Documents against Payment (D/P) flow diagram

Author: bmpc
Informative diagram on how D/P payment method works.

Documents against Payment/Bill of Exchange flow diagram

Courtesy of Wiley Publishing

Letter of Credit - Checklist and Guide for Exporters (Part 3)

When Compiling Documents for Presentation to the Bank

Ensure that:
 Documents presented in the credit are presented as separate documents
 o For example, if a packing list and weight list are required and you have a combined
packing and weight list, two original copies of this document will need to be presented
 You have the correct number of originals and/or copies of each; they carry the information called
for; the title of each is correct and it is issued by the party specified in the credit
 They do not conflict
o For example, the shipping marks, quantities/weights, transport details, references, and in
general terms the descriptions, must tally so that they clearly relate on their face to the same shipment
 The description of goods is correct
o They may be described in general terms (not conflicting with the credit) in all documents
except the invoice, where the exact contract description should be reproduced
o Contract details should preferably not be repeated in full in transport documents and some
carriers will refuse to enter more than the minimum necessary information. This may cause a discrepancy
if the information conflicts with that in the credit or other documents
 Documents are authenticated where necessary - import regulations in some countries still make it
essential to sign manually and possibly witness documents and any alterations or additions to them
 Any restrictions in the credit are catered for, for example if short form bills of lading are prohibited

Check each document to ensure that it is in order

Transport Document
 Type of transport document, e.g. sea, air, road, rail, inland waterway, multimodal, courier or postal
despatches
 The document should:
o Indicate the name of the carrier and be signed by the carrier, master (for sea shipments)
or named agent
o Indicate the goods have been dispatched, taken in charge or shipped on board (as
appropriate) at the place stated in the credit
o Indicate the place of dispatch, taken in charge, ports of loading and discharge, and/or the
final destination (as appropriate) stated in the credit
 Date of issuance - deemed to be the date of dispatch, taking in charge or shipment, unless
otherwise indicated
 Consignor - can be different from beneficiary

 Consignee - can differ from buyer

 Endorsed as may be stipulated in the credit

Insurance Document
 Correct type, e.g. a certificate or policy, and number of documents as stipulated in the credit

 Correct amount stated for insured coverage -the amount must be at least 110% of the CIF or CIP
value of the goods (UCP 600 Article 28(f)(ii))
 Same currency as the credit
 Risk covered in the credit

 Date of insurance document no later than date of shipment -unless cover takes effect from date of
shipment (UCP 600 Article 28(e))
 Endorsed, if necessary, exactly as required by the credit

Invoice
 Must not contain merchandise not called for in the credit, even if they are stated to be free of
charge
o Invoices listing no-charge goods or samples not included in the credit will be refused

 Invoice heading containing your company's name

 Made out in name of Applicant, expressed and spelt exactly as in the credit.

 Same currency as the credit

 Description of goods, including import licence or pro-forma details, price, terms of delivery, and any
no-charge goods or samples, worded and spelt exactly as set out in the credit
 Clauses or statements word for word identically spelt and the use of any foreign language specified

 Value not more than the credit permits and the same as any bill of exchange -under certain
conditions you may be able to underdraw by up to 5% (see below)
 Quantity: a ± 5% tolerance is sometimes permitted. Alternatively, the credit may permit a specific
variation, e.g. an 'about' amount is equivalent to a ± 10% tolerance (see Article 30(a) and (b) of UCP 600)
 Produced, signed and authenticated as necessary in a way allowed for by UCP and in the credit
(UCP 600 Article 17)

Other Documents
 Correct issuer

 Correct wording or content -avoid unnecessary wording which might confuse the bank checker

 Clearly relate to the goods invoiced

 Tele-transmissions to the Applicant and/or insurer correctly set out, addressed and dated

 Certificates to cover any other credit requirement only where a specific certificate is called for (note
UCP 600 Article 14(h))
 Signed, authenticated or endorsed as necessary

 Do not enclose any documents not required by the credit

Bills of Exchange, if any

 Date

 Signature identifies signatory

 Endorsement

 Clause

 Letters of Credit reference number

 Term - sight or usance dates

 Amount and currency

 Words and figures tally

 Drawn on correct party

 Correct document e.g. "sole" or "1st and 2nd of exchange"

Covering note/letter to Nominated bank

 List the documents, preferably in the same order as they appear in the credit
o Give the name, address, telephone, email and fax details of the correct contact in your
office and back-up contact in case of absence
o Indicate how to pay - cheque or direct to **** (in which case show bank, branch, sort code,
account name and ****)
o If you have a forward currency contract for a letter of credit payable in foreign currency,
provide contract details

Present documents to the bank without delay and within the expiry date

and transport document time limit

 All documents must be completed and delivered to the bank by close of business on the expiry
date and within the presentation of transport documentation time limit, whichever is earlier; or, if the bank is
normally closed on that day, on the next business day
o Obtain a time/dated receipt where appropriate

 Check the transport document presentation time limit very carefully: presentation must be
completed within 21 days of the date of shipment, unless the credit specifies a different period -this may well
be earlier than the expiry date of the credit itself or any specified "last date for presentation/negotiation"
(Article 14 of UCP 600)
 The import licence expiry date is equally important and it may not be possible to extend this

 If any discrepancies are found and they can be put right, the corrected documents must still be
presented to the bank by the original expiry date and within the time permitted from date of shipment
evidenced by the transport document
 Check and send any specified documents to the Applicant if required to do so under the terms of
the credit, enclosing a copy of your documents schedule as sent with your credit documents when making
presentation to the bank for payment

Source: www.sitpro.org.uk