Letter Of Credit Audit Process In International Trade

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The most commonly used method of payment is characterized by the fact that the beneficiary (usually the exporter) assumes the first payment obligation on the premise that the relevant documents are in conformity with the stipulations of the letter of credit, and its nature is bank credit.

It should be said that the payment by L / C is safe and efficient when the terms of the L / C are met.

However, we must pay special attention to the letter of credit payment method, which emphasizes the principle of "strict compliance" which is consistent with the documents. If the documents provided by the beneficiary (usually the exporter) are mistaken, it will not only generate additional costs, but also be refused by the issuing bank, which will bring great risks to the security and timely collection of foreign exchange.

To this end, according to the relevant provisions of the general rules of interpretation for documentary credits, No. 500th of the International Chamber of Commerce published by the International Chamber of Commerce, in conjunction with international trade practice, the guide for the examination of letters of credit is specially designed to help beneficiaries of letters of credit in advance to check in accordance with the following clauses, so as to avoid unnecessary expenses and risks in the future.

Therefore, we should carefully check the relevant contracts carefully on the day of receipt of the letter of credit, so that we can detect errors early and take corresponding remedial measures.

It should be noted that one of the following circumstances is not an effective payment guarantee or that the payment guarantee is defective.

This letter of credit can be revoked or changed at any time without notice to the beneficiary or without the consent of the beneficiary. It should be said that there is no guarantee for payment to the beneficiary, and such letters of credit are generally not acceptable.

If there is no indication that the letter of credit can be revoked, according to UCP500, it should be understood that it cannot be revoked.

The letter of credit has not entered into force.

A valid Letter of credit; such as: "it will take effect after obtaining the import licence".

The letter of credit is not in conformity with the pledge.

Letter of credit is brief or advance notice;

A letter of credit sent directly by an issuer;

Application for opening a letter of credit provided by the applicant;

Is the payment time of the L / C consistent with the relevant contract stipulations?

In this regard, we should check whether such payment time is in line with the requirements of the contract or your company.

The letter of credit expires abroad.

Stipulate that the letter of credit expires abroad, and the relevant documents must be sent abroad. Because we can not grasp the time required for the arrival of foreign documents by the documents, and it is easy to delay or lose, there is a certain risk. Usually we require payment in domestic documents. Payment must be made in advance.

The shipping documents stipulated in the L / C will form a discrepancy, and the bank has the right not to pay.

The time between actual loading and time of presentation is too short.

The letter of Credit stipulates the time and quantity of shipment in batches. We should pay attention to whether or not it can be done. Otherwise, any batch of unscheduled delivery will be invalid after every period.

Check whether documents can be made during the presentation period stipulated in the letter of credit.

The date of presentation to the bank is not later than a few days after the date of the bill of lading, if the deadline or documents are issued.

The bank has the right not to pay.

The time required for inland pportation or port collection.

Carry out necessary inspection, such as the time required for statutory commodity inspection or customer inspection.

The time required to apply for export licence /FA certificate of origin (if necessary).

The time required for customs inspection.

Shipping schedule.

The time required to certify or issue relevant certificates to the chamber of Commerce and / or consulates, if necessary.

Apply for inspection certificates such as SGS inspection report /OMIC LETTER or other inspection reports such as customer identification.

The time required to manufacture, collate and audit documents stipulated in the letter of credit.

The time required for the receipt of the documents to the bank includes the time when the documents are sent to the bank for examination and found to be returned by mistake.

Check whether the contents of the letter of credit are complete.

If the letter of credit is pmitted by telex or telegraph to the advising bank, that is, "telecommunication service", the content of the message should be verified.

Whether it is complete, if the message is not specified, it is stated that it is based on the International Chamber of Commerce serial number 500th, "merchandiser".

The general rule of interpretation of letters of credit ", the message can be regarded as a valid Letter of credit.

It is safe and reliable to check the letter of credit.

A letter of credit is generally notified to the beneficiary through the notification / confirming bank in the country or region where the beneficiary is located.

The letter of credit notification in this way is safer, because the notification bank is responsible for the authenticity of the letter of credit in accordance with the relevant provisions of the general rules for the uniform practice of documentary credits, No. 500th of the International Chamber of Commerce series.

The letter of credit is sent from a local address asking your unit to send the shipping documents overseas, and your unit does not know the bank they appointed.

For the above situation, we should first check through the bank.

The main contents are:

The amount of the letter of credit should be consistent with the prior consultation.

The unit price and the gross value of the letter of credit must be accurate, capitalized and consistent in content.

If there is a certain degree of expansion in quantity, the letter of credit should also provide for a certain extent when payment is allowed.

If the word "approximate" is used before the amount, it means allowing the amount to have a 10% expansion.

Check whether currency is correct.

For example, the currency stipulated in the contract is "pound" and the letter of credit uses "US dollar".