HOW TO ARRANGE LC DOCUMENTS / PRESENTATION OF LC DOCUMENTS

HOW TO ARRANGE LC DOCUMENTS / PRESENTATION OF LC DOCUMENTS

Before arranging the LC documents, you should carefully read the LC swift and highlight all the required details and summarize if any important facts.

Field 46A refers required documents under LC and field 47A refers to additional conditions. These two fields are very important for the LC documents.

And all LC documents required under the LC must be submitted and below details should be considered when preparing LC documents.

Signature:	Commercial invoice, delivery Note, packing list should be manually counter sign and if required applicants authorized signature, also should be arranged.
Date	Transport documents (BL, Air waybill or delivery Note) and insurance documents must be dated.
Description	The description of the goods in the commercial invoice must correspond with that appearing in the LC which means same wording should be copied to commercial invoice as per LC.
Strict Compliance	Documents must strictly comply to the terms of the LC.
Timing of presentation	Documents must be presented to the Bank within the date prescribed in the LC (field 48 – Period of presentation). Presentation of LC documents after expiry date (field 31D-date of expiry of LC) will lead for discrepancy.
Consistency	And Data in a document, when read in text 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 which means consistence within the LC documents should be maintained.
Originality	Original LC documents are required (Article 17 UCP 600) when required under LC swift. Sometimes Copies are acceptable when LC required to do so.

How to prepare Commercial invoice for LC purpose?

As per UCP rule there is not any specific format for commercial invoice and however, below details should be considered when preparing commercial invoice for LC purpose.

The description of the goods and/or services must be full and accurate.
The amount must not exceed the amount of the credit and however, if LC allows for tolerance 5%, 10% or any % LC can be utilized up to the tolerance level.
LC currency and commercial invoice currency should be same
Commercial invoice need not to be signed unless LC required to do so.
Applicant address should be perfectly match to the LC
Commercial invoice should be dated
LC number and date should be reflected in the commercial invoice. it is advisable to use in bellow format “drown under Letter of credit number xxxx dated xxx of xxxx Bank”

How to arrange Transport documents for LC purpose?

There can be 3 transport types of sea, air and land or combination of all. And transport documents are difference in each case.

Mode of Transport	Source Documents
Sea transport	Bill of Lading
Air transport	Air waybill
Land transport	Delivery Note

Based on the above fact arrangement of transport documents will be vary and incoterms will come in to play. However, there are common facts to be considered when arranging transport documents as below.

Sea Transport – Bill of Lading

These must be “clean on board”
They must indicate the name of the carrier
BL must be signed.
There must be full coverage from the place of loading to place of discharge. - There must be a full set of originals 3 original plus 3 copies.
A charterparty BL cannot be used for LC purpose. Specific requirements also apply to other documents such as insurance, bureau, and many more.

Air Transport – Air waybill

Air waybill Indicate the name of the carrier and be signed by the carrier, or a named agent for or on behalf of the carrier.
Should mentioned that the goods have been accepted for carriage.
Should mentioned that the date of issuance. This date will be deemed to be the date of shipment unless the air
Airway bill contains a specific notation of the actual date of shipment.
Required to mention the airport of departure and the airport of destination mentioned in the LC

Land Transport – Delivery Note

Should be prepared for land transport only.
Applicants authorized signatories should countersign that the goods have been received in full of good condition.
Date of delivery is mandatory.
Value of goods are not compulsory.

How to present the LC documents to Bank?

Once required LC documents are in order, all documents must present to Bank within indicated time as per LC. Usually, 21 days from the date of delivery or shipment. Below two letters to be prepared for the presentation of LC documents and get the Bank acknowledgement once documents are submitted.

Cover letter is required to prepare indicating all LC documents. Sometimes Bank itself have specimen format to use. In that case, you have to use the same format of cover letter.
Bill of exchange. BOE is required to prepare and sign by the beneficiary ordering applicant bank to pay the funds to advising Bank.

Banks treatment for LC documents

Once documents are presented to the nominated/ advising Bank. Bank will follow the instructions in the cover letter. If cover letter instructs the Bank to review the LC documents, Bank will review if not Bank forwards the LC documents to applicant Bank without checking. Applicant Bank has the full authority to check the LC documents and honour/ accept or reject. Discrepant the LC documents. IF documents are accepted, payment will effect as per the LC terms. Following are the most common LC discrepancies.

Common examples of LC Discrepancies:

Invoice value exceeds the letter of credit value.
Bills of lading are not endorsed in the back side.
Bills of lading are not made out to order of applicant.
Not all documents required by the LC are presented.
Late presentation
LC expired
The invoice does not specify the shipment terms (DDP, DIP, CIF, FOB, etc.) as stated in the LC.
The invoice is not manually signed by the beneficiary
Late shipment or late delivery
Port of loading and/or port of discharge is incorrect
Bills of lading are not clean - meaning they bear notations that call into question the condition of the goods as the LC does not allow to unclean BLs.
Description of goods in the commercial invoice is not as per LC.
Applicants authorized signature is not matching with specimen signature.

How to act when LC documents are Discrepant?

As per UCP 600 – article 16, says to approach the applicant for a waiver of the discrepancies. This is the best way to act when there is a discrepancy.
Recall the LC documents and correct whatever discrepancies and re submit the lc documents. However, this has limitations for time. You have to arrange all of these within LC presentation period.
When there is a discrepancy, issuing bank is holding the documents until it receives a waiver from the applicant and agrees to accept it, or receives further instructions from the beneficiary 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 beneficiary.
Also you can counter argue with Bank for the discrepancy if you think the discrepancy is not reasonable.
These are the only options available when LC documents got discrepant.