Negotiation of Export-Import Documents

8/22/2019 Negotiation of Export-Import Documents

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AIBS

MBA-IBExports-Imports Documentation

& Logistics

Sem-2

Negotiation of Export-Import

DocumentsSupriya Lamba


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Documents required under Letter of

Credit Sight or Usance Bill Of Exchange

Commercial Invoice/ Customs Invoice

Packing List

Full set clean-onboard Bill of lading (all negotiable

copies) / Airway bill/ Combined transport document Inspection Certificate

Marine insurance policy/ certificate, in duplicate.

GR-1/SDF Form, in duplicate

Original letter of credit along with amendments madeup to date

Certificate of Foreign Inward remittance in case ofadvance payment

Any other document as required by the buyer,mentioned in letter of credit


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When Documents can be

negotiated?

Document should permit negotiation

Not obligatory to negotiate

Documents should be non- discrepant Slight discrepancy in documents takes

away the Right

Recourse to Drawer


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Precautions in Scrutiny of

Documents-Bill of Exchange

Drawn on the party /bank as stated in the Letter

of Credit.

Drawn in favour of the negotiating bank. Drawn for a period not exceeding six months

from the date of shipment when it is usance bill.

Drawn in sets as per the terms of L/C , marked

first & second bill of exchange for the net

amount of the invoice.


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Documents-Invoice

It should be prepared on the standard invoiceform & properly signed.

Description of the goods in the invoice should

strictly conform to the description of goods inL/C.

It should be certified by the authority as requiredin L/C.

Value of the invoice should not be more than theamount available on the L/C.

Currency of the invoice should be as per L/C.


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Documents-Bill of Lading Should be presented in full set, with as many negotiable & non-

negotiable copies as mentioned in L/C.

Bill of Lading should be marked shipped on board unlessL/C permits shipment or combined transport document.

It should not contain any adverse clauses as to the condition of

goods or packing. It should be issued in the name of the shipper & blank

endorsed or made out to the order of the overseas bank, as perthe terms of L/C.

If bill of lading states that the goods are received for shipment& later stamped ON BOARD with the authorised signature ofthe carrier.

Date of shipment should not be later than the date specified inL/C.

It should bear the name of the notifying party , if required inL/C.

Additional condition such as stored in refrigerated

compartment should be incorporated if it is requirement of theL/C.


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Documents-Airway Bill

It should indicate name of the carrier

It should indicate place & date of issuance

It should indicate name of the consignor &consignee

It should indicate port of loading

destination Air way bill should not be claused or a

charter party


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Documents-Certificate of Origin

The Chamber of Commerce or other

competent authority as required by L/C

should issue it.

It should state the country of original

details.

It should state the description of goods,

invoice number & shipping marks.


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Exchange Control Guidelines

Documents through Authorised dealer.

Realisation through Authorised dealer.

Payment within six months(i) Drawal on Invoice & bill of exchange

(ii) Change of Buyer

(iii) Presentation of Shipping Documents Export of jewellery.


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Practical Mechanism of

Documentary L/C

The buyer & seller agree to the terms of sale ,including opening of L/C.

The buyer approaches his bank to open L/C &

incorporate the documents , specified in theexport contract , in L/C.

Opening Bank opens the L/C & advises theexporter about opening of credit , through the

advising bank. After receipt of advice of opening of credit , if

exporter is happy with the terms of credit & isin accordance with the contract of sale ,

proceeds to execute the export contract.


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Practical Mechanism of

Documentary L/C Exporter ships the goods & obtains the relevant

documents specified in the credit.

Exporter presents the documents to a bank that maybe paying/ negotiating bank; whichever one isappropriate to him.

The bank checks the documents & effects thepayment if the documents are in order.

After payment to exporter , negotiating bank sendsthe documents to the issuing bank forreimbursement.

Issuing bank checks the documents & if they are inorder makes reimbursement to the negotiating bank.

Issuing bank sends advice to importer to retiredocuments under the L/C opened, at his request.

Importer retires documents to get possession ofgoods.


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Common Errors in Documents-

Guidelines to Exporters

The L/C has expired

The Bill of lading is Claused ( unclean or dirty)

The goods were shipped on dock when it was

not permitted ,as L/C has required clean onboard Bill Of Lading

Insurance cover was inadequate & expressed in

a currency other than that required in the L/C. The description of goods or even the spelling is

different from that in the L/C.


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The amount in the invoice & bill of exchange

differed.

The drawing was for a value , in excess of the

amount of the L/C. The Bill of Lading did not evidence whether the

freight was paid or not.

The Bill of Exchange was drawn on wrong party. The Bill of Lading , Insurance document & Bill of

Exchange were not endorsed correctly.


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Transshipment / partial shipment made

when prohibited under the L/C.

The facsimile signatures were used when

not allowed.

The Bill of Lading is stale.


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Flow of Documents & Funds in L/C


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Home Assignment

Describe the mechanism of Negotiation of

Documents with pictorial presentation.

Describe the role of negotiating bank in

negotiation of documents. (minimum 150

words)