Case Study on Export Document and Financing!
Part – I
- An exporter submitted a bill under L/C to Agrani Bank for negotiation, who is also an advising bank of the Concerned L/C. The term deck shipment was specifically allowed in the credit. The bank negotiated the bill since all the terms and Condition of the L/C were Compiled with. But before negotiation of the bill the issuing bank sent an amendment of the L/C prohibiting deck shipment, which was advised by Janata Bank. The documents were sent to the issuing bank for reimbursement as per terms of the credit. But the issuing bank rejected the documents on the ground that the documents drawn are not inconformity with the terms and conditions of L/C due to above amendment.
- MANTRUST, UK negotiated a bill under L/C. The L/C was issued by Janata Bank, Bangladesh. The bill was sent to the issuing banks by debiting Janata Banks A/C maintained with them. After receipt to the bill. Janata Bank sent a message to MANTRUST as “Documents are not acceptable to us due to some discrepancies” and instruct the bank to reverse their Account with interest. After one month it was detected that MANTRUST, UK did not comply with the request of Janata Bank.
- A cable was received from Bank of Tokyo Ltd., to advise a credit with the addition of words “details to follow”. The exporter shipped the goods on the basis of cable advice and tendered the documents for negotiation to the advising bank. But the mail confirmation has not yet been received. The advising bank negotiated the documents on the basis of Cable advice.
- Agrani Bank negotiated an export bill under L/C from one of its valued customers, under reserve for the following discrepancy:
“Certificate of inspection issued by a different body other than the one specified in the Credit”.
They obtained reimbursement from the bank specified in the credit by giving a guarantee. The issuing bank rejected the documents after two months and claimed refund on the ground that the documents are not in conformity with the terms of the credit and that the negotiating bank itself has observed the discrepancy.
- Agrani Bank negotiated a bill under L/C and all the terms and conditions of the L/C were complied with. The documents were sent to the issuing bank for reimbursement as per terms of the credit. By that time the issuing bank has received authentic information that the goods shipped were of much inferior quality and it repudiated the documents on the ground that the negotiating bank should have satisfied itself that the quality shipped conformed to the requirements of L/C.
- Rupali Bank negotiated a bill for $2500 under a letter of credit issued by Bank of Tokyo Ltd, Japan. As per instructions contained in the L/C, it claimed reimbursement from Gindlays Bank Ltd., London who insisted on a Certificate from Rupali Bank to the effect that the bill had been negotiated in accordance with the terms and conditions of the L/C.
- Export documents tendered for negotiation under L/C include a bill of lading wherein it was mentioned “Said to contain”. The negotiating bank accepted the documents since L/C did not throw any light in this aspect. The issuing bank refused to honour the documents on the ground that the bill of lading is not clean but claused.
- M/S. Jute exporters presented a set of export documents for negotiation under a letter of credit. The bill of lading read “shipped on S.S. Padma.” The L/C stipulated that a full set of clean bill of lading should be tendered along with other documents. The negotiating bank insisted that bill of lading should read “shipped on board on S.S. Padma.
- M/S. Pioneer exporters tendered an export bill for negotiation under a letter of credit. The bill of lading disclosed transhipment enroute. The negotiating bank refused to accept the document on the ground that the L/C is silent about transhipment and hence transhipment should not be permitted.
- A bill of lading tendered alongwith other export documents for negotiation contained the Words “shipped on deck.” The negotiating bank negotiated the bill since the L/C did not specifically prohibit this. The issuing bank refused to honour the documents.
- While negotiating an export bill under L/C, the negotiating bank noticed that the date of bill of lading is 09-11-78 and the date of insurance policy is 11-11-78. But the insurance policy gives reference to the bill of lading No. and date. Can the Bank negotiate the bill since the insurance policy gives a reference to the date of bill of lading. The documents are otherwise in order.
- M/S. Goodfood exports tendered an export bill for negotiation under L/C. The insurance policy was expressed in Japanese Yen while the other documents are in U.s. $ as per terms of L/C. The Credit is silent about insurance policy but export was to Japan and the bill was to be drawn in U.S. $. M/S. Goodfood Exports contended that since shipment had been made to Japan it would help to put up claim if necessary, if the insurance policy is expressed in Japanese Yen. The Officer did not know what to do.
- A letter of credit stipulated that insurance should cover “All Risks.” The insurance policy tendered also mentions that “all risks” have been covered. But the printed sheet attached to the policy giving details of “all risks” disclosed that “War Risks” are not covered by this clause but should be covered by a separate clause if necessary. The negotiating bank did not go through the attached sheet and went by the words “all risks” given in the main policy. The issuing bank refused to honour the documents since, according to them, this was a serious discrepancy. The negotiating bank was in a dilemma Comment.
- An irrevocable letter of credit mentioned that about 12,500 Ibs of “shrimps” should be shipped. The invoice disclosed that the actual shipment was 13,560 ibs. The negotiating bank refused to negotiate since the ceiling on quantity has been exceeded.
- Agrani Bank negotiated an export under L/C which prohibited partial shipments. The set of documents contained two full sets of bills of lading, bearing the same date, same stcamer for the same voyage. The issuing bank refused to honour the documents stating that partial shipments have been allowed contrary to the terms of the credit. Agrani Bank maintained that even though two separate bill of lading had been accepted, it would not amount to partial shipment.
Part – II
- Standard Bank opened L/C favouring Mr. Kim of Korea. which describe the goods as 10 M/Tons of Cement. The expiry date of the credit was Sunday, 22nd March (no latest shipment date was stipulated). Standard Bank received the Export documents against the said L/C with the following comments of negotiating Bank:
- i) Bill of lading describe the goods as 10.40 M/Tons of cement instead of 10 M/Tons.
- ii) Documents presented on Monday the 23rd March 22nd March being holiday.
The Bank negotiated the documents obtaining Indemnity.
But the standard Bank rejected the documents on the ground that documents were not drawn strictly as per credit terms. (bill of lading not in order and late presentation) and the negotiating bank itself observed it. The negotiating bank protested and insisted on that documents were in order and drawn strictly as per credit terms.
What is the position of standard Bank, Dhaka.
- Star Bank issued L/C for US$ 90,000 and received export document on 9-11-01 duly negotiated by Tokyo Bank. Star Bank examined the same and determined that the documents were discrepant due to Late shipment and late presentation. Star Bank informed the applicant on the same day but the applicant did not waive the discrepancy and rejected the documents.
Star Bank informed the Tokyo Bank about the discrepancies and rejection of documents and stated that they are holding the documents at the risk and responsibility of Tokeyo Bank and sought disposal instruction. On the next day i e 10th Nov. 01 Tokyo Bank requested start bank to hold the documents at their disposal pending further instruction. On 11-11-01 the applicant approached star Bank and informed that due to good relationship with supplier they now accepted the documents and made full payment. Star Bank delivered the documents to the applicant with due endorsement. And the applicant released the goods accordingly. Star Bank made payment authorization by talex releasing payment to Tokyo Bank. On the same day Tokyo Bank informed star Bank that consequent upon non acceptance of documents the beneficiary re-sold the goods to another buyer at US$ 1,00,000. Star Bank informed in reply that they released the documents and made payment in full. This was done to save the supplier from any loss. But Bank of Tokyo and the beneficiary did not agree.
How Star Bank can solve this problem?
- Gama Bank issued an irrevocable L/C for US$ 5,00,000 and advised through Beta bank London, Beta Bank advised the credit to the beneficiary. Among other conditions, the credit required –
- a) Certificate of origin to be issued by London chamber of commerce.
- b) Inspection certificate should be signed by Mr. Anderson a renowned Director of SGS.
- c) Signal packing list.
Upon receipt of documents from beneficiary Beta Bank determined that they were in compliance with the terms of the credit. Beta Bank negotiated the documents and forwarded the same to Gama Bank and claimed reimbursement. Gama Bank examined the documents and determined that documents were discrepant and notified by telex rejecting the documents for the following reasons:
- a) “Certificate of origin is dated after the date of Shipment,
- b) The signature in Inspection Certificate is not tallied with specimen lying with issuing bank
- c) Packing list is undated.”
Case Study on Export Document and Financing!
An exporter submitted a bill under L/C to Agrani Bank for negotiation, who is also an advising bank of the Concerned L/C. The term deck shipment was specifically allowed in the credit. The bank negotiated the bill since all the terms and Condition of the L/C were Compiled with.