MONDAY EXPORT CLASS With DR GODWIN OYEFESO (SUCCESSEDGE EXPORTERS NETWORK)

MONDAY EXPORT CLASS

With

DR GODWIN OYEFESO (SUCCESSEDGE EXPORTERS NETWORK)

Topic: NEGOTIATIONS DOCUMENTS WITH BANKS (Part 3)

PRACTICAL MECHANISM OF DOCUMENTARY LETTER OF CREDIT

In a Documentary letter of credit, the sequence of events may be as follows:

The buyer and seller agree to the terms of sale, including opening of letter of
The buyer approaches his bank to open letter of credit and incorporate the documents, specified in the export contract, in letter of
Opening Bank opens the letter of credit and advises the exporter about opening of credit, through the advising
After receipt of advice of opening of credit, if exporter is happy with the terms of credit and is in accordance with the contract of sale, proceeds to execute the export
Exporter ships the goods and obtains the relevant documents specified in the
Exporter presents the documents to a bank that may be paying/negotiating bank; whichever one is appropriate to
The bank checks the documents and effects the payment if the documents are in
After payment to exporater, negotiating bank sends the documents to the issuing bank for
Issuing bank checks the documents and if they are in order makes reimbursement to the negotiating
Issuing bank sends advice to importer to retire documents under the letter of credit opened, at his
Importer retires documents to get possession of

COMMON ERRORS IN DOCUMENTS—GUIDELINES TO EXPORTERS

Banks observe the following general discrepancies in documents, which normally occur, when presented for negotiation/payment.

First, documents are presented to the negotiating bank that scrutinises carefully and then makes the payment to the exporter. Later, when the negotiating bank submits the documents to the paying bank, the paying bank, again, makes a careful scrutiny and on finding the documents in order, makes reimbursement to the negotiating bank. The following are the common errors in documents.

The Letter of credit has
The Bill of Lading is claused (unclean or dirty)
The goods were shipped on dock when it was not permitted, as Letter of credit has required clean on board Bill of
Insurance cover was inadequate and expressed in a currency other than that required in the letter of
The description of goods or even the spelling is different from that in the letter of
The total amount in the invoice and bill of exchange
The drawing was for a value, in excess of the amount of the letter of
The Bill of Lading did not evidence whether the freight was paid or
The Bill of Exchange was drawn on wrong
The Bill of Lading, Insurance document and Bill of Exchange were not endorsed
Transshipment/partial shipment made when prohibited under the L/C.
The facsimile signatures were used when not
The Bill of Lading is