What the course covers
A documentary credit replaces direct trust between buyer and seller with a bank undertaking against presentation of documents. The course works through that circuit using the UCP 600 rules of the International Chamber of Commerce, 39 articles published in 2007, together with the eUCP in its version 2.0, fourteen articles on presentation of documents in electronic form.
The course covers the role of each party: applicant, issuing bank, advising bank, confirming bank and beneficiary. It distinguishes confirmed from unconfirmed credits and examines what confirmation adds in terms of country risk and bank risk. It then works through the methods of availability: sight payment, deferred payment, acceptance and negotiation.
Presentation is the practical core. The course takes apart the usual document set, with commercial invoice, transport document, insurance policy or certificate, certificate of origin and packing list, and checks each item against the terms of the credit. From there it works through discrepancies: how they are spotted, how they are notified, what room the applicant has to waive them and what happens to rejected documents.
The last part links the credit to the sale contract. The delivery rule shapes which documents can be called for, and the option FCA 2020 provides for obtaining a bill of lading with an on-board notation exists so that an FCA sale can meet a credit that asks for that document.
Who it is for
Export and administration departments, treasury teams, corporate banking staff and freight forwarders who prepare document sets. It also suits lawyers reviewing the payment clause of an international contract.
Why it matters
A presentation is refused on the documents. A shipment date outside the period, a weight that does not match between invoice and packing list, or a description that departs from the wording of the credit will hold up payment even where the goods left in good order.
The effect is on cash. The exporter has already shipped and payment waits on the applicant accepting the discrepancy. Reading the credit as soon as it arrives and preparing documents before shipment moves that work to the point where an amendment can still be requested.
Programme
- The documentary credit circuit and the role of each bank
- Confirmed and unconfirmed credits: country risk and bank risk
- Methods of availability: sight, deferred payment, acceptance, negotiation
- Checking the document set against the terms of the credit
- Discrepancies: detection, notice, waiver and rejected documents
- Fit with the agreed Incoterms rule and the contract payment clause
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