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What Happens if Letter of Credit is Silent in Regards to the Period of Presentation

By
Ozgur Eker (CDCS)
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0

Documents must be presented to the nominated banks within allowed time frame under letters of credit payments.

Otherwise issuing banks or confirming banks raise late presentation discrepancy.

According to the letters of credit rules a presentation consists of a transport document should be presented to the nominated bank within 21 days after the date of shipment, but not later than the expiry date of the letter of credit.

Presentation Period of a Letter of Credit

If the letter of credit does not require presentation of a transport document, then the presentation period does not become effective.

Under such a scenario, the documents must be presented to the nominated bank before the expiry date.

presentation period under letter of credit

If the letter of credit is silent in regards to the period of presentation, the documents must be presented to the nominated bank before the expiry date, when the letter of credit does not ask for a transport document.

Example:

A Serbian food exporter signs a proforma invoice with in importer located in Kuwait. The letter of credit amount is 75.000 EUR and partial shipments are not allowed.

Expiry date of the letter of credit is 15.February.2019.

The letter of credit is silent in regards to the presentation period, which means that there is no Field 48 -Period for Presentation indicated in the letter of credit.

Option 1: Letter of credit does not ask for a presentation of a transport document:

  • The beneficiary must present the document to the nominated bank before the expiry date of the letter of credit.

Option 2: Letter of credit asks for a presentation of a transport document:

Under the same scenario, please assume that selected transportation mode is sea shipment and transport document is a bill of lading and latest date of shipment is 10.January.2019.

  • The beneficiary must complete the shipment before 10.January.2019 and presents the document to the nominated bank within 21 days after the date of shipment, but not later than the expiry date of the letter of credit.

Related Articles:

Stale Bill of Lading

By
Ozgur Eker (CDCS)
-
0

According to the letter of credit rules a presentation consists of a transport document should be presented to the nominated bank within 21 days after the date of shipment, but not later than the expiry date of the letter of credit.

Bill of lading is a transport document covering the carriage of goods by sea.

If a set of documents, which consists of a bill of lading as a transport document, could not be presented to the nominated bank within 21 days after the date of shipment by the beneficiary, then late presentation discrepancy is emerged.

A bill of lading that is not presented within 21 days after shipment is called a Stale Bill of Lading.

In other words, stale bill of lading is a type of bill of lading which is presented to the nominated bank after the presentation period.

Stale Bill of Lading Example:

Let us try to understand the stale bill of lading term with an example.

An exporter in Malaysia signs a sales contract with an US importer for the sale of refined palm oil. The payment term is letter of credit. The importer have issued the letter of credit in favor of the exporter.

Letter of Credit Conditions:

  1. Latest Date of Shipment: 10.March.2019
  2. Expiry Date: 31.March.2019
  3. Presentation Period: 21 days after shipment but withing expiry date

Date of Shipment and Presentation Date:

The exporter completes the production and makes the shipment. Shipped on board date indicated on the bill of lading is 01.March.2019.

The exporter presents the documents to the nominated bank on 25.March.2019.

Conclusion:

The exporter could not complete the presentation within allowed time frame after shipment. Late presentation discrepancy condition has been fulfilled.

The shipping documents and also bill of lading is stale.

Related Articles:

Letter of Credit Condition: Bill of Lading with Multiple Notify Party

By
Ozgur Eker (CDCS)
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0

Letter of credit, in a broad perspective, is one of the payment methods in international trade.

Bill of lading is a transport document covering the carriage of goods by sea.

Notify party means a person that should be notified by the carrier along with the consignee when the shipment arrives at port of discharge.

Letter of credit is a conditional payment method.

The beneficiary of a letter of credit will receive the payment as long as he presents documents in comply with the terms and conditions of the letter of credit.

Some letters of credit especially the ones issued in Bangladesh request bills of lading that contain not one but multiple notify parties.

On my previous post I have explained that multiple notify parties on a single bill of lading is possible.

Let me explain the situation with an example.

Multiple Notify Party Example:

A textile fabric paint exporter in Italy signs a trade deal with an importer in Bangladesh.

According to the national law of Bangladesh all imports must be paid by letters of credit. As a result an issuing bank in Bangladesh issues a letter of credit against the proforma invoice of the Italian exporter.

The letter of credit contains a condition as below:

Full set original clean on board ocean bills of lading, plus three non-negotiable copies issued by the carrier or its agent drawn or endorsed to the order of Bangladesh Islamic Bank showing ”Freight Prepaid” marked notify applicant and the issuing bank.

The bill of lading must show two notify parties:

  • Notify 1: Applicant (importer company)
  • Notify 2: Issuing bank

Related Articles:

What are the Differences Between Consignee and Notify Party Fields of Bills of Lading?

By
Ozgur Eker (CDCS)
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0

Bill of lading is a transport document covering the carriage of goods by sea.

Consignee means a person entitled to take delivery of the goods under a contract of carriage indicated on a bill of lading.

Notify party means a person that should be notified by the carrier along with the consignee when the shipment arrives at port of discharge.

On today’s post I explain the main differences between the consignee and notify party fields of bills of lading.

Differences Between Consignee and Notify Party

Delivery of Goods:

Carriers hand over goods to the entity stated on the consignee field. Notify party can not claim goods from the carrier under sea shipments.

Optional versus Mandatory Field:

Notify party can also be used as an optional field and need not to be completed. On the other hand consignee field is mandatory and needs to be completed in all occasions.

Title of Goods:

Consignee field determines how title of goods will be delivered from the shipper to the consignee. Notify party has no connection with the title of goods.

  • Consignee field determines if the bill of lading issued in straight, negotiable or bearer format.

Single versus Multiple Entries:

It is possible to enter multiple company names under the notify party field. On the other hand consignee field always completed with single entities.

Related Articles:

Notify Party of a Bill of Lading

By
Ozgur Eker (CDCS)
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0

What Does Notify Party Mean?

Notify party means a person that should be notified by the carrier along with the consignee when the shipment arrives at port of discharge.

Notify party has no effect on the title of goods, which determines delivery of the goods to the consignee.

Notify party is mostly importer, importer’s forwarder or importer’s customs broker.

Notify Party Examples:

Notify Party is the Importer:

Under an advance payment terms a Belgium dessert exporter makes a shipment to an importer located in Saudi Arabia.

The importer pays the contract amount full in advance before shipment takes place.

The goods have been shipped under FOB trade terms and shipment takes place between Antwerp Port, Belgium and Dammam Port, Saudi Arabia.

As freight will be paid by the buyer the freight notation that is mentioned on the bill of lading is Freight Collect.

The bill of lading consigned to the importer company. The bill of lading is not issued in negotiable form, but in straight form.

Notify Party is the Importer’s Forwarder:

Under a letter of credit payment a German machinery exporter makes a shipment to an importer located in Hong Kong.

The letter of credit is payable at sight.

The goods have been shipped under CFR trade terms and shipment takes place between Hamburg Port, Germany and Hong Kong Port, Hong Kong.

As freight will be paid by the seller the freight notation that is mentioned on the bill of lading is Freight Prepaid.

The bill of lading consigned to order of the issuing bank. The bill of lading is issued in negotiable form.

Points of Consideration When Filling Out Notify Party Field:
  1. Notify party has no connection with the title of goods.
  2. Selected payment method may affect notify party field completion.
  3. Under open account, cash in advance and cash against documents payment methods notify party field is usually filled out by the shippers without any restrictions.
  4. Under letters of credit payment methods notify party field must be completed according to the letter of credit terms and conditions.

Related Articles:

Kenya Export Letter of Credit Consultancy

By
Ozgur Eker (CDCS)
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0

Letter of Credit References:

We have completed our export letter of credit consultancy services with success in regards to a letter of credit which is issued by Standard Chartered Bank Kenya Limited on 20.December.2018.

The letter of credit number was 201010061093S. Letter of credit issued in English language.

Total letter of credit amount was EUR 57.605,67. The beneficiary shipped goods in a single shipment for full letter of credit amount. Partial shipment has not been utilized.

Documents have been accepted by the issuing bank on first presentation.

Documents Required:

Specific Conditions:

  • Nothing special in this letter of credit. Standard procedures have applied.

Our Work:

  • The exporter has supplied us the draft letter of credit.
  • We have checked the letter of credit and changed the delivery term from CFR to CPT and corrected port of loading field.
  • Once the letter of credit was issued, it was rechecked and approved by us.
  • The beneficiary had started to the production and made the shipment.
  • After the beneficiary supplied us the shipment details we have prepared the commercial invoice, packing list, weight list and draft (bill of exchange) .
  • We also completed the shipping instructions for the bill of lading document and filled out the draft version of certificate of origin.
  • After shipment, the beneficiary has sent us all of the documents for final evaluation.
  • The documents have been presented to the issuing bank through the advising bank located in beneficiary’s country.

Conclusion:

  • Documents have been accepted by the issuing bank on first presentation.

Morocco Export Letter of Credit Consultancy

By
Ozgur Eker (CDCS)
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0

Letter of Credit References:

We have completed our export letter of credit consultancy services with success in regards to a letter of credit which is issued by Banque Marocaine du Commerce Extérieur on 05.Dec.2018.

The letter of credit number was ILC18A003477. Letter of credit issued in English language.

Total letter of credit amount was USD 46.620,00. The beneficiary dispatched goods in a single shipment.

All presentations have been accepted by the issuing bank on first presentation.

Documents Required:

Specific Conditions:

  • USD 19.980,00 has been paid in advance outside of the letter of credit.
  • USD 46.620,00 has been paid against shipping documents.
  • Total invoice amount was USD 66.000,00.

Our Work:

  • The exporter has supplied us the draft letter of credit.
  • We have checked the draft letter of credit and corrected the points that may create problem at the presentation period.
  • Once the beneficiary supplied us the shipment details we have prepared the commercial invoice, packing list and weight .
  • We also completed the shipping instructions for the Bill of Lading and filled out the draft version of EUR1 certificate.
  • After shipment, the beneficiary has sent us all of the documents for final evaluation.
  • The documents have been presented to the advising bank and have been checked once again to eliminate possible discrepancies.

Conclusion:

  • All presentations have been accepted by the issuing bank on first presentation.

Qatar Export Letter of Credit Consultancy

By
Ozgur Eker (CDCS)
-
0

Letter of Credit References:

We have completed our export letter of credit consultancy services with success in regards to a letter of credit which is issued by International Bank of Qatar on 07.January.2018.

The letter of credit number was ILCQAI011818937. Letter of credit issued in English language.

Total letter of credit amount was USD 617.750,00. The beneficiary shipped goods in 4 partial shipments.

The beneficiary applied us very late. At the time of our intervention, 1st shipment had been waiting at the port of discharge and demurrage and port charges had been piling up.

Consequently the beneficiary was very angry and lost its confidence to the advising bank.

After we were included in the transaction, we quickly analyzed the situation and took necessary steps so that the goods were cleared from the customs for the 1st shipment.

Afterwards we prepared documents for 2nd, 3rd and 4th shipments.

Documents belonging to the remaining shipments have been accepted by the issuing bank on first presentation.

Documents Required:

Specific Conditions:

  • The letter of credit was available with mixed payments. %50 of letter of credit had been paid in advance. %40 of letter of credit amount is payable against shipping documents and %10 of letter of credit amount is payable after installation of the machinery in Qatar.
  • Commercial invoice and certificate of origin had to be legalized by Qatar’s embassy in the exporting country.

Our Work:

  • The exporter contacted us too late around 30 days after the 1st shipment.
  • At the time of our intervention, 1st shipment had been waiting at the port of discharge and demurrage and port charges had been piling up.
  • Consequently the beneficiary was very angry, had no idea what to do and lost its confidence to the advising bank.
  • We could not checked the letter of credit in order to clear unacceptable conditions.
  • Instead we quickly analyzed the situation and took necessary steps so that the goods were cleared from the customs for the 1st shipment.
  • Payment of 1st shipment received by the exporter.
  • Afterwards we prepared documents for 2nd, 3rd and 4th shipments.
  • Documents belonging to the remaining shipments have been accepted by the issuing bank on first presentation.

Conclusion:

  • Although the exporter contacted us very late, we managed to put things in order and completed the transaction without any problem for each side.

Libya Export Letter of Credit Consultancy

By
Ozgur Eker (CDCS)
-
0

Letter of Credit References:

We have completed our export letter of credit consultancy services with success in regards to a letter of credit which is issued by Wahda Bank on 28.March.2019.

The letter of credit number was 114MIS.LC.49.075. Letter of credit issued in English language.

Total letter of credit amount was USD 20.345,00. The beneficiary shipped goods in a single shipment for full letter of credit amount. Partial shipment has not been utilized.

Documents have been accepted by the issuing bank on first presentation.

Documents Required:

  • Bill of Lading Full Set
  • Vessel Certificate 1 Original
  • Commercial Invoice 4 Originals
  • Certificate of Origin 1 Original, 1 Copy
  • Packing List 4 Originals
  • Pre-Shipment Inspection Certificate 1 Original, 2 Copies

Specific Conditions:

  • Libya has been dealing with political uncertainties for almost a decade and one of the highest risk possessing countries in the world.
  • Libyan banks demand very high discrepancy fees around 450-500 USD per presentation.
  • All shipments directed to Libya is subject to a compulsory pre-shipment inspection from one of the authorized inspection companies.
  • The letter of credit has been confirmed by a bank in beneficiary’s country.

Our Work:

  • The exporter has supplied us the actual letter of credit.
  • We have checked the letter of credit and changed the delivery term from CIF to CFR and eliminating insurance policy from the L/C.
  • Once the amendments have been received from the issuing bank, the beneficiary has started to the production and made the shipment.
  • After the beneficiary supplied us the shipment details we have prepared the commercial invoice and packing list.
  • We also completed the shipping instructions for the bill of lading document and filled out the draft version of certificate of origin.
  • We also helped the beneficiary to complete Inspection Certificate Request Form.
  • After shipment, the beneficiary has sent us all of the documents for final evaluation.
  • The documents have been presented to the confirming bank.
  • Confirming bank found one discrepancy claiming that the inspection company indicated on the inspection certificate is not exactly matching the letter of credit.

Letter of Credit : Inspection Certificate Clause:

Pre-shipment inspection certificate in one original and two copies dully issued and signed by Kfali for Inspection and Conformity

Inspection Certificate Issued by:

Kfali Inspection Company

  • Confirmation drops out and the documents have been dispatched to the issuing bank unconfirmed.
  • At the same time an amendment request have been sent to the applicant regarding the issuer of the inspection certificate.

Conclusion:

  • Documents have been accepted by the issuing bank on first presentation.
  • The issuing bank deducted enormous discrepancy fee of USD 500 from the proceeds without indicating any discrepancy information.

Algeria Export Letter of Credit Consultancy

By
Ozgur Eker (CDCS)
-
0

Letter of Credit References:

We have completed our export letter of credit consultancy services with success in regards to a letter of credit which is issued by Banque de Developpement Local on 31.Dec.2018.

The letter of credit number was INCDI000005580. Letter of credit issued in English language.

Total letter of credit amount was EUR 34.900,00. The beneficiary shipped goods in a single shipment for full letter of credit amount. Partial shipment has not been utilized.

Documents have been accepted by the issuing bank on first presentation.

Documents Required:

  • Commercial invoice in 6 originals
  • Bill of Lading (Full Set)
  • Packing list in 1 original
  • Certificate of Origin

Specific Conditions:

  • As per Algerian import regulations, the NIF number of the applicant must be mentioned on the all originals bills of lading.
  • Letter of credit issued in a simple form without containing unnecessary conditions or documentation.

Our Work:

  • The exporter has supplied us the actual letter of credit.
  • We have checked the letter of credit and determined that the latest date of shipment is too close and needs to be amended along with expiry date.
  • Once the beneficiary supplied us the shipment details we have prepared the commercial invoice and packing list. We also completed the shipping instructions for the bill of lading document and filled out the draft version of certificate of origin.
  • After shipment, the beneficiary has sent us all of the documents for final evaluation.
  • The documents have been presented to the advising bank and have been checked once again to eliminate possible discrepancies.

Conclusion:

  • Documents have been accepted by the issuing bank on first presentation.
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