- Whether documents and the number of documents required by L/C have been all submitted.
- Whether the submitted bill of change and each documents fulfill all the indicated special terms of L/C.
- Whether the documents indicated in commercial invoice meets mutual relation and the goods indicated in the statement are consistent to the L/C term.
- Whether all the documents are issued by the appropriate person and signed.
- Whether all the documents are equipped with certain format.
- Whether the bill of change, B/L, insurance policy are appropriately transferring the right of marketable securities to the purchasing bank
- Check for any poison pill with L/C in the prior |
|
[2] Nego procedure |
(1) Customs clearance of the export goods, shipping
(2) Concluding documentary bill transaction agreement |
|
| - Conclude only for the initial transaction (Details) |
|
1. Incidental documents and cargo are Nego exchanging bank's bill loan or incidental expense payment's security
2. Process method for accident or responsible materials while transporting documentary bill and incidental documents.
3. Process method of incidental cargo when the documentary bill is default or rejected for undertaking.
4. If necessary, offer security or reimburse bill of exchange payment or responsibility of incidental expense. |
|
| (3) Beneficiary's draft and prepare transportation document, be equipped. |
|
- Transportation document
- Standard documents |
|
| 1. Bill of Lading
2. Commercial Invoice
3. Insurance Policy
4. Packing List |
|
|
1. Consular Invoice
2. Customs Invoice
3. Certificate of Origin
4. Inspection Certificate
5. GSP C/O
6. Beneficiary's Certificate |
|
| (4) Bill of exchange Nego request |
|
|
- NEGO application
- Original L/C
- Documentary bill transaction agreement and seal impression declaration : Submit only at the initial transaction
- Bill of change : Appointed L/C. No need for Usance L/C
- Transportation documents : Choose from B/L, AWB, CTD and PR
- Insurance documents : Only CIF, CIP - Commercial invoice
- Other documents required by L/C : P/L, C/O etc. |
|
[3] Purchasing bank |
|
| - A exporter request to a drawee bank to Nego with the shipping documents required by L/C, and when a purchasing bank confirm the documents submitted by a exporter are consistent to the L/C term, the bank pays to the exporter with the banks capital and send the Nego documents to the opening bank waiting for the payment from the opening bank. |
|
|
- Per UCP500 article 10, the right to appoint a purchasing bank is with a opening bank.
<1> If there is a branch |
|
| - If the opening bank has its own branch in the exporting region (The city where the exporter resides in), it process notification of L/C through the branch (advising bank), only allow Nego at the branch (purchasing bank), authorize payment in proxy of the bank (Paying bank), and execute confirming process in some case. |
|
| <2> If there is a foreign currency exchange bank for business |
|
- If there is a bank in the exporting region that concluded correspondent contract with the opening bank : In order to preserve exchange transaction agreement, the opening bank restricts the purchasing bank only.
- If a bank is exchange transaction bank "Negotiation under this credit is restricted to XXX Bank" will be indicated in the L/C
- and in this case, a exporter may Nego through other bank(exporter's corresponding bank) for 1 time but to keep the L/C term, the 1st purchasing bank must execute Renego through a drawee bank and such L/C is called Restricted L/C. |
|
| <3> If there is no bank in relation |
|
- if there is no bank related to the opening bank at the exporter location : The right to appoint is delegated to a exporter.
- At this point a opening bank will state payment undertaking word saying "In relation to this L/C if the exporter indicates the bank as a payor and submit the bill of change issued by the bank, the said bank will pay the submitted amount to any bank regardless." and such L/C is called Negotiable L/C. |
|
| (3) Ripple effect with appointing |
|
| <1> Presentation condition of bill of change |
|
- If Straight L/C or deferred payment L/C: Since appointed bank is carrying out loan reimburse action to a exporter directly behalf of the opening bank there is no possibility of assignment problem with the right to request.
- Therefore, in this case, as long as L/C is not requiring bill of change in a written contract, a exporter has no obligation to submit bill of exchange at the time of Nego and such L/C is called "No bill L/C".
- If Restricted L/C, Acceptance L/C or Negotiable L/C, Negotiable Usance L/C : The exporter must submit bill of change when Nego and such credit is called "Bill L/C". |
|
| <2> Recourse right exercise by purchasing bank |
|
- Paying bank executing payment for Payment L/C or Deferred Payment L/C is reimbursing its own loan as a proxy of a opening bank, it may not exercise recourse right to a exporter and the payment at this point is the final.
- However, a bank paying to a exporter for Restricted L/C, Acceptance L/C, Negotiable L/C, Negotiable Usance L/C by the right to request assigned by the opening bank from exporter through bill of change, the bank may reserve recourse right to a exporter for the default amount when default occurs. (The article 9 of bill provision) |
|
[4] Document inspection of purchasing bank |
(1) When a exporter presents shipping documents to an appointed bank : An purchasing bank upon checking the presented documents with payment undertaking terms for the consistency and pay to the exporter with bank's own capital.
(2) Purchasing bank's document inspection method
<1> Consistency inspection <2> Consistency inspection <3> Fake documents' inspection
(3) Inspection details of transportation documents |
|
1. If the transportation documents are consistent to the L/C terms
2. If the transportation documents are mutually consistent.
3. If there is no vice or inconsistency to the transportation documents after Nego inspection, indicate Nego date, Nego number, amount and bank name on the back of the L/C and issue to the exporter. |
|
[5] Payment by purchasing bank |
|
- As of a result of purchasing bank's document inspection, first of them is they found vice with the document and the second of them is they found no vice with the document.
- If vice is found: Take care by vice document handling. -If vice is not found: Nego amount is paid immediately to the exporter called Clean Nego.
- The Nego amount will be remitted to the exporter's bank account after deducting service fee and trade finance loan. |
|
| (2) Calculating Nego payment |
|
| <1> Exchange commission calculating formula |
|
- Number of days of region / 360 X 1% additional rate on LIBO rate (yearly rate)
X book value X exchange commission
- Book value is amount that is less than fixed unit from standard rate
(Market average exchange rate).
1. At sight L/C, D/P method bill of change |
|
- T/T Selling rate - number of days of region / 360 X yearly exchange commission rate X book value = At sight bill of change selling rate
- At sight bill of change selling rate X L/C face value = Amount
- Total amount - Bank service fee = Actual amount to pay
- yearly exchange commission rate = LIBO rate +1% |
|
| 2. usance L/C, D/A method bill of change |
|
a. If Usance bill is Ex-90days after sight term
- At sight bill of change selling rate - 90 / 360X yearly exchange commission rate X book value = Usance bill selling rate
b. If Usance bill is Ex-90days after B/L date term
- T/T Selling rate - 90 / 360 X yearly exchange commission rate X book value = Usance bill selling rate
c. Usance bill selling rate X L/C amount = Total amount
d. Total amount - Bank service fee (Selling, undertaking, paying, reimburse, advising service fee) = Actual amount to pay |
|
| (3) Selling procedure of purchasing bank |
|
1. Document receipt: Issue certificate of receipt
2. Entry: Record on bank's purchase ledger
3. Document examination : Inspect consistency with L/C term and any contradiction between the mutual documents
4. Complementary instruction : When trivial mistake on the invoice and bill was found that could be corrected by a exporter's effort
5. Purchasing bank: After remitting the balance that deducted export fiance amount, incidental service fee and interest from L/C face value, issue only the receipt to a exporter. (The original L/C will be return to a exporter after indicating the purchasing fact on the back of the L/C)
6. Preparing covering letter : Cover for the documents to be sent to paying bank. It indicates purchasing fact, details of documents, examination opinion and whether reimburse request has been executed on the designated form.
7. Sending documents : Prepare two sets to prevent loss and send the twice using two separate air express.
8. Sending reimburse request : Send to the actual paying bank |
|
- If the bank to reimburse is indicated on the L/C: Send shipping documents to opening bank and send only the bill for reimburse to the reimbursing bank.
- For paying restricted L/C: Send entire documents to the drawee bank and request renego.
- For Remittance L/C: Send only debit request to the bank appointed by opening bank upon agreement. |
|
| 9. Sending debit request: If purchasing bank is the depositary correspondent bank of the opening bank, settle the account and telegraph "debit advice" to the opening bank electronically, and Nego document will be sent. |
|
[6] Documents with vice processing by purchasing bank |
| (1) If vice is correctable |
|
- If inconsistency of documents are insignificant and correctable by the purchasing bank: Demand exporter to submit new document to supplement or to submit additional document.
- If a exporter obey and supplement the vice document, it is subjected for Clean Nego. |
|
| (2) If vice is uncorrectable |
|
- If inconsistency of documents submitted by a exporter are significant and uncorrectable: A purchasing bank should process the following.
1. L/C Nego |
|
- If a exporter insisted of notifying vice details to a importer and that the exporter received oral agreement from the importer that the importer is taking over the vice documents: The purchasing bank pay to the exporter in advance with its own capital same as Clean Nego case.
- At this point the purchasing bank demand a memorandum from the exporter to prepare for possible default occurrence and apply default exchange commission rate (L/C exchange commission) when paying Nego payment. |
|
|
- Case a purchasing bank notifying in advance of the vice details using telegraph to request whether normal remittance is going to be made.
- When a opening bank is notifying of normal remittance: The purchasing bank pay Nego payment to the exporter. Notifying claim intention : The purchasing bank returns submitted documents to the exporter. |
|
|
| - A method the purchasing bank sending the vice documents to the opening bank in notifying payment intention for Nego payment to the opening bank if make normal remittance even though the documents are vice. |
|
|
| - Purchasing bank request to exporter to request to opening bank to amend L/C term. When the amend sheet arrives, process Clean Nego accordingly. |
|
[7] Processing method for the inconsistency documents against L/C terms |
| - If vice occurred due to unavoidable reason : The bank accepted this (paying or take over) will process the following method. |
|
<1> The purchasing bank request amend by sending the document to the beneficiary and demand it to be amend and resent.
<2> For uncorrectable vice : The opening bank examine it electronically and process according to the examined response.
<3> Method to accept Nego against indemnity or under reserve
<4> For the vice that are uncorrectable and the vice details are significant with payment doubt of beneficiary : Consult with the party of beneficiary and send the documents to the opening bank as "approval basis" or "payment basis". When sending documents in "collection basis" : Protection in accordance with UCP is not guaranteed requiring cautious. |
|
[8] Requiring documents for Nego (Refer to documents related to L/C) |
| (1) basic requiring documents |
|
- documents required regardless of L/C type
<1> bill of exchange purchasing application
<2> orignal copy of L/C
<3> bill of change
<4> commercial invoice
<5> shipping documents (B/L)
<6> insurance documents (insurance policy) |
|
1. requisites of insurance policy
2. preparing method |
|
|
- Requiring documents of L/C for substantive enactment
<1> Consular invoice
<2> Customs invoice
<3> place of origin certification
<4> GSP(general system of preference) C/O(country of origin) |
|
|
<1> Packing slips
<2> Inspection certification
<3> Weight certification |
|
[9] Nego documents check lists |
(1) General(Quick-Check)--Amount complies / Quantity of goods complies / Shipped before latest shipment date / DC still valid / All called - for document present / Documents not stale / Short shipment may be partial shipment if permitted
(2) General(All Documents)--Names and addresses agree / Description of goods consistent
/ Corrections signed or initialled / Shipping marks consistent
(3) Draft-- Amount(figures and words) agrees with invoice / DC No. / Drawee / Term (4) Bill of Lading--Not charter party, sailing vessel etc. / Consignment and endorsement(as per DC) / Notify party / Ports of loading and discharge / On board / Freight prepaid or collect / Clean - no clause condition of goods / Shipping marks / Transhipment / If combined, bears "on board" notation
(5) Airway Bill--Flight No. and date / consignment as per DC / Notify party / Airports of loading and discharge / Freight prepaid or collect / Issued by carrier(not forwarder)
(6) Insurance Policy of Certificate--Negotiable form / Amount insured(minimum CIF or invoice
amount) / Issue date and sailing date / Endorsement / Risks covered
(7) Commercial Invoice--Names of beneficiary and applicant agree with DC / Description of goods with DC / Clauses, certification are present and agree with DC / No extra charge
(8) Certificate of Origin--Issued by authorised party / Correct origin of goods
(9) Clerical--Disposal of document as per DC / Reimbursement instructions understood and followed / Funds placed to correct account(foreign currency) / DC endorsed (and duplicate, if advised by us) |
|
Trade Helper 
Ex-Import Procedure(to Way of Payment)
Export-Import procedure according to the Irrevocable Documentary Credit method
Nego
2006 - 2011 tradegoods.com All right reserved