DOCUMENTARY CREDITS AND RELATED DOCUMENTATION

1 Brief History and the Basic Documentary Credit Operation

1.1 Brief History

1.2 The basic documentary credit application · The Buyer

• The Issuing Bank
• The Irrevocable Undertaking
  
• Advising Bank
  
• Nominated Bank
  
• Shipment of Goods and Presentation of Documents
  
• Documents and Payment
  
• Buyers and Goods

1.3 Generic flow chart of the Documentary Credit Process

1.4 Definition – A Generic Understanding of Letter of Credit, Commercial Credit,
Documentary Credit and Standby Letter of Credit.

2 The Sales Agreement

2.1 Contract of Sale

• Conclusion of Export Contract
  
• Law Governing Contract
  
• International Sales Law
  
• An effective Sales Agreement
  
• Independence of Contract
• WHO is involved
  
• WHY it is needed
  
  

2.2 Trade Terms in Foreign Trade · Incoterms

• Incoterms and Documentary Credits
  
  

2.3 Methods of Payment · Advance Payment

• Open Account
  
• Documentary Collection
• Documentary Credits
  
• Aval
  
• Guarantees
  
  

3 Types of Credits

• Clean Credits
  
• Commercial credits v standby letters of credit
  
• Revocable credits
  
• Advance Payment Credits (Red Clause Credits)
  
• Revolving Credits and Installment shipment
  
• Evergreen Credits
  
• Credits established under aid agreements
  
• Inoperative Credits
  
  

3.1 Transferable Credits

• Transferable credits
• Back-to-back credits
• Transferable credits v back-to-back credits
  
  

3.2 Irrevocable Credits

• Irrevocable Credits
  
• Irrevocable Confirmed Credits

3.3 Types of Credit and Settlement methods

• Sight Payment
  
• Deferred Payment
  
• By Acceptance
  
• By Negotiation

4 Payment to third parties - Assignment of Credit Proceeds

• Background
  
• Extent of bank’s responsibilities
  
• Extent of payment security
  
• Assignment of credit proceeds

5 Parties to Documentary Credit Transactions

5.1 Roles and Responsibilities – Applicant’s side

• Applicant and Beneficiary
  
• Applicant and Issuing Bank
  
• Issuing Bank and Advising/Nominated Bank
  
• Issuing Bank and Confirming Bank

5.2 Roles and Responsibilities – Beneficiary’s side

• Beneficiary and Advising Bank
  
• Beneficiary and Nominated/Confirming Bank
  
• Beneficiary and Transferring Bank
  
• Beneficiary and Issuing Bank

5.3 Roles and Responsibilities in Reimbursement

• Claiming Bank and Reimbursing Bank
  
• Claiming Bank and Issuing Bank
  
• Reimbursing Bank and Issuing Bank

5.4 Roles and Responsibilities illustrated

• Diagram – Who “talks” to whom about what

6 Stages of Transport

• Pre-Carriage
• Main Carriage
  
• Post Discharge

6.1 Sea – Types of Carriers

• Ship Owners
  
• Chatterer
  
• Liners
  
• Tramps
  
• Freight Forwarders
  
• Multimodal Transport Operators
  
• Forwarders v Carriers

6.2 Introduction - Mate Receipt

6.3 Characteristics of Transport Documents

• Marine/Ocean Bill of Lading
• Non-Negotiable Sea Waybill
  
• Charter Party Bill of Lading
  
• Multimodal transport document
  
• Difference between Multimodal Transport Document (MTD) and a through Transport Document (TTD)
• Air transport document
  
• Road, rail or inland waterway transport documents
  
• Courier and post receipts
  
• Summary - Transport Documents

6.4 Common discrepancies in transport documentation

7 Other Documents

7.1 Insurance Documents

• Insurance Policies
  
• Insurance Certificates
  
• Broker’s Cover notes
  
• Insurance terms as commonly seen – average, franchise, excess deductible, deck shipment, claims payable/UAE/London/New York/etc, warehouse to warehouse clause.

7.2 Financial Documents

• Bills of Exchange
• Drafts and Promissory Notes
  
  

7.3 Commercial Documents

• Commercial Invoice
  
• Certified Invoice
  
• Certificate of Analysis
  
• Certificate of Weight
  
• Inspection Certificate
  
• Packing List
  
• Weight List

7.4 Documents for Official Purpose

• Certificate of Origin
  
• Consular Invoice
  
• Legalised Invoice
  
• Health Certificate

7.5 Ten Common Discrepancies from Bankers’ Survey

7.6 Release of Goods

• Steamship Guarantees/Indemnities
  
• Airway releases and delivery orders
  
• Letters of Indemnity (LOIs)
  
• Counter Indemnities

8 Risks

8.1 Risks for the Applicant

• Goods
  
• Foreign Exchange
  
• Failure of the Issuing Bank

8.2 Risks for the Issuing Bank

• Insolvency of the Applicant
  
• Fraud risk, sovereign and regulatory risk and legal risk

8.3 Risks to the Beneficiary

8.4 Risks to the Advising Bank

8.5 Risks to the Confirming Bank

8.6 Risks to the Reimbursing Bank

8.7 General risks

• Fraud risks
• Sovereign and regulatory risks
• Legal risks
• Force majeure and frustration of contract

9.0 Making LC Work ·

• Anatomy of LC
  
• Deadlines in LC
  
• What is not discrepancy in the eyes of UCP

10.0 Checklist and Guide

• For Exporters
  
• For Importers
  
• For Export Sales Executives

11.0 Specimens of Major Trade Documents