| [1] Advising L/C |
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- It is an act to notify the L/C opening fact to the beneficiary in accordance with the opening bank by third banks located in the export region.
- An advising bank advise L/C to a Seller and when at the time of advising, the bank confirms the authentification of the L/C by the Test Key or by the signature.
- correspondent contract |
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| - Following documents are to be exchanged when making Non-Depositary Correspondent Contract. |
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<1> List of authorized signature : A list of authorized personnel in charge of foreign currency business at both banks or a booklet that contains the signature of the said people or a micro film. (To compare and confirm document's authenticity)
<2> Cyper code : A booklet containing all kinds of terminology cyper code related to foreign currency business (Use to reduce telex fee and security maintenance)
<3> Test key : It is a code mark when exchanging Telex by both banks, it is used to display the bank's position. (For security purpose)
<4> Schedule of Terms and Conditions : A table that indicates the said service fees in US dollars as per the kinds of foreign currency business. (For fair service fee charge purpose) |
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| - When contracting, a Credit Facility Agreement should be made to resolve a temporary insufficient balance. |
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| (2) Role of advising bank |
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| - When a opening bank opened a L/C by mail or short cable, a advising bank has a simple role as a messenger however, when opening method are as following, the bank executes special duties. |
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| - When entire contents of L/C is sent to advising bank by Telex, it is called Full Cable. In this case a opening bank doesn't send a separate original L/C therefore, the advising bank upon receiving the Telex has to transfer onto the bank's own L/C form and include following sentences to delivery. Then this message act as the original L/C. |
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- "This letter is solely an advice of credit opened by the above mentioned correspondent and conveys no engagement by us."
"We reserve the right to make such amendments to this advice as may be necessary upon receipt of mail confirmation and assume no responsibility for any errors and/or omissions in the transmission and/or translation of the cable." |
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| - When a opening bank open a L/C using test codes only, a advising bank then compare these with "cyper code" and decoded documents are sent to the beneficiary. |
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| <3> Refer to our previous credit |
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- Frequent L/C transaction with same business partner: To save Telex cost, send only the different contents to the currently opened L/C and the rest should be referred to the prior L/C. The advising bank prepares and delivery them.
- Instruction sentence : "Repeat our credit No. OOOO except XXX". |
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| (3) Duty of advising bank |
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- Responsible to delivery the opinion of a opening bank to a beneficiary 'fast' and 'clearly' therefore, advising should take place at the bank by having the beneficiary come in person to the bank to delivery the original L/C.
- While transferring arrived L/C by Telex on its own bank, there could be problems with translation, indicating error occurred by the advising bank and the beneficiary is damaged for it however, if the advising bank insist on "reasonable care and reasonable time' the bank is waived. |
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[2] Advice of L/C Received
[3] Review L/C contents |
| (1) Items to confirm when receiving L/C |
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| - A seller must review and confirm the following items to prevent an risks in the prior when L/C is received. |
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| <1> Check for L/C's authenticity |
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- As per UCP 500, when a bank declined a request to advise or has no intention to participate and when there is authentification doubt from the appenance of L/C : Request all the doubtful items to be confirmed by the opening bank. If the L/C is notified to the beneficiary as is : Must send together with 'authenticity is doubtful'
1. L/C received only by mail-- AS per the Specimen Signature Booklet exchanged with opening bank, compare the signature and check for authenticity of L/C.
2. L/C received by telex-- As per the Test Key exchanged with the opening bank confirm the Test Key number and heck for authenticity of L/C. |
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| <2> Check possession of L/C form |
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1. Check wither it is irrevocable L/C : If there is no clause for irrevocable clause, it should be translated as non-irrevocable as per UCP 500,
2. Check for UCP observance existence
3. Check for payment confirmation clause existence
4. Goods, price, unit price and correction of total calculation
5. Mistype, Misspelled and Logically inconsistent. |
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| <3> Check the opening bank's credibility |
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- If it confirms to be there is a credit problem with the opening bank, it is safe to execute export after receiving confirmed L/C.
1. Check for the opening bank's insolvency and payment default possibility.
2. Check for delaying or possible foreign payment stop due to the country of opening bank's weak foreign exchange circumstances
3. Check for possible payment default or whether dispatching documents would become incapable due to a war status of opening bank's location. |
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| <4> Check for any possible items that might cause a trouble in executing the process. |
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- Check for any sentence structure that might make the applicant to make unilateral opinion and ultimately determine the L/C execution by it.
Ex)-Appoint a vessel of applicants
1. If requesting coverage of marine insurance or freight prepaid with L/C although the term is FOB.
2. Request to supply a confirmation of the chief of a customs clearance who isn't residing in the importing country resides.
Ex)-Certificate of Origin must be legalized by XYZ Embassy in XXX.
3. Requesting Shipment to be made from xxxxx,xxxxx etc., while requesting Marine Bill Lading.
4. Requesting a goods inspection certificate by an agent that applicant appointed.
Ex)-Inspection Certificate approved and signed by Buyer's Agent in triplicate.
5. Requesting a inspection to be made on a sample by a buyer before the shipment and attach the inspection certificate onto the Nego documents.
Ex)-Shipment sample should be inspected and approved by buyer before Shipment, and the Certificate issued by Buyer must be presented for Negotiation.
- If found above special agreements, you should request to delete or change. L/C with above special agreements are called Conditional L/C. |
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| <5> Consistency with contract |
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1. Check if a item, standard and shipping date are consistent to the contract.
2. Check if enough and appropriate time is given for documents presenting
3. Check for a wrong word, an omitted word and pitfall phrases |
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| <6> Check also the documents other than L/C |
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1. Check whether the bill of lading is consistent to the L/C
2. Packing list
3. Inspection certificate
4. Insurance documents |
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<7> Risks per each countries
<8> Check whether the country to deal is established with commercial practice
<9> Check terms with L/C not with sales contract
<10>Check for any impossible practice |
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1. Inspection at destination
Ex)-"60% of invice value available at sight and remainder go be negotiated upon receipt of notice from drawee that they satisfied with merchandise"
2. Instruct shipping
Ex)-"This L/C is available for negociation only after receipt by the beneficiary
of further instruction of shipment from us"
-"The name of vessel will be indicated by us"
3. samples
Ex)-"Sample must be approved by the buyer prior to shipment" |
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| <11> You need to make sure of the authenticity with a advising bank in the following cases. |
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- If the consignee of the shipping documents is third party rather than the one appointed by the opening bank or as what the opening bank have instructed.
- If one of the original shipping documents is requested to be directly deliver to third parties. |
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| (2) Requesting L/C correction |
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- It is normal process to request the applicant to correct any unclear statement found in the L/C as it is discrepancy to the sales contract.
- A contradiction of L/C, an ommission of necessary items or items regarding as a mistake of a opening bank are more efficient to notified to a opening bank by an advising bank. |
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[4] Shipping documents to be prepared by a exporter |
- If a exporter do not institute a different view upon reviewing a L/C, it is regarded as a consent to the opened L/C having its unique irrevocable nature.
- Since changing the contents of L/C is impossible without a consent of a exporter, shipping documents can be prepared. |
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Trade Helper 
Ex-Import Procedure(to Way of Payment)
Export-Import procedure according to the Irrevocable Documentary Credit method
Advising and Receiving L/C
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