "third original" are all considered original documents. Bills of lading do not have to be marked original to be adequate.

Signing of Bills of Lading

All original bills of lading must be signed and the proper noun of the carrier identified on sea/marine and multimodal transport documents.

When an agent signs either an ocean/marine or multimodal pecker of lading for the carrier, they need to be identified equally an agent. The carrier or multimodal transport operator must so be identified either at the signature line or elsewhere on the face up of the bill of lading.

If the master or captain signs the bill of lading, the signature must be identified as either the captain or master. The name of the captain or primary isn't required in addition to the signature. Still, if an amanuensis signs on behalf of the helm or master, they must be identified as an agent and the name of the captain or master must be identified.

If the credit states "Freight forwarder'south bill of lading adequate" or "Freight forwarder'south multimodal transport document is acceptable," that document tin can be signed by the freight forwarder. The name of the carrier and the multimodal transport operator does not demand to be shown.

On-Board Notation

If a pre-printed shipped-on-lath beak of lading or charter party pecker of lading is issued, the engagement of outcome will be considered the ship date unless at that place is an additional dated on-lath notation. If that is the case, the dated on-board notation will be considered the send appointment, even if this date is before the issuance appointment.

The same volition apply to a multimodal send document where the issuance engagement is considered the on-board date or the engagement of dispatch. If there is a separate dated annotation, that will be considered the date of shipment.

When phrases such every bit "make clean on board," "shipped on board," or "shipped in good gild" are used, they are considered to have the same meaning equally "shipped on board."

Port of Loading and Discharge

The letter of credit volition identify a port of loading. This port should appear on the body of water/marine bill of lading in the field designated for the port of loading. However, information technology may also exist shown in the field identified as the identify of receipt. If this is the case, two things must be clear:

1. That the goods were moved from the identify of receipt past vessel, and
2. That the on-board notation shows that the goods were placed on lath the vessel at the place of receipt.

The alphabetic character of credit volition as well identify a port of belch. 1 would wait to find this data on the ocean/marine bill of lading in the field identified as the port of discharge. Yet, it is possible that it could exist in the field identified as the place of final destination. If this is the example, two things again must be articulate:

1. That the goods volition be transported to the place of last destination past the vessel, and
2. That there is a notation that the port of discharge is shown equally the place of final destination.

If the place of receipt on the ocean/marine bill of lading is shown every bit a container yard or container freight station and that aforementioned place is shown as the port of loading, it should be considered the same. As a outcome, the port of loading and the name of the vessel would not have to exist office of the on-board notation.

It's non uncommon for a alphabetic character of credit to place either the port of loading and/or discharge in a geographical term, such equally "Any Usa Westward Declension Port." If this is the case, the body of water/marine bill of lading and the multimodal ship document must evidence the bodily port of loading and discharge and, of course, it must be inside the geographical area.

If a lease party bill of lading is used, the port of loading must exist shown but equally on the sea/marine bill of lading. However, the port of belch may be shown equally the geographical expanse.

Consignee, Guild Party, Shipper and Endorsement, Notify Party

When the letter of credit requires either an bounding main/marine, charter party, or a multimodal bill of lading and requires a direct consignment to a named party—for example, "consigned to ABC Company"—the consignment must not employ language such as "to order" or "to the lodge of." Conversely, if the letter of credit requires a consignment "to the order of" or "to lodge," a straight consignment is not acceptable.

If the ocean/marine, charter party, or multimodal bill of lading is issued "to social club" or "to order of the shipper," the shipper must endorse the certificate. It is acceptable if the endorsement indicates that it is made for or on behalf of the shipper.

If the letter of the alphabet of credit doesn't require a notify party to be designated on either the bounding main/marine, charter party, or multimodal beak of lading, that field tin can be either left blank or completed whatever which way.

Transshipment and Fractional Shipment

Transshipment occurs when appurtenances are unloaded from one vessel or fashion of transport and reloaded onto some other. This would occur from the fourth dimension the appurtenances are put on lath the vessel (otherwise known as the port of loading) to the final destination (or port of belch) as required in the letter of credit.

On ocean shipments, if this movement of goods doesn't happen between the port of loading and discharge, it is not considered a transshipment. With multimodal shipments, if the ship document covers the entire voyage and shows that a transshipment has occurred, this will be adequate fifty-fifty if the letter of credit prohibits transshipments.

When partial shipments are prohibited and the letter of the alphabet of credit allows shipment from more than one port, it is adequate if multiple sets of original bills of lading or transport documents are presented showing a variety of adequate ports of loading. This is, of course, if the goods are shipped on the aforementioned vessel and the voyage ends at the aforementioned destination.

If multiple ready of bills of lading or ship documents are presented and they have different shipment dates, the latest shipment appointment should be used for whatever presentation timeframe and for determining if the documents comply with the latest ship date allowed for in the letter of credit.

A banking concern will consider it a fractional shipment if more than than one vessel or other means of send is used to move the goods, even if done on the same day for the aforementioned destination.

Clean Bills of Lading

A clean bill of lading or multimodal transport certificate is one that does not contain a notation to the effect that either the appurtenances or the packaging are defective. The give-and-take "clean" does non really have to appear on the bill of lading or send document even if the letter of credit is calling for a "clean on board" document.

In addition, if the bill of lading or transport document contains the word "clean" but it is crossed out or deleted, this is all the same adequate provided at that place is no other indication that the appurtenances or packaging is defective.

Goods Description

The merchandise description on the bill of lading or ship certificate does not have to be exactly as stated in the letter of credit. The description can be more full general as long as information technology is not inconsistent with the letter of credit.

Corrections and Alterations

Any and all changes made to a bill of lading or transport document must exist authenticated past the carrier or their agent for bills of lading; the owner, captain, chief or their agent for charter party bills of lading; and the carrier/master or their agents for multimodal documents.

Not-negotiable copies of these documents, which comport a correction or alteration, do not demand to be authenticated.

Freight and Boosted Costs

The letter of the alphabet of credit should require freight to be either prepaid or collect, and the bill of lading must reflect this. If the letter of credit states that no charges in addition to the freight are allowed, the bill of lading cannot show charges in addition to the freight that may or might exist incurred. This includes costs with the loading or unloading of the goods.

Fees that could be charged as a result of a delay in unloading goods or delays after the proficient are unloaded such as a fee for the late render of the container are not considered an additional cost.

Goods Covered by More than than I Pecker of Lading or Multimodal Ship Certificate

Should a pecker of lading or multimodal transport document signal that the goods in the container are covered past more than one bill of lading or transport certificate, all bills of lading or transport documents related to that container must be presented for the container to exist released to the consignee. This is only adequate if all the bills of lading or transport documents are presented together under the same letter of credit.

Air Transport Documents

Air bills of lading are covered by Article 27 of the UCP 500. The term "air waybill" or "air consignment notation" exercise not have to appear on the transport document, but information technology must indicate that an airport to airport shipment has been made.

Original Air Waybills

An original air waybill is one that states "original for consignor/shipper" on the face of the document. If the letter of credit (LC) should require a full fix of originals, this also satisfies that requirement.

Signing of Air Waybills

The identity of the political party signing the air waybill and the name of the carrier must be clearly stated. If the signor of the air waybill is an agent, information technology must exist clearly stated that they are an agent, and the name of the carrier that they are signing on behalf of.

Nevertheless, if the LC allows for either a house air waybill or freight forwarders air waybill, then the freight forwarder can sign the document and be identified as the freight forwarder and not the carrier or an agent for the carrier.

Goods Accepted for Wagon, Engagement of Shipment, and Requirement for an Actual Date of Dispatch

The air waybill e'er must testify that the goods accept been accepted for carriage.

If the LC requires the appointment of dispatch be shown on the air waybill, this data must appear someplace on the certificate. The engagement of acceleration is considered the date of shipment. Any information marked every bit "for carrier use but" is not to be used to make up one's mind the date of acceleration.

If the LC doesn't require the appointment of acceleration to be shown on the air waybill, the engagement of issuance will be considered the date of dispatch. If the air waybill shows the flying date or flight number only is not required past the LC, that information will be disregarded.

Airports of Departure and Destination

The airport of departure and destination must appear on the air waybill as required by the LC. It is not a discrepancy if the IATA code for the airport is used instead of the full name of the airport.

If the LC allows for shipment to or from a geographical surface area or region, the actual airdrome used inside that area or region must exist shown on the air waybill.

Consignee, Gild Party, and Notify Party

Air waybills are not documents of title. Therefore, even if the LC requires a "to social club of" air waybill, an air waybill marked "consigned to" volition exist accepted. An air waybill should not be issued drawn "to guild of."

If the LC does not signal a notify party, the air waybill does not need to show a notify party or, if information technology does, any notify political party will be adequate.

Transshipment and Partial Shipment

The UCP 500 defines transshipment as the unloading and reloading of merchandise from i airplane to another. This would occur during the course of carriage from the airport of deviation to the airport of arrival. In improver, if the letter of the alphabet of credit prohibits transshipment, it is allowed if the entire voyage is covered by i airway bill.

When the LC prohibits partial shipments and multiple air waybills are presented roofing shipment from 1 or more than airports of departure, no discrepancy should be called provided they encompass the shipment on the same airplane and the aforementioned flight and will arrive at the same aerodrome of inflow.

When more than one air waybill is presented, it may exist possible multiple ship dates volition appear. If this is the instance, the latest date of shipment will be considered the bodily shipment date and would be used for the calculation of whatsoever presentation time period.

When shipment occurs using more than 1 plane—even if the planes get out on the same solar day for the same destination—it will be considered a partial shipment.

Clean Air Transport Documents

If there is a note on the air waybill that indicates the appurtenances or the packaging are defective, a bank will phone call a discrepancy. If a annotation doesn't point any kind of defect, and so a discrepancy won't be called.

he ISBP gives this case: an air waybill with the statement "packaging may not exist sufficient for the air journey" is adequate; an air waybill with the statement "packing is not sufficient for the air journey" is non acceptable.

Even though the LC may require a make clean air waybill, the word "clean" would not have to appear on the document. If the discussion "make clean" did appear but then was crossed off or deleted in some manner, the air waybill would still exist acceptable equally long as there is not a notation indicating the goods or packaging are defective.

Goods Clarification

The merchandise description that appears on the air waybill doesn't have to be exactly as stated in the LC. If the goods are described in more full general terms just are non inconsistent with the LC, it is acceptable.

Corrections and Alterations

Should a correction or alteration appear on the air waybill, either the carrier or their amanuensis must authenticate it.

If a copy of the air waybill is presented, the copy does non need to be signed by the carrier or their amanuensis, and any correction or alteration doesn't need hallmark.

Freight and Additional Costs

The LC will typically indicate that the air freight is to be either collect or prepaid, and the air waybill must reflect this.

If the credit stipulates that information technology does not permit any cost in add-on to the freight charges, the air waybill must not show any additional charges. This includes any references that would point the toll of loading or unloading the merchandise. It is acceptable, nevertheless, if there is a clause stating that at that place could be a fee charged if at that place is a delay in unloading the goods.

If the air waybill has a place where freight charges, either prepaid or collect, may appear, it is adequate if the LC requires freight prepaid for those charges to appear in the prepaid department of the air waybill. If the LC requires freight collect, information technology would exist adequate for those charges to appear in the collect department of the air waybill.

Other Ship Documents

Commodity 28 Route, Rails or Inland Waterway

The requirements for route, runway or inland waterway bills of lading are very similar. If the credit requires one of these documents, the document that is presented will be accepted if the following conditions are met:

• The name of the carrier, or their agent, is shown on the certificate. Their signature, or other ways of hallmark, is displayed, and an indication that the goods have been received by the carrier or their agent for shipment.
• The date of shipment is in accord with the terms of the letter of credit. This is determined past the date on the reception postage stamp. In the absence of a reception postage, the issuance engagement of the document would be considered the shipment date.
• Lastly, the place of shipment and destination must comply with the terms of the alphabetic character of credit, as well as any other conditions the credit may specify.

The alphabetic character of credit may crave a full set up of the rail, road or inland waterway transport document. In these cases banks will accept the transport documents presented equally a full ready. All the same, if the transport certificate specifies how many documents were issued, and so that number needs to exist presented in order to comply with the full set requirement.

Again, the UCP 500 defines transshipment every bit the unloading and reloading from one means of conveyance to another using a different manner of ship, during the grade of wagon, from the identify of shipment to the place of destination as required past the LC.

Let'southward only imagine a letter of credit where transshipments are prohibited. Let's keep to imagine a transport document, such as a rail document, is presented. That certificate clearly specifies that transshipment has or might take identify, only that document also conspicuously specifies that it cover the entire shipment using the same mode of transport. This document would exist considered acceptable.

Article 29 Courier and Post Receipts

An adequate post receipt would be one that has been stamped and dated at the place of shipment required by the letter of credit. This date is considered the shipment date.

An acceptable courier receipt would exist ane that shows the proper name and signature of the courier service. If the credit specified a particular courier service, that service obviously would have to be used. The courier receipt must likewise be dated and this date is considered the shipment date.

Both of these documents would also have to comply with whatsoever other conditions specified in the letter of credit to be acceptable.

Article xxx: Transport Documents Issued by Freight Forwarders

Before a bank will accept a transport document issued by a freight forwarder, the document must see certain criteria.

Start the ship certificate must prove the forwarder as either the carrier or as a multimodal send operator. In addition, the forwarder has to sign or cosign the document equally either the carrier or as the multimodal ship operator.

If, all the same, the document shows the actual proper noun of the carrier or multimodal transport operator, the freight forwarder must sign or cosign the document on behalf of the carrier or operator as their named agent.

Article 31: On Deck, Shipper's Load and Count, Proper name of Consignor

Allow'south start with "on deck" notations on the bill of lading when the goods are being shipped via body of water freight.

If the bill of lading indicates that the goods are loaded on deck or volition exist loaded on deck, the document is not adequate. This is due to possible salt-h2o harm that may occur when the goods are loaded on deck as opposed to under deck. If you know that the only way to ship your production is on deck, brand sure that the letter of credit allows for this.

If a clause appears on the pecker of lading that the goods may be loaded on deck, it volition exist acceptable every bit long as there isn't whatsoever indication that the goods actually are on deck.

The phrase "shipper's load and count" is typically seen with containerized shipments, which make upward the majority of shipments today. Since the carrier has no way to verify the contents of a sealed container, they make a notation on the bill of lading that information technology'due south the "shipper's load and count", not theirs.

Years ago this was always considered a discrepancy, simply today with the UCP 500, information technology is considered acceptable.

Who can be shown as the consignor of the appurtenances? According to the UCP 500, the beneficiary does not accept to exist shown as the consignor. A third-party consignor is acceptable. This is particularly helpful in the case of transferable letters of credit, which I volition discuss in a future article.

Article 32: Clean Transport Documents

I've been asked if a make clean transport document is 1 that isn't smudged or dingy. Actually a clean send document has nothing to practise with either smudges or dirt. It has to do with a note that may appear on the send document showing that the goods or packaging may accept been compromised.

When a carrier receives the goods, they volition make a notation to that impact on the ship certificate if they notice that the appurtenances may have been damaged. If this type of clause appears on the transport certificate, it is considered an unclean certificate and is discrepant.

Insurance Documents

Issuers of Insurance Documents

When a letter of credit requires an insurance document, banks will expect to receive a certificate issued by an insurance company or their agent. When reading both the alphabetic character of credit and the insurance document, it may exist required that all originals be countersigned.

An insurance broker may effect an insurance document using their stationery. All the same, the insurance document has to exist signed by the insurance company or their amanuensis. In many cases the insurance banker will be interim as the agent for the insurance company.

Risks to Exist Covered

Whatever and all risks mentioned in the letter of credit must be covered on the insurance document. Near messages of credit are very clear nigh the types of risks that need to be covered, and in that location tin be no exceptions.

I think one expanse that has caused some confusion is the "all risks" clause. By its very nature, one would think that all risks would cover all risks, only in fact information technology doesn't. For instance, the all risks clause does not comprehend strikes, riots and civil commotions.

If the letter of the alphabet of credit calls for all risks coverage, whatever annotation on the insurance document mentioning all risks coverage will be accepted. Also, if there is a notation on the insurance certificate that information technology covers Establish Cargo Clauses (A), the condition for all risks coverage has been met.

It has been my feel that simply one insurance document is typically presented covering the entire shipment value or the value stipulated in the letter of credit. Yet, it is possible that multiple insurance documents tin can be presented for one shipment. This tin can be washed provided that each document clearly indicates what the individual value of cover actually is and that coverage is independent and not tied to whatever other insurance document.

In addition, joint liability must be stated on all multiple insurance documents, or the insurer covering the highest value must declare that it will bear 100% of the hazard.

The insurance document must prove coverage, at a minimum, from the port of shipment to the port of delivery equally stipulated in the letter of credit.

Dates

When reading the alphabetic character of credit, more than than likely information technology volition not mention anything relating to the engagement of the insurance document. Still, if y'all are familiar with the UCP 500, you already know that the insurance certificate must exist dated on or before the on-board notation or the date of acceleration. The only exception to this is if the insurance certificate stipulates that coverage began on or earlier the on board date or the date of acceleration.

If an expiration appointment appears on the insurance document, it must clearly stipulate that it relates to the latest date that goods can be loaded on board or the latest date that the appurtenances can be taken in accuse, and that information technology has nothing to do with the timeframe for making a merits against the insurance in the issue information technology would be necessary to practise then.

Insurance—Currency and Amount

The insurance document must be in the aforementioned currency equally the letter of credit. The value of the insurance coverage, at a minimum, must be as stated in the letter of the alphabet of credit. If no minimum coverage is mentioned in the credit, it automatically is assumed to be 110 percent of either the CIF or CIP invoice value. The UCP 500 does not address a maximum value for insurance coverage.

If the letter of the alphabet of credit stipulates that the insurance is to be "irrespective of percentage," then the insurance certificate cannot comprise any indication that it is subject to a deductible or a franchise.

Sometimes a letter of credit may exist issued for only a portion of the value of the goods. This might happen when a second method of payment is being used. For example, xx percent of the value of the shipment is handled on open account with the balance of fourscore percent covered by the letter of the alphabet of credit.

Sometimes the invoice may testify a disbelieve or a prepayment deductible. In all cases the insurance coverage must be based on the full value of the goods and non the value of the letter of credit.

Document of Origin

Sometimes when dealing with a letter of credit, the all-time dominion of thumb y'all can use is to present documents to the banking concern as chosen for in the letter of credit. A classic example of this is with the certificate of origin. Should a letter of the alphabet of credit require a certificate of origin, that requirement is satisfied when a certificate is presented that certifies the origin of the trade and is signed and dated.

To take this ane step further, if the letter of the alphabet of credit stipulates that a document must be issued past a item party, then that party must outcome the document. This certainly holds true for the certificate of origin.

However, and this is where it can go a little complicated, if the credit requires that the beneficiary issue the document of origin merely the certificate is actually issued past a chamber of commerce, it may nonetheless be acceptable. If the document identifies the beneficiary, it's so an adequate document.

So far we take indicated that a certificate that certifies the origin of the merchandise, is signed, dated and issued by the political party as required past the letter of the alphabet of credit is acceptable. Does annihilation else demand to be in identify? There should be a brief description of the merchandise. The description tin can be in general terms as long every bit it's not inconsistent with the letter of credit.

Finally, when preparing documents to present to the bank nether a letter of credit, only include information on those documents as required by either the letter of credit or the UCP 500. If you keep your documents uncomplicated, you may eliminate the potential for discrepancies.

Final Words

This concludes my interpretation of the ISBP. I would strongly advise y'all to obtain a copy of the International Standard Banking Exercise (ISBP) for the Examination of Documents under Documentary Credits, issued by the International Chamber of Commerce (ICC), for your reference and to draw your own conclusions.

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Source: https://www.shippingsolutions.com/blog/international-letter-of-credit-what-constitutes-a-discrepancy

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