Chapter 12: Checklists for Key Documents

CHAPTER 12

THE FOLLOWING IS a series of checklists for document preparation and examination by the buyer, seller, and advising and issuing banks. These checklists cover the most common documents and have an emphasis on document consistency in documentary collection and documentary letter of credit payment situations. The issues covered in these checklists, however, apply for document preparation in all payment and transaction situations.

EXPORTER / SELLER / BENEFICIARY ( OF THE LETTER OF CREDIT ) The exporter/seller/beneficiary has the responsibility of preparing and presenting documents in accordance with the terms of the contract for the sale of goods, the documentary collection or documentary letter of credit. If the documents are incorrect or inconsistent there is a risk of having them refused, wasting time and money, and possibly imperiling the transaction itself.

IMPORTER / BUYER / APPLICANT ( OF THE LETTER OF CREDIT ) The importer/buyer/applicant initially has the responsibility of listing and clearly communicating to the seller which documents are required. Once the document package is received, either directly from the seller, or indirectly from the seller through the banks, the buyer examines the documents for consistency and accuracy. Problems with documents can lead to receiving unwanted or incorrect goods, problems securing goods from the shipping company or clearing a shipment through customs.

ISSUING ( BUYER ’ S ) BANK In letter of credit payment situations, the issuing (buyer’s) bank has the responsibility of examining the documents presented by the seller to make certain they are consistent with the credit.

ADVISING BANK The advising bank (often the confirming bank as well) has the responsibility of examining the documents presented by the issuing bank to determine if they are consistent with the requirements of the documentary credit.

SELLER BUYER ADVISING BANK ISSUING BANK

The following is a list of general points of consistency the seller, buyer, and banks should be aware of when preparing or examining documents. Does information on all the documents agree as to the following: 1.Name and address of seller/shipper/exporter/beneficiary? ❑ 2.Name and address of buyer/consignee/importer? ❑ 3.Issuer name and address? ❑ 4.Quantities and description of the goods? ❑ 5.Country of origin of the goods? ❑ 6.Country of destination of the goods? ❑ 7.Invoice numbers, documentary credit numbers? ❑ 8.Certifications? ❑ 9.Legalizations? ❑ 10.Shipping marks and numbers? ❑ 11.Net weight, gross weight, volume? ❑ 12.Number of crates, cartons, or containers? ❑ 13.Documents that so require are legally certified or legalized? ❑ 14.All documents are in complete sets and of the number specified? ❑

SELLER BUYER ADVISING BANK ISSUING BANK

1.Is the name of the drawee correct? ❑ 2.Is the name of the payee correct? ❑ 3.Does the draft contain the “to the order of” notation? ❑ 4.Does the draft contain an expiration date? ❑ 5.Does the draft contain an unconditional instruction to pay? ❑ 6.Are the amounts in words and figures identical? ❑ 7.Is the draft drawn on the party named in the documentary credit? ❑ 8.If the draft is made out to own order (ourselves), is it endorsed? ❑ 9.Does the draft contain any and all notations as stipulated in the letter of credit? (i.e., drawn under credit number _______)? ❑ 10.Does the draft name the place and date of issue? ❑ 11.Does the draft bear the signature of the issuer? ❑ 12.Are the values of the draft, invoices, and the credit consistent? ❑

SELLER BUYER ADVISING BANK ISSUING BANK

1.Is the invoice issued by the seller as named in the contract, documentary collection or documentary letter of credit? ❑

2.Is the invoice issued to the buyer as named in the contract, documentary collection or documentary letter of credit? ❑

3.Is the invoice issued to the correct address of the buyer as stated in the contract, documentary collection or documentary letter of credit? ❑ 4.Does the description of the goods in the invoice correspond exactly to their description in the contract, documentary collection or documentary letter of credit? ❑ 5.Does the quantity of the goods in the invoice correspond exactly to the quantities specified in the contract, documentary collection or documentary letter of credit? ❑ 6.Does the value of the goods (unit price and total price) correspond exactly to the values specified in the contract, documentary collection or documentary letter of credit? ❑ 7.Does the invoice amount not exceed the amount of the contract, documentary collection or documentary letter of credit? ❑ 8.Is the invoice free of any unauthorized charges? ❑ 9.Does the currency used in pricing in the invoice match that of the contract, documentary collection or documentary letter of credit? ❑ 10.Does the invoice state the delivery terms (e.g., CIF, EXW)? ❑ 11.Do the delivery terms stated in the invoice match those specified in the contract, documentary collection or documentary letter of credit? ❑ 12.If required by the contract, documentary collection or documentary letter of credit, is the invoice signed? ❑ 13.If required by the contract or documentary letter of credit, does the invoice bear proper certifications, authorizations, or legalizations? ❑ 14.If required by the contract or documentary letter of credit, does the invoice contain any special marks, numbers, or other notations? ❑

SELLER BUYER ADVISING BANK ISSUING BANK

1.Does the transport document contain the correct consignee name and address as specified in the credit? ❑ 2.Does the transport document contain an “on board” notation? ❑ 3.Does the transport document contain a notation naming the vessel? ❑ 4.Does the transport document contain a notation of the on board date? ❑ 5.Does the transport document name the correct port of loading and port of destination as stipulated in the documentary credit? ❑ 6.Is the transport document “clean” (without notations for shortage, loss, or damage)? ❑ 7.If the transport document states “on deck” stowage, it is allowed by the credit? ❑ 8.If required by the documentary credit, is the “notify address” listed? ❑ 9.Was the transport document issued within the period specified in the documentary credit? ❑ 10.Is the full set of originals being presented? ❑ 11.Is the transport document not a charter party document, unless authorized by the documentary credit? ❑ 12.Is the transport document not a forwarder’s transport document, unless authorized by the documentary credit? ❑ 13.Is the quantity and description of the goods consistent with that contained in the documentary credit? ❑ 14.Are the marks and numbers on the transport document consistent with those on other documents? ❑ 15.Are the freight payments terms consistent with those stipulated in the documentary credit? ❑ 16.Does the transport document meet the stipulations of the documentary credit with regard to transshipment? ❑ 17.Does the transport document meet all other stipulations of the documentary credit? ❑

SELLER ( IN DOCUMENTARY LETTER OF CREDIT PAYMENT TRANSACTIONS )

BANK DOCUMENT CHECKLIST PRIOR TO SUBMISSION TO THE BANK

1.Do all the documents refer to the same order and the same credit? ❑ 2.Are the documents present in the correct number and in complete sets? ❑ 3.Is the name and address of the shipper correct? ❑ 4.Is the name and address of the buyer/consignee correct? ❑ 5.Is the issuer name and address correct? ❑ 6.Does the description of the goods, unit price, and total price match the description in the credit? ❑ 7.Is the description of the goods, unit price, and total price consistent from document to document? ❑ 8.Does the invoice total not exceed the amount available in the credit? ❑ 9.Is the country of origin of the goods listed and as specified in the documentary credit? ❑ 10.Is the country of destination of the goods listed and as specified in the documentary credit? ❑ 11.Do all the dimensions, weights, number of units, and markings agree on all documents? ❑ 12.Have all the necessary documents been certified or legalized? ❑ 13.Are the invoice numbers and documentary credit numbers correct and listed in the proper places? ❑ 14.Is the bill of exchange legally signed? ❑ 15.Does the bill of exchange have to be endorsed? ❑ 16.Does the insurance document cover all the risks specified in the credit? ❑ 17.Has the insurance document been properly endorsed? ❑ 18.Are the documents being presented within the validity period? ❑ 19.Is the bill of lading “clean,” without notations? ❑ 20.If the bill of lading has an “on deck” notation, does the credit allow for it? ❑ 21.If the bill of lading is a charter party bill, does the credit allow for it? ❑ 22.Is the notify address in the bill of lading correct? ❑ 23.Is the bill of lading endorsed? ❑ 24.Are corrections properly initialed by their originator? ❑

SELLER BUYER ADVISING BANK ISSUING BANK

1.Does the inspection certificate contain key details of the consignor, consignee, and inspection entity? ❑

2.Does the inspection certificate contain a description of the goods that is consistent with the description of goods in the credit? ❑ 3.Does the inspection certificate contain the date of the inspection? ❑ 4.Does the inspection certificate contain a statement of the sampling methodology? ❑ 5.Does the certificate contain a statement of the inspection results? ❑ 6.Does the inspection certificate contain the name, signature, and/or stamp or seal of the inspecting entity? ❑ Insurance Document

SELLER BUYER ADVISING BANK ISSUING BANK

1.Was the insurance document issued as either a policy or as a certificate as stipulated in the credit? ❑

2.Is the insurance document issued and signed by an insurance carrier, underwriter, or their agent (not by a broker)? ❑ 3.Does the insurance document cover all the risks specified in the credit? ❑ 4.Does the insurance document cover the risks resulting from a) the particular mode of shipment, b) the transport route, or c) reloading or “on deck” storage, etc.? ❑ 5.Does the insurance document indicate that cover is effective at the latest from the date of loading of the goods on board or the taking in charge of the goods by the carrier, as indicated by the transport document? ❑ 6.Is the information in the insurance document concerning mode of transport and transport route consistent with the documentary credit? ❑ 7.Does the document specify coverage for at least 110 percent of either a) the CIF or CIP value of the shipment, or, if that information is not provided, b) the amount of the payment, acceptance or negotiation specified in the documentary credit, or c) the gross amount of the invoice? ❑ 8.Is the currency of the insurance document consistent with the credit? ❑ 9.Have all issued originals of the document been presented? ❑ 10.If endorsement is required, is the document properly endorsed? ❑