from our ISBP training modules.
Basic considerations to be borne in mind for any
A documentary credit is independent of any
sale or other contract to which it may relate.
As the rules do not provide full coverage of all
the documents that may be required for presentation, an applicant and
beneficiary should determine, and agree upon, the documents that are to be
presented, the issuer, their data content and time frame for their
Any ambiguity inherent in the instruction phase
is at the responsibility and risk of the applicant. An issuing bank may be
required to provide an element of assistance to its client, at the time of
completion of the application form, and this should include guidance as to the
possible implications of articles 3, 14, 19-21, 23, 24, 28 (i) and 31.
An issuing bank may enhance the instructions of
an applicant in order that a documentary credit is issued in a form that is
deemed workable for each bank and the beneficiary. However, any changes it
makes or suggests should be with the full knowledge and agreement of the
A document to be issued and/or signed by an
applicant is often seen as being counter-productive in a documentary credit.
Such a condition should only be required with the full agreement and
understanding of the beneficiary, i.e., of the possible outcome should a
document not be issued or signed as may be expected, or that it is issued at a
time that is too late for its presentation under a documentary credit.
Abbreviations are regularly and commonly used in
international trade instruments and documentation in substitution for a word or
An abbreviation in a documentary credit allows
the use in a document of the same abbreviation, an abbreviation with a similar
meaning, or the use of the complete word in a document.
When issuing a documentary credit, and to avoid
any confusion or unnecessary refusal of documents, an issuing bank is advised
to state the complete word or phrase.
Treatment of virgules and commas
Virgules (usually referred to as a ‘slash' mark)
and commas are commonly seen in a documentary credit when describing optional
places of receipt or delivery; ports of loading or discharge; or airports of
departure or destination. They are also seen with regard to details given in
respect of the origin of the goods, or their colour, type or components, etc.
Examination of copy transport documents
When a copy of a transport document is required
for presentation in lieu of an original, it is the responsibility of the
issuing bank and applicant to ensure that a documentary credit stipulates the
terms and conditions that will apply to that document, otherwisesub-article
14 (f)will be applied due toarticles 19-25not being
Such terms and conditions should include any
requirement for naming the carrier, any required evidence of the signing
capacity and the means to determine the date of shipment.
When examining a copy transport document, a bank
is to ensure that the named place of receipt, port of loading, airport of
departure, port of discharge, airport of destination or place of delivery, as
may be indicated in the documentary credit, is not in conflict. Similarly, any
defined date of shipment, as shown on the copy transport document, is to be
within any stated latest shipment date.
Non-Beneficiary documents with more than one correction
When a correction or alteration occurs in a
non-beneficiary document, it is often a single occurrence. However, it can be
that more than one correction or alteration is made to a document.
The entity that authenticates the correction or
alteration i.e., the issuer of the document or an agent or proxy acting for the
issuer (and a Chamber of Commerce, Embassy or other similar entity when the
document is legalised, visaed or certified) has a choice as to how to indicate
- to provide a separate authentication for each
correction or alteration, or
- to provide one authentication that covers all
of the corrections or alterations.
Identification of document issuing parties
When a documentary credit requires one or more
documents to be issued by a named entity, this can be fulfilled in either of
Firstly, and the more common way, by appearing
to be issued by the named person or entity by the use of its letter head; or,
secondly, if no letter headed paper is used, when the document appears to have
been completed or signed by, or for (or on behalf of) the named person or
Handling of mathematical calculations
An area that has caused particular problems in
the past has been with regard to the handling of mathematical calculations -
whether this be in respect of individual quantities or weights of goods, or a
calculation such as unit price x the quantity or weight of one or more type of
It is important that all parties involved in
documentary credits are aware of the practice to be applied. Beneficiaries, in
particular, need to determine whether extensive data is required or not, when
the terms and conditions of the documentary credit do not impose a requirement
for detailed breakdowns of weights, unit prices, quantities, etc.
If mathematical calculations are included in a
document, banks need only determine that the stated total in respect of fields
such as amount, quantity, weight or number of packages, is not in conflict with
the documentary credit or similar details shown on any other stipulated
A more in-depth consideration of these issues can be found
in the ISBP training modules at www.tradefinance.training