documentations and forms banking 2
TRANSCRIPT
Documentations and Forms
Documents Required
with Letters of CreditIN AS MUCH AS THE LETTER OF CREDIT IS A CONTRACTUAL
OBLIGATION AND SINCE THE EXPORTER (BENEFICIARY) MUST MEET
THE CONDITIONS SPECIFIED THEREIN, THE FOLLOWING DOCUMENTS
ARE NORMALLY REQUIRED TO ACCOMPANY LETTERS OF CREDIT.
Commercial Invoice
The commercial invoice describes the
merchandise, the identifying marks for
shipment, the unit price and the total
amount, and such other details.
Insurance Certificate
This is a certification by an insurance
company to the effect that the goods are
insured in accordance with the terms of
sale.
Consular Invoice
This is similar to the commercial invoice
except that it is issued by consular
establishments.
Forwarding Receipts
These receipts would indicate the position of the goods
for shipment. These may be composed of the bills of
lading as evidences that the merchandise is already in
the hands of the transporter for shipment. The bill of
lading may evidence shipment by mail, by air cargo, by
express or freight, and most often by ship. They may
also either be “on board” or “endorsed” bills of lading.
Export License
A license is issued when the exports
are restricted or by quotas.
Import License
This is similar to the export license,
except that it would indicate import
controls perhaps through a system of
priorities.
Exchange License
When there are restrictions in the
movement of foreign exchange, such
license would be necessary to
accompany the letter of credit.
Acceptance Credit
Acceptance Credit
Banker’s acceptances are also popular, if not more
desirable sometimes, than letters of credit. These are
also used for financing imports and exports. It might
do well to look into the differences between the two
types of credit.
Acceptance Credit
An acceptance is the annotating of a bank’s or a
merchant’s acquiescence to the performance of the
obligation usually the payment of a duly accepted
draft. When a bank, a trust company, or a person
authorized to do so accepts the obligation – it is
termed a banker’s acceptance; and when a merchant
does the same, it is termed as trade acceptance.
Acceptance Credit
Acceptances are used widely in trade transactions and
they represent a means by which the seller may
immediately obtain cash although he sells his goods
ion credit. The underlying principle is much the same
as the letter of credit, which is the substitution of the
bank’s credit. But, where the substitution is for the
buyer in the letter of credit, in an acceptance, the
credit substituted is that of the seller.
Acceptance Credit
Acceptance also strengthens the position of the holder
or a time draft because he is assured that the
acceptor will honor the same at maturity. Since the
time element is in effect advanced due to the
acceptance being negotiated prior to maturity, it
benefits the persons engaged in arbitrage and foreign
exchange.
Bank’s Position Before and After
Acceptance
In assuming the obligation to honor the drafts at
maturity, the banks add to the acceptability of the
draft or bill of exchange.
The most fundamental distinction between the
position of the bank as an issuer of a letter of credit
and the bank as an acceptor of a draft drawn under
the terms of a letter of credit is that the letter of credit
is not negotiated whereas the acceptance is fully
negotiable.
There might be some exceptions to permit the
negotiability of the letter of credit but in an
acceptance, it becomes not only implied but effective.
The letter of credit partakes of the nature of the
contractual relationship between the bank and the
person to whom it is directed. For this reason, there
might still be room for interpretation.
An acceptance, on the other hand, is a negotiable
instrument, which in the hands of a holder in due
course, is precisely in the same category as a
promissory note which has been negotiated. In such a
case, there seems to be no room for interpretation on
avoidance of the liability.
Creation of Acceptance Credit
As in all cases regarding credit transactions, the
Bangko Sentral has its own regulations as far as
the “power to accept” by the banks is concerned.
Such limitation is contained in the New Central
Bank Act.
Some of the most common sources of drafts for acceptance are as follows:
1. Importation and exportation of goods;
2. Domestic shipment of goods;
3. Drafts secured by documents conveying or securing titles to readily marketable staples; and
4. Drafts drawn by foreign banks or bankers for the purpose of furnishing dollar exchange. The draft, of course, is either “time date” or “time sight” bills.
The Trust Receipt
The Trust Receipt
One of the most important documents used in
connection with letter of credit financing is the trust
receipt. This is availed of when the buyer or importer
is momentarily out of cash and arranges to have the
goods released under trust receipt. There is, therefore,
created a fiduciary relationship.
The Trust Receipt
The title of the property is retained by the bank and
the buyer is allowed to dispose of the goods. However,
the buyer obligates himself to turn over the proceeds
of sale to the bank.
Upon full payment of the goods, the importer is
released from his liability under trust receipt.
BSP’s Current Policies
on Letter of CreditIN LINE WITH SECTION 8 OF THE BANGKO SENTRAL’S CIRCULAR
NO. 1389, AS AMENDED, SALE OF FOREIGN EXCHANGE FOR TRADE
TRANSACTIONS MUST BE SUPPORTED BY THE FOLLOWING
MINIMUM DOCUMENTARY REQUIREMENTS
1. Importation under Sight L/C (Reimbursing bank debits the account of the local banks on negotiable date):
a. copy of import L/C;
b. original transmittal letter of foreign negotiating bank to local bank covering the import documents;
c. telex from negotiating bank of cable negotiation done;
d. proof of debit to the local bank’s account abroad;
e. copy of original commercial invoice;
f. copy of original first bill of lading; and
g. copy of report to BSP on L/C opening and L/C negotiation
2. Importation under Sight L/C but with documentary discrepancies, which are sent on collection basis (local bank remits payment to the negotiating bank after obtaining the client’s conforme to the discrepancies.):
a. copy of the import L/C;
b. original transmittal letter of foreign negotiating bank to local bank covering the import documents;
c. copy of authenticated/tested message of outgoing remittance;
d. copy of original commercial invoice;
e. copy of original first bill of lading;
f. copy of report to BSP on L/C opening and L/C negotiation; and
g. proof of debit to the local bank’s account abroad
3. Importation under Usance L/C:
a. copy of import L/C;
b. original transmittal letter of foreign negotiating bank to local bank covering the import documents;
c. copy of the accepted draft;
d. copy of original commercial invoice;
e. copy of original first bill of lading;
f. copy of authenticated/tested message of outgoing remittance;
g. proof of debit to the local bank’s account abroad;
h. copy of report to BSP on L/C opening and L/C negotiation
4. Importations under OA/DA:
a. for DA – accepted draft;
b. copy of original commercial invoice;
c. copy of original first bill of lading;
d. copy of BSP registration of OA/DA;
e. original transmittal letter of foreign bank to local bank covering the import documents
for DA transactions;
f. copy of report to BSP on OA/DA transactions booked;
g. copy of authenticated/tested message of outgoing remittance; and
h. proof of debit to the local bank’s account abroad
5. Importations under DP:
a. original transmittal letter of foreign collecting bank to local bank covering the import documents;
b. copy of original commercial invoice;
c. copy of original first bill of lading;
d. copy of authenticated/tested message of outgoing remittance; and
e. proof of debit to the local bank’s account abroad
6. Importations under Direct Remittance (pre-payments not allowed):
a. copy of original commercial invoice;
b. copy of original first bill of lading (foreign exchange sale should not be beyond 15 calendar days from BL date);
c. copy of authenticated/tested message of outgoing remittance; and
d. proof of debit to the local bank’s account abroad
Remittance of payment to the beneficiary should be
made immediately after sale of foreign exchange.
The bank must indicate the amount of foreign
exchange sold below the phrase “FX SOLD” which
should be stamped on the face of all original copies of
the negotiable bill of lading and duly signed by the
bank’s authorized signatory.
In addition, importer-client and bank must accomplish
and submit notarized certifications, in the attached
format, signed by the importer-client’s responsible
officer and the bank’s officer with the rank of at least
vice-president, respectively.
Where the importer buys foreign exchange as
payment for importations made through another
(opening/booking) bank, the importer-client must
submit to its foreign exchange selling bank(s) a
notarized application to purchase foreign exchange
together with the requirements provided under
Circular Letter dated 31 March 1998.