Trade Finance Expertise

The subject of differentiation between originals and copies document has been one of major problem for many years. This is especially today, with advancements in technology making it very difficult to determine the originality or otherwise of a document. An overriding consideration is for each issuing bank and applicant to determine the relevance of an original document being presented and whether one is required in all cases, ie in the example of a packing list, weight list, etc.   A bank deals with documents and not with the goods, Article 17 of UCP 600 provides basic details to identification and requirement of an original and copies documents. Article-17-UCP-600, Original Documents and Copies a. At least one original of each document stipulated in the credit must be presented. If a credit stipulates a document without providing brief details then at least one original of each document must be presented. Example: Credit requires – “1- Commercial Invoice 2- Bill of Exchange

Credit subject  to UCP, is an undertaking, issues to honour the complying presentation, which means presentation of the documents must be as per terms and conditions of the credit, UCP-600 and ISBP-745, however, if documents are not as per that, then it is considered a non-complying presentation.   The process of document examination is independent of the beneficiary’s relationship with the applicant, sale or other contract upon which the documentary credit may be based and independent of the goods, services or performance to which the documents relate. Document examination is on the basis of the documents alone and on their face. A determination as to whether the documents comply or not is not based on information gained from other source. There may be several types of discrepancy in various documents, we will look into the basic characteristic as per below article 16 of UCP-600. Article-16, UCP-600-Discrepant Documents, Waiver and Notice a. When a nominated bank acting on

Article 2 defines ‘complying presentation’ as a presentation that is in accordance with the terms and conditions of the credit, the applicable provisions of these rules and international standard banking practice.   Article-15, UCP-600-Complying Presentation a. When an issuing bank determines that a presentation is complying, it must honour. An undertaking is issued by an issuing bank in order to honour the complying presentation, presented by beneficiary or on behalf of beneficiary, once the documents are presented at issuing bank counter, they would have maximum of 5 banking days following the day of the presentation to determines whether the presentation is clean or discrepant, in case of clean document they must have to honour as per credit terms whether on sight or at maturity in case of USANCE. b. When a confirming bank determines that a presentation is complying, it must honour or negotiate and forward the documents to the issuing bank. Same goes to the confirming bank

The issuing bank issues the undertaking to honour the complying presentation so final liability comes to an issuing bank who examines the documents as per documentary credit, UCP-600, ISBP-745 and, in the case of conforming documents, honours in accordance with its terms and conditions. Usually opening banks require  original transport document to present at their counter or consign to them (to order) as a primary security for an undertaking issued in the form of credit, and releases the document with further endorsement to applicant upon payment or acceptance/debit authority, the applicant will then surrender one original bill of lading to the carrier or its agent to take the delivery of the goods. This “Document of examination” is one of the important and considerable topic, we will touch upon basic standard for examination of documents as per below article.   Article-14-UCP-600,  Standard for Examination of Documents   a. A nominated bank acting on its nomination, a confirming b

General meaning of reimbursement is when a business pays back client, or other people for money they spent out of their pocket. Some examples are getting money back for business costs, insurance premiums, and income tax return.  Coming back to the contest of UCP-600 “Reimbursing bank’ is the bank named in a documentary credit upon which the nominated bank (the ‘claiming bank’) may claim in respect of any honour or negotiation that it has effected to the beneficiary. The nomination of a reimbursing bank arise in cases where nominated bank or a bank presenter (on behalf of the beneficiary) is to effect settlement to the beneficiary upon issuing bank’s acceptance of a waiver of discrepancies issued by the applicant. It could also be where a nominated bank has not acted on its nomination to honour or negotiate, but settlement is due to the beneficiary. This situation would be based on the issuing bank authorising the nominated bank or bank presenter for settlement to occur, and that reim

A bank that agrees to act on a nomination of an issuing bank to pay, accept, incur a deferred payment undertaking or negotiate will be known as a nominated bank. Article 2 defines a ‘nominated bank’ as the bank with which the credit is available or any bank in the case if a credit available with any bank.   A nominated bank is not a party to credit and mostly located in the country of beneficiary; indicated in a credit to help beneficiary in order to get early settlement or a beneficiary may present the documents to nominated bank to avoid delay in presentation if available with nominated   bank, A documentary credit can be made available with the issuing bank only and in that case, there is no need of a nominated bank and the beneficiary will be required to ensure delivery of the stipulated documents to the issuing bank not later than the expiry date and the latest date of presentation. A named nominated bank usually given in field 41a of a credit which is a mandatory field beca