Sample document LC:
OUR ADVICE NO.
MB-5432
ISSUING BANK REF. NO. & DATE
SBRE-777 January 26, 2001 TO UVW Exports
88 Prosperity Street East, Suite 707 Export-City and Postal Code
Dear Sirs:
number SB-87654
for account of DEF Imports, 7 Sunshine Street, Sunlight City, Import-Country
in your favor for the amount of not exceeding Twenty Five Thousand U.S. Dollars (US$25,000.00)
available by your draft(s) drawn on us
at sight for full invoice value
accompanied by the following documents:
1. Signed commercial invoice in five (5) copies indicating the buyer's Purchase Order No. DEF-101 dated January 10, 2001.
2. Packing list in five (5) copies.
3. Full set 3/3 clean on board ocean bill of lading, plus two (2) non-negotiable copies, issued to order of The Sun Bank, Sunlight City, Import-Country, notify the above accountee, marked "freight Prepaid", dated latest March 19, 2001, and showing documentary credit number.
4. Insurance policy in duplicate for 110% CIF value covering Institute Cargo Clauses (A), Institute War and Strike Clauses, evidencing that claims are payable in Import-Country.
Covering: 100 Sets 'ABC' Brand Pneumatic Tools, 1/2" drive, complete with hose and quick couplings, CIF Sunny Port
Shipment from Moonbeam Port, Export-Country to Sunny Port, Import-
Country
Partial shipment Prohibited
Transshipment Permitted
1. All documents indicating the Import License No. IP/123456 dated January 18, 2001.
2. All charges outside the Import-Country are on beneficiary's account.
Documents must be presented for payment within 15 days after the date of shipment.
Draft(s) drawn under this credit must be marked
Drawn under documentary credit No. SB-87654 of The Sun Bank, Sunlight City, Import-Country, dated January 26, 2001
We confirm this credit and hereby undertake that all drafts drawn under and in conformity with the
terms of this credit will be duly honored upon delivery of documents as specified, if presented at
this office on or before March 26, 2001
Very truly yours,
Authorized Signature
Unless otherwise expressly stated, this Credit is subject to the Uniform Customs and Practice for Documentary Credits, 1993 Revision, International Chamber of
Commerce Publication No. 500.
Letter of Credit Particulars: a) Latest Negotiation Date
The latest negotiation date is the last day of the period of time allowed by the letter of credit (L/C) for the presentation of documents and/or draft(s) to the bank. The latest negotiation date is not necessarily the L/C expiry date. In the sample letter of credit the latest negotiation date can be March 26, 2001 or 15 days after the date of shipment,
In case the L/C does not stipulate the latest negotiation, it is within 21 days after the date of issuance of the transport documents, but on or before the L/C expiry date.
b) Expiry Date and Place
The expiry date and place is the last day of validity of the credit and the place allowed by the letter of credit (L/C) for the presentation of documents and/or draft(s) for payment, acceptance or negotiation. In the sample letter of credit the expiry date is March 26,
2001 and the place for presentation of document is Export-City, which is the
beneficiary's city.
In case the validity of an L/C is stated in a period of time, for example "this credit is valid for three months" or "this credit is available for two months" or "this credit is good for one month", but does not specify the date from which the time is to run, its validity starts from the issuance date of L/C by the issuing bank. The bank normally discourages stating the L/C validity in a period of time.
In case the expiry date and/or the latest negotiation date falls on a day on which the bank is closed for reasons not including the acts of God, strikes, riots, civil commotions, lockouts, insurrections, wars or any other causes beyond the bank's control, the expiry date and/or the latest negotiation date is extended to the succeeding first day on which the bank is opened. Such extension, however, does not extend the latest date of shipment.
c) Draft(s) Drawn On
The draft(s) drawn on answers the question "Which bank or who is the drawee (the payer) of the draft?" The draft is most often drawn on the confirming bank or the issuing bank. In some cases, the draft is drawn on the applicant. In the sample letter of credit the draft is drawn on the confirming bank, which is The Moon Bank.
d) Draft(s) Drawn At
The draft(s) drawn at answers the question "The draft is drawn at what terms?" It can be a sight draft (i.e., payment on demand or on presentation) or a term draft (i.e., payment at a fixed or determinable future time). In the sample letter of credit the draft is drawn at
sight.
e) Draft(s) Drawn Under
The draft(s) drawn under answers the question "The draft is drawn under which credit and the credit is of which bank?" In the sample letter of credit, the L/C requires that the draft(s) be marked "Drawn under documentary credit No. SB-87654 of The Sun Bank, Sunlight City, Import-Country, dated January 26, 2001" (please see the completed sample
f) Latest Shipment
The latest shipment---latest date of shipment or last date for shipment---is the last day of the period of time allowed by the letter of credit (L/C) for shipment, dispatch or taking in charge. In the sample letter of credit the latest shipment date is March 19, 2001.
g) Port or Point of Origin and Port or Point of Destination
The port or point of origin is the port or place of loading, dispatch or taking in charge. The port or point of destination is the port or place of discharge or delivery. Some of the expressions that may appear in the letter of credit (L/C) indicating the origin and the destination are: "shipment from ... to ..." "dispatch from ... to ..." "carriage from ... to ..." "delivery from ... to ..." "forward from ... to ..."
"taken in charge at ... for transportation to ..."
In the sample letter of credit the origin is Moonbeam Port, Export-Country and the destination is Sunny Port, Import-Country.
3)
Commercial Invoice :
The commercial invoice is a record or evidence of transaction between the exporter and the importer. Invoice is a bill for itemized goods or services. The pre-shipment invoice is a shipment detailing the transaction.It is one of the most important documents prepared and signed by exporter with whose help other documents are prepared. The description of merchandise as given in the commercial invoice must correspond to the description in the L/C and other documents must contain the similar description are:
Specific Language Requirements in the Commercial Invoice
Certain importing countries may require that the commercial invoice and the packing list be made out in, or translated to, the language of the importing country, for example, in French for shipment to France, in Italian to Italy, and in Spanish to Mexico and Venezuela.
Declaration on Commercial Invoice
The declaration on the commercial invoice for some countries must be in a specified wording. The exporter may check the wording with the customs broker, the government external trade department, or the foreign government trade office concerned in the exporting country.
The content of a typical declaration includes a sworn statement from the exporter indicating that the goods in question are manufactured in the exporting country, and that the amount shown in the invoice is the true and correct value.
Certification and/or Legalization of Commercial Invoice
The letter of credit (L/C) from certain importing countries, in particular from the Middle East, requires the certification and/or legalization of the commercial invoice.
The certification, which usually is performed by the local Chamber of Commerce of the exporting country, is to confirm that the invoice and declaration (in the invoice) are correct. The legalization, which is done by The Consulate or The Commercial Section of the Embassy of the importing country, is to verify that the invoice is correct.
The certification and legalization are most often satisfied with a stamp or a seal on the invoice and payment of a fee. The processing time may take one week
Signature and/or stamp
The commercial invoice and packing list need not be signed, unless otherwise stipulated in the letter of credit (L/C). In practice, the original and the copy of the commercial invoice and packing list are often signed.
Description of Goods
The description of the goods in the commercial invoice must correspond with the description in the letter of credit (L/C). In all other documents, the description can be in general terms provided it is not inconsistent with the description in the L/C.
Shipping Marks & Numbers
• Quantity
If the letter of credit (L/C) does not stipulate the quantity in a stated number of units (i.e., it does not state in units such as piece, set, box, dozen, or gross), or unless the L/C stipulates that the quantity of the goods specified must not be exceeded or reduced, a tolerance of 5% more or 5% less quantity is permitted, provided the total amount does not exceed the amount of the L/C.
In the sample L/C the stated quantity is 100 Sets, thus the quantity in the invoice must be 100 Sets. If such sample L/C does not state the quantity, the UVW Exports can ship between 95 sets and 100 sets of pneumatic tools, but not over 100 sets as the total amount will exceed the L/C amount of US$25,000. If such L/C does not state the quantity and the L/C amount is US$26,250 or more, the exporter may ship between 95 and 105 sets.
If the L/C quantity is indicated using the words "about", "approximately", "circa" or similar expressions, the quantity in the invoice cannot exceed 10% more or 10% less than the quantity indicated in the L/C. For example, if the L/C quantity is "about 100 sets", the quantity in the invoice can be any quantity between 90 sets and 110 sets, provided the total amount does not exceed the amount of the L/C.
• Unit Price
If the letter of credit (L/C) unit price is indicated using the words "about", "approximately", "circa" or similar expressions, the unit price in the invoice cannot exceed 10% more or 10% less than the unit price indicated in the L/C. For example, if the L/C unit price is "about US$250", the unit price in the invoice can be any unit price between US$225 and US$275, provided the total amount does not exceed the amount of the L/C.
• Amount
Unless otherwise stipulated in the letter of credit (L/C), the amount must not exceed the amount permitted by the L/C. If the L/C amount is indicated using the words "about", "approximately", "circa" or similar expressions, the amount of the invoice cannot exceed 10% more or 10% less than the amount indicated in the L/C. For example, if the L/C amount is "approximately US$10,000", the amount of invoice can be any amount between US$9,000 and US$11,000.
Explanations:
Fields in the Preamble of the Commercial Invoice
" For account and risk of Messrs. "
Enter the complete name and address of the importer (the consignee) in the field (For account and risk of Messrs.). The title Messrs. stands for Messieurs in French meaning gentlemen. It is used to address a business firm in a formal manner, the same way the title
Mr., Mrs. or Miss is used to address a person.
" Letter of Credit No. " , " Date " and " Issuing Bank "
Referring to the sample L/C, enter "SB-87654", "January 26, 2001" and "The Sun
Bank" in the respective fields in the documents. The sample L/C does not stipulate
indicating this information in the documents except the draft(s), thus UVW Exports may choose not to enter it in the documents, but there is no harm if it is entered in the documents.
" Import Permit/License No. " and " Date "
Referring to the sample L/C, enter "IP/123456" and "January 18, 2001" in the commercial invoice and all other documents, including bill of lading and insurance policy.
" Buyer's P.O. or Contract No. " and " Date "
The letter of credit may require the documents to show the purchase order (P.O.) or contract number. Referring to the sample L/C, enter "DEF-101" and "January 10, 2001" in the respective fields in the documents.
" Buyer's Department / Store No. "
The department or store number is often required when dealing with the chain stores. It is the identification number of the store or branch of a chain store. The store number is used in the routing of goods by the chain store. It identifies the store that places the order or to which branch (of the chain store) the goods will be delivered.
" Shipment on or about "
Shipment on or about is the ETD (estimated time of departure) or the ETS (estimated
time of sailing). In practice, the date of loading on board, dispatch or taking in charge is often regarded as the ETD.
" From (Port of Loading) " and " To (Port of Discharge) "
The port of loading is the port or point of origin and the port of discharge is the port or point of destination. Referring to the sample L/C, enter "Moonbeam Port, Export-
Country" as the origin and "Sunny Port, Import-Country" as the destination in the
fields.
" Via (Tranship At) "
The via (tranship at) refers to the transhipping port or point in a transhipment. For example, if a consignment destined for landlocked Afghanistan has to tranship at Karachi, Pakistan, enter "Karachi, Pakistan" in the field.
" For Transhipment To "
For transhipment to is the final destination in the onward routing or carriage, which is
4)
Packing List :
It is a document showing the details of goods contained in individual packages, which helps customs authorities and receives in identifying the contents of specific package.It contains almost all the information provided in invoice along with details of packing like:
No. of bales or cartons Gross weight
Net weight Dimensions etc.
For the purpose of explaining other fields in the packing list, it is assumed that the pneumatic
tools in the sample L/C contain the following data:
The catalogue or item number of the pneumatic tools is A380
Each set is in an inner box and there are two boxes in an export master carton, or a total of 50 cartons for the 100 sets
Each master carton:
Net Weight (N.W.) ... 20 kgs. (44.1 lbs.) Gross Weight (G.W.) ... 23 kgs. (50.7 lbs.) Measurement (Meas.) ... 0.113 CBM (4 cft.)
61 cms. x 61 cms. x 30.5 cms.(2' x 2' x 1')
" Package No. "
The entries preferably arranged in sequence from the lowest number to the highest, that is, from package No. 1 and up. From the sample L/C, enter "C/No. 1-50" or the like in the field (Package No.), provided it is not inconsistent with the marks and numbers on the master cartons.
" Item No. " and " Description of Goods "
The description of the goods in the packing list can be in general terms, provided it is not inconsistent with the description in the L/C. From the sample L/C and data of the pneumatic tools above, entering "A380" and "'ABC' Brand Pneumatic Tools" in the fields will satisfy the requirements.
" Quantity "
It shows the total quantity within a stated range of the package number and the breakdown in each package. The stated range is C/No. 1-50, enter:
100 Sets 2 Sets/Ctn.
or
100 Sets 2 Sets @ Ctn.
or the like in the field. The / and @ used here stands for per or each.
" Weight "
It shows the total weight within a stated range of the package number and the weight of each package. The stated range is C/No. 1-50, enter:
1,150 Kgs. 23 Kgs./Ctn.
or
1,150 Kgs. 23 Kgs. @ Ctn.
or the like in the field and put a notation "Gross Weight".
As far as the carrier is concerned, the gross weight or measurement of a consignment is needed to calculate the freight. In case the goods are assessed in the importing country or exported on the net weight basis, it is necessary to show the net weight and gross weight in the packing list. The entry may appear as:
N.W. 1,000 Kgs. G.W. 1,150 Kgs.
" Measurement "
Ocean shipments are most often charged by the cubic meter (CBM or cbm). Enter:
5.65 CBM 0.113 CBM/Ctn.
in the field (Measurement). Sometimes, it is necessary to include the size or dimensions (length-width-height) of the master package. The entry may appear as:
5.65 CBM 0.113 CBM/Ctn. @ 61 x 61 x 30.5 Cms.
The @ stands for at or each.
Some carriers may calculate the freight on a cubic feet (cft. or cu. ft.) basis. In the case of an irregular shaped cargo, take the three widest dimensions that describe the smallest cubic space enclosing the cargo to determine the measurement.
" Signature and/or Stamp "
The packing list and commercial invoice need not be signed, unless otherwise stipulated in the letter of credit (L/C). In practice, the original and the copy of the packing list and commercial invoice are often signed.