Summary of Major Issues in LC Transactions
Check List for Issuing/Accepting L/C
• Quality of Issuing Bank
• Method of Payment: Sight or Deferred Basis
• Transport Documents
• Other Documents
• Documents: Banks deal in documents not in goods, services or performance
• Should not refer to underlying contract
• Timing: UCP norm is max. 21 days after shipment date for presentation of
documents
Responsibilities and Obligations of Banks
• Irrevocable unless otherwise mentioned
• Issuing Bank: Prime obligation
• Advising Bank: Only obligation to authenticate the credit and passing it on promptly
to beneficiary
• Confirming Bank: takes over payment responsibilities of the issuing bank as far as the
beneficiary is concerned
• Reimbursing Bank: Responsibility of Issuing Bank to provide proper reimbursement
instructions
• Applicability of Force Majeure clause limiting banks’ liability on account of Acts of
God, riots, etc.
• Banks have five banking days to examine documents after receipt of documents
• Banks will examine documents with reasonable care
• Documents should be consistent with each other and complete
• Documents should conform with the terms of the credit
• Documents should comply with the provisions of UCP
Common Defects in Documentation
Commonly found discrepancies between the letter of credit and supporting documents
include:
• Letter of Credit has expired prior to presentation of draft.
• Bill of Lading evidences delivery prior to or after the date range stated in the credit.
• Stale dated documents.
• Changes included in the invoice not authorized in the credit.
• Inconsistent description of goods.
• Insurance document errors.
Check List for Issuing/Accepting L/C
• Quality of Issuing Bank
• Method of Payment: Sight or Deferred Basis
• Transport Documents
• Other Documents
• Documents: Banks deal in documents not in goods, services or performance
• Should not refer to underlying contract
• Timing: UCP norm is max. 21 days after shipment date for presentation of
documents
Responsibilities and Obligations of Banks
• Irrevocable unless otherwise mentioned
• Issuing Bank: Prime obligation
• Advising Bank: Only obligation to authenticate the credit and passing it on promptly
to beneficiary
• Confirming Bank: takes over payment responsibilities of the issuing bank as far as the
beneficiary is concerned
• Reimbursing Bank: Responsibility of Issuing Bank to provide proper reimbursement
instructions
• Applicability of Force Majeure clause limiting banks’ liability on account of Acts of
God, riots, etc.
• Banks have five banking days to examine documents after receipt of documents
• Banks will examine documents with reasonable care
• Documents should be consistent with each other and complete
• Documents should conform with the terms of the credit
• Documents should comply with the provisions of UCP
Common Defects in Documentation
Commonly found discrepancies between the letter of credit and supporting documents
include:
• Letter of Credit has expired prior to presentation of draft.
• Bill of Lading evidences delivery prior to or after the date range stated in the credit.
• Stale dated documents.
• Changes included in the invoice not authorized in the credit.
• Inconsistent description of goods.
• Insurance document errors.
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