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Letters Of Credit Funding
Key Stage 6. Shipping documents are prepared and submitted to the Advising Bank by the Exporter

When all details of the transaction have been decided, the goods are despatched. The Exporter then prepares the shipping documents and submits them to the Advising Bank.

Preparation of Shipping Documents

When assembling the documents for presentation to the bank, the Exporter must make sure that the documents match the LC. The following must be ensured:

1. The Exporter has the correct number of copies and originals
Also ensure that they contain the information called for, that the title of all the documents is correct and they are issued by the party specified in the LC. The document name must match exactly what the LC calls for.

2. They are consistent with each other
The shipping marks, quantities/weights, transport details, references and general descriptions must all? Be consistent to ensure? That they clearly relate to the same shipment.

3. The description of the goods is correct
Goods may be described in general terms in all documents except the invoice, where the exact LC description must be reproduced.

4. The documents are authenticated
Import regulations in some countries require the documents to be signed manually and any alterations or additions witnessed.

Submission of documents to the Advising Bank

Once prepared, the shipping documents need to be presented to the Advising Bank without delay. Be aware of the following:

The following documents must all be in order

Transport Document
Ensure these include the right type of transport, places and ports, have the correct consignor and consignee, date of shipment and 'freight paid' notation.

Insurance Document
Ensure that this is of the correct type, amount and currency as stipulated in the LC. The date must be no later than the date of issue of the transport document, unless the insurance document clearly states that cover takes effect from the date of shipment/receipt of cargo, ie. warehouse-to-warehouse.

Invoice
The Importer and Exporter's names and details, the description of the goods and the clauses or statements must all appear exactly as they are in the LC. The value must not be more than the LC permits, though you can under certain conditions sometimes under-draw by up to 5%. A 5% variation is sometimes permitted, alternatively the LC may permit a specific variation such as an 'about' amount having a 10% variation.

Bills of Exchange
Ensure that the date, amount and currency are all correct, that the words and figures agree and that it is drawn on the correct party. Also check the endorsement, clause, and Letter of Credit reference number and ensure the signature identifies the signatory.

Covering note/letter to Advising bank
The note/letter must include the Exporter's contact details.
Include a request that the bank notifies any discrepancies by fax or telephone rather than mail. Indicate how to be paid and include account details. Provide details if the Exporter has a forward currency contract.

Any other documents
Ensure all other documents are from the correct issuer, have the correct wording and content, clearly relate to the goods invoiced and are all signed and endorsed as necessary.

Also ensure that all communications are correctly set out, addressed and dated and that no documents are enclosed that are not required.

 
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