Bill of Exchange, Invoice and Consular Invoice, Bill of lading/Truck Receipt/Air Way Bill etc, Certificate of Origin, GSP certificate and Other Documents in Foreign Trade

Bill of Exchange, Invoice and Consular Invoice, Bill of lading/Truck Receipt/Air Way Bill etc, Certificate of Origin, GSP certificate and Other Documents in Foreign Trade

Md.Saiful Islam,CDCS

SAVP

Centralized Trade processing Unit

Bill of Exchange, Invoice and consular Invoice, Certificate of Origin, GSP certificate and other Documents in foreign trade.

Bill of exchange

 “A bill of exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay on demand or at fixed or determinable future time a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument”.

 There are usually three parties to a bill of exchange drawer, acceptor or drawee and payee. Drawer himself may be the payee.

Bills in sets :

(i) A bill of exchange may be drawn in parts, each part being numbered and containing a provision that it shall continue payable only so long as the others remain unpaid. All parts make one bill and the entire bill is extinguished, when payment is made on one part- the other parts will become inoperative.

(ii) The drawer should sign and deliver all the parts but the acceptance is to be conveyed only on one of the parts. In case a person accepts or endorses different parts of the bill in favour of different persons, he and the subsequent endorsers of each part are liable on such part as if it were a separate bill.

(iii) As between holders in due course of the different parts of the same bill, he who first acquired title to anyone part is entitled to the other parts and is also entitled to claim the money represented by bill .

Time and Demand Bill

Time bill/Usance bill : A bill payable after a fixed time or determinable future time is termed as a time bill/Usance bill.

Demand bill/Sight Bill : A bill payable at sight or on demand is termed as a demand bill/Sight bill.

Basic requirement of Bill of exchange/ draft as per ISBP

B1) a. A draft, when required, is to be drawn on the bank stated in the credit.

b. Banks only examine a draft to the extent described in paragraphs B2)-B17).

Tenor

B2) a. The tenor stated on a draft is to be in accordance with the terms of the credit.

b. When a credit requires a draft to be drawn at a tenor other than sight or a certain period after sight, it must be possible to establish the maturity date from the data in the draft itself. For example, when a credit calls for drafts at a tenor 60 days after the bill of lading date, and when the date of the bill of lading is 14 May 2013, the tenor is to be indicated on the draft in one of the following ways:

i) “60 days after bill of lading date 14 May 2013”, or

ii) “60 days after 14 May 2013”, or

iii) “60 days after bill of lading date” and elsewhere on the face of the draft state “bill of lading date 14 May 2013”, or

iv) “60 days date” on a draft dated the same day as the date of the bill of lading, or

v) “13 July 2013”, i.e., 60 days after the bill of lading date.

c. When the tenor refers to, for example, 60 days after the bill of lading date, the on  board date is deemed to be the bill of lading date even when the on board date is prior to or later than the date of issuance of the bill of lading.

d. The words “from” and “after” when used to determine maturity dates of drafts signify that the calculation of the maturity date commences the day following the date of the document, shipment or the date of an event stipulated in the credit, for example, 10 days after or from 4 May is 14 May.

i) When a credit requires a bill of lading and drafts are to be drawn, for example, at 60 days after or from the bill of lading date and a bill of lading is presented evidencing unloading and reloading of the goods from one vessel to another, and showing more than one dated on board notation and indicating that each shipment was effected from a port within a permitted geographical area or range of ports, the earliest of these dates is to be used for the calculation of the maturity date. For example, a credit requires shipment from any European port, and the bill of lading evidences on board vessel “A” from Dublin on 14 May, with transshipment effected on board vessel “B” from Rotterdam on 16 May. The draft should reflect 60 days after the earliest on board date in a European port, i.e., 14 May.

ii) When a credit requires a bill of lading and drafts are to be drawn, for example, at 60 days after or from the bill of lading date, and a bill of lading is presented evidencing shipment of goods on the same vessel from more than one port within a permitted geographical area or range of ports, and shows more than one dated on board notation, the latest of these dates is to be used for the calculation of the maturity date. For example, a credit requires shipment from any European port, and the bill of lading evidences part of the goods loaded on board vessel “A” from Dublin on 14 May and the remainder on board the same vessel from Rotterdam on 16 May. The draft should reflect 60 days after the latest on board date, i.e., 16 May.

iii) When a credit requires a bill of lading and drafts are to be drawn, for example, at 60 days after or from the bill of lading date, and more than one set of bills of lading is presented under one draft, the on board date of the latest bill of lading will be used for the calculation of the maturity date.

B3) While the examples in paragraphs B2) (e) (i‐iii) refer to bill of lading dates, the same principles apply to any basis for determining a maturity date.

Maturity date

B4) When a draft states a maturity date by using an actual date, that date is to reflect the terms of the credit.

B5) For drafts drawn, for example, “at 60 days sight”, the maturity date is established as follows:

a. in the case of a complying presentation, the maturity date will be 60 days after the day of presentation to the bank on which the draft is drawn, i.e., the issuing bank, confirming bank or a nominated bank that agrees to act on its nomination (“drawee bank”).

b. in the case of a non‐complying presentation:

i) when such drawee bank has not provided a notice of refusal, the maturity date will be 60 days after the day of presentation to it;

ii) when the drawee bank is the issuing bank and it has provided a notice of refusal at the latest 60 days after the date the issuing bank accepts the waiver of the applicant;

iii) when the drawee bank is a bank other than the issuing bank and it has provided a notice of refusal, at the latest 60 days after the date of the acceptance advice of the issuing bank. When such drawee bank does not agree to act on the acceptance advice of the issuing bank, the undertaking to honour on the due date is that of the issuing bank.

c. The drawee bank is to advise or confirm the maturity date to the presenter.

B6) The method of calculation of tenor and maturity dates, as shown above, also applies to a credit available by deferred payment or, in some cases, negotiation, i.e., when there is no requirement for a draft to be presented by the beneficiary.

Banking days, grace days, delays in remittance

B7) Payment is to be made in immediately available funds on the due date at the place where the draft or documents are payable, provided that such due date is a banking day in that place. When the due date is a non‐banking day, payment is due on the first banking day following the due date. Delays in the remittance of funds, for example grace days, the time it takes to remit funds, etc., are not to be in addition to the stated or agreed due date as defined by the draft or documents.

Drawing and signing

B8) a. A draft is to be drawn and signed by the beneficiary and to indicate a date of issuance.

b. When the beneficiary or second beneficiary has changed its name, and the credit mentions the former name, a draft may be drawn in the name of the new entity provided that it indicates“formerly known as (name of the beneficiary or second beneficiary)” or words of similar effect.

B9) When a credit indicates the drawee of a draft by only stating the SWIFT address of a bank, the draft may show the drawee with the same details or the full name of the bank.

B10) When a credit is available by negotiation with a nominated bank or any bank, the draft is to be drawn on a bank other than the nominated bank.

B11) When a credit is available by acceptance with any bank, the draft is to be drawn on the bank that agrees to accept the draft and is thereby willing to act on its nomination.

B12) When a credit is available by acceptance with:

a. a nominated bank or any bank, and the draft is to be drawn on that nominated bank (which is not a confirming bank), and it decides not to act on its nomination, the beneficiary may choose to:

i) draw the draft on the confirming bank, if any, or request that the presentation be forwarded to the confirming bank in the form as presented;

ii) present the documents to another bank that agrees to accept a draft drawn on it and thereby act on its nomination (applicable only when the credit is available with any bank); or

iii) request that the presentation be forwarded to the issuing bank in the form as presented with or without a draft drawn on the issuing bank.

b. a confirming bank, and the draft is to be drawn on that confirming bank and the presentation is non‐complying, and it decides not to reinstate its confirmation, the beneficiary may request that the presentation be forwarded to the issuing bank in the form as presented, with or without a draft drawn on the issuing bank.

Amounts

B13) A draft is to be drawn for the amount demanded under the presentation

B14) The amount in words is to accurately reflect the amount in figures when both are shown, and indicate the currency as stated in the credit. When the amount in words and figures are in conflict, the amount in words is to be examined as the amount demanded.

Endorsement

B15) A draft is to be endorsed, if necessary.

Correction and alteration (“correction”)

B16) Any correction of data on a draft is to appear to have been authenticated with the addition of the signature or initials of the beneficiary.

B17) When no correction of data is allowed in a draft, an issuing bank should have included a suitable stipulation in its credit.

Drafts drawn on the applicant

B18) a. A credit must not be issued available by a draft drawn on the applicant.

b. However, when a credit requires the presentation of a draft drawn on the applicant as one of the required documents, it is to be examined only to the extent expressly stated in the credit, otherwise according to UCP 600 sub‐article 14 (f).

Commercial invoice:

A commercial invoice is a document records a transaction between the seller and the buyer and used in trade. It is a declaration by the seller of a sale. Commercial invoices are normally prepared by sellers/beneficiary and made out in the name of buyer/applicant .It shows the description of goods, service or performance and value of merchandise.

Commercial invoice as per UCPDC 600

 UCP says regarding Commercial Invoice

a. A commercial invoice:

i. must appear to have been issued by the beneficiary (except as provided in article 38);

ii. must be made out in the name of the applicant (except as provided in sub-article 38 (g));

iii. must be made out in the same currency as the credit; and

iv. need not be signed.

b. A nominated bank acting on its nomination, a confirming bank, if any, or the issuing bank may accept a commercial invoice issued for an amount in excess of the amount permitted by the credit, and its decision will be binding upon all parties, provided the bank in question has not honoured or negotiated for an amount in excess of that permitted by the credit.

c. The description of the goods, services or performance in a commercial invoice must correspond with that appearing in the credit.

ISBP says regarding commercial invoice

C1) a. When a credit requires presentation of an “invoice” without further description, this will be satisfied by the presentation of any type of invoice (commercial invoice, customs invoice, tax invoice, final invoice, consular invoice, etc.). However, an invoice is not to be identified as “provisional”, “pro‐forma” or the like.

b. When a credit requires presentation of a “commercial invoice”, this will also be satisfied by the presentation of a document titled “invoice”, even when such document contains a statement that it has been issued for tax purposes

Issuer of an invoice

C2) a. An invoice is to appear to have been issued by the beneficiary or, in the case of a transferred credit, the second beneficiary.

b. When the beneficiary or second beneficiary has changed its name and the credit mentions the former name, an invoice may be issued in the name of the new entity provided that it indicates “formerly known as (name of the beneficiary or second beneficiary)” or words of similar effect.

Description of the goods, services or performance and other general issues related to invoices

C3) The description of the goods, services or performance shown on the invoice is to correspond with the description shown in the credit. There is no requirement for a mirror image. For example, details of the goods may be stated in a number of areas within the invoice which, when read together, represent a description of the goods corresponding to that in the credit.

C4) The description of goods, services or performance on an invoice is to reflect what has actually been shipped, delivered or provided. For example, when the goods description in the credit indicates a requirement for shipment of “10 trucks and 5 tractors”, and only 4 trucks have been shipped, an invoicemay indicate shipment of only 4 trucks provided that the credit did not prohibit partial shipment. An invoice indicating what has actually been shipped (4 trucks) may also contain the description of the goods stated in the credit, i.e., 10 trucks and 5 tractors.

C5) An invoice showing a description of the goods, services or performance that corresponds with that in the credit may also indicate additional data in respect of the goods, services or performance provided that they do not appear to refer to a different nature, classification or category of the goods, services or performance.

For example, when a credit requires shipment of “Suede Shoes”, but the invoice describes the goods as “Imitation Suede Shoes”, or when the credit requires “Hydraulic Drilling Rig”, but the invoice describes the goods as “Second Hand Hydraulic Drilling Rig”, these descriptions would represent a change in nature, classification or category of the goods.

C6) An invoice is to indicate:

a. the value of the goods shipped or delivered, or services or performance provided.

b. unit price(s), when stated in the credit.

c. the same currency as that shown in the credit.

d. any discount or deduction required by the credit.

C7) An invoice may indicate a deduction covering advance payment, discount, etc., that is not stated in the credit.

C8) When a trade term is stated as part of the goods description in the credit, an invoice is to indicate that trade term, and when the source of the trade term is stated, the same source is to be indicated. For example, a trade term indicated in a credit as “CIF Singapore Incoterms 2010” is not to be indicated on an invoice as “CIF Singapore” or “CIF Singapore Incoterms”. However, when a trade term is stated in the credit as “CIF Singapore” or “CIF Singapore Incoterms”, it may also be indicated on an invoice as “CIF Singapore Incoterms 2010” or any other revision.

C9) Additional charges and costs, such as those related to documentation, freight or insurance costs, are to be included within the value shown against the stated trade term on the invoice.

C10) An invoice need not be signed or dated.

C11) Any total quantity of goods and their weight or measurement shown on the invoice is not to conflict with the same data appearing on other documents.

C12) An invoice is not to indicate:

a. Over‐shipment (except as provided in UCP 600 sub‐article 30 (b)), or

b. goods, services or performance not called for in the credit. This applies even when the invoice includes additional quantities of goods, services or performance as required by the credit or samples and advertising material and are stated to be free of charge.

C13) The quantity of goods required in the credit may be indicated on an invoice within a tolerance of +/P5%. A variance of up to +5% in the quantity of the goods does not allow the amount demanded under the presentation to exceed the amount of the credit. The tolerance of +/P5% in the quantity of the goods will not apply when:

a. a credit states that the quantity is not to be exceeded or reduced; or

b. a credit states the quantity in terms of a stipulated number of packing units or individual items.

C14) When no quantity of goods is stated in the credit, and partial shipments are prohibited, an invoice issued for an amount up to 5% less than the credit amount will be considered to cover the full quantity and not a partial shipment.

Instalment drawings or shipments

C15) a. i) When a drawing or shipment by installments within given periods is stipulated in the credit, and any instalment is not drawn or shipped within the period allowed for that instalment, the credit ceases to be available for that and any subsequent instalment. Given periods are a sequence of dates or timelines that determine a start and end date for each instalment. For example, a credit requiring shipment of 100 cars in March and 100 cars in April is an example of two periods of time that start on 1 March and 1 April and end on 31 March and 30 April respectively.

ii) When partial drawings or shipments are allowed, any number of drawings or shipments is permitted within each instalment.        

b. When a credit indicates a drawing or shipment schedule by only indicating a number of latest dates, and not given periods (as referred to in paragraph C15) (a) (i):

i) this is not an instalment schedule as envisaged by UCP 600, and article 32 will not apply.

The presentation is to otherwise comply with any instructions in respect of the drawing or shipment schedule and UCP 600 article 31;

ii) when partial drawings or shipments are allowed, any number of drawings or shipments is permitted on or before each latest date for a drawing or shipment to occur.

ICC opinion and UCP regarding Invioce

Under International Standard Banking Practice, It is expected that an invoice will mention the name and address of the applicant. However, an invoice that only quotes the name of the applicant, without any address, would be acceptable.(ICC opinion)

 When the addresses of the beneficiary and the applicant appear in any stipulated document, they need not be the same as those stated in the  credit or in any other stipulated document, but must be within the same country as the respective addresses mentioned in the credit.( 14(j))

In some countries, due to their exchange control requirements, the invoice may have to show a local currency equivalent. If the invoice is made out in a local currency showing an equivalent amount in the currency of the credit, the invoice will be deemed to be discrepant. However, it will be acceptable if the invoice is made out in the same currency as the credit and also shows a local currency equivalent. UCP600 DRAFTING GROUP’S COMMENT

UCP600 Sub-article 18(b) doesn’t cover invoices prepared exceeding credit values due to over shipment. Over shipment is not allowed in UCP and is always treated as a reason for refusal.

 UCP600 Sub-article 18(b) covers the invoices prepared exceeding credit values due to reasons like increase of price of the goods after issuance of the credit, advance payments not covered by the credits etc.

Consular Invoice: An invoice covering a shipment of goods certified by the consul of the importing country resident in the exporting country. The invoice is used by customs officials of the country to verify the value, quantity and nature of the merchandise imported to determine the import duty. In addition, the export price may be examined to ensure that dumping is not taking place.

CERTIFICATE OF ORIGIN

Certificate of origin: Certificate of origin is a signed document that appears to relate to the invoiced goods and certifies their origin.

ISBP says regarding Certificate of origin-

Basic requirement and fulfilling its function         

L1) When a credit requires the presentation of a certificate of origin, this will be satisfied by the presentation of a signed document that appears to relate to the invoiced goods and certifies their origin.

L2) When a credit requires the presentation of a specific form of certificate of origin such as a GSP Form A, only a document in that specific form is to be presented.

Issuer of a certificate of origin.

 L3) a. A certificate of origin is to be issued by the entity stated in the credit.

b. When a credit does not indicate the name of an issuer, any entity may issue a certificate of origin.

c. i) When a credit requires the presentation of a certificate of origin issued by the beneficiary, the exporter or the manufacturer, this condition will also be satisfied by the presentation of a certificate of origin issued by a Chamber of Commerce or the like, such as, but not limited to, Chamber of Industry, Association of Industry, Economic Chamber, Customs Authorities and Department of Trade or the like, provided it indicates the beneficiary, the exporter or the manufacturer as the case may be.

ii) When a credit requires the presentation of a certificate of origin issued by a Chamber of Commerce, this condition will also be satisfied by the presentation of a certificate of origin issued by a Chamber of Industry, Association of Industry, Economic Chamber, Customs Authorities and Department of Trade or the like.

Content of a certificate of origin

L4) A certificate of origin is to appear to relate to the invoiced goods, for example, by:

a. a goods description that corresponds to that in the credit or a description shown in general terms not in conflict with the goods description in the credit; or

b. referring to a goods description appearing in another stipulated document or in a document that is attached to, and forming an integral part of, the certificate of origin.

L5) Consignee information, when shown, is not to conflict with the consignee information in the transport document. However, when a credit requires a transport document to be issued “to order”, “to the order of shipper”, “to order of issuing bank”, “to order of nominated bank (or negotiating bank)” or “consigned to issuing bank”, a certificate of origin may show the consignee as any entity named in the credit except the beneficiary. When a credit has been transferred, the first beneficiary may be stated to be the consignee.

L6) A certificate of origin may indicate as the consignor or exporter an entity other than the beneficiary of the credit or the shipper as shown on any other stipulated document.

L7) When a credit indicates the origin of the goods without stipulating a requirement for the presentation of a certificate of origin, any reference to the origin on a stipulated document is not to conflict with the stated origin. For example, when a credit indicates “origin of the goods: Germany” without requiring the presentation of a certificate of origin, a statement on any stipulated document indicating a different origin of the goods is to be considered a conflict of data.

L8) A certificate of origin may indicate a different invoice number, invoice date and shipment routing to that indicated on one or more other stipulated documents, provided the exporter or consignor shown on the certificate of origin is not the beneficiary.

Guidelines for foreign exchange transaction says -

All LCs/similar arrangements must specify submission of signed invoices and certificates of origin. Before delivering the import documents to the importers, the AD should invariably endorse on the invoices accompanying the bills the amount both in figures and words that they have remitted from Bangladesh. The endorsement should be under the seal and signature of the ADs.In case of payment on deferred/usance basis, the amount for which the bill has been accepted should be endorsed in the invoices.