WEBINAR ON

ICC RULES ON TRADE FACILITATION

(INCOTERMS 2020/UCP 600/ISBP 745/URR 725/
URDG 758/ISP 98/e UCP version 2.0/e.URC)

AT
HDFC BANK LIMITED

CASE STUDIES

No Case study on Page no.

1. Import transactions – how to avoid ambiguous conditions 2
&impact of exclusion of certain UCP Articles in the credit
2. Handling letter of credit from under developed countries in 9
MT 710 – risk factors
3. Examination of documents under LC with specific reference 15
to ISBP 745
4. Demand Guarantee – structure – MT 760 and URDG 758 17
5. Case studies on Demand Guarantees 20
6. Court Intervention in Guarantee– Sec 28 of ICA (amended) – 22
claim period and LC transactions
7. Standby letter of Credit and ISP 98 – domestic transaction - 23
8. ICC Banking Commission opinion and other cases relating to 26
application of UCP 600/ISBP 745/URR 725

by:
K. Parameswaran
Corporate Trainer and Advisor
9820601546
karthikeyap@gmail.com

1
 Case study No.1

IMPORT OF CAPITAL EQUIPMENT – STRUCTURING OF A CREDIT

Questions:
1. Please go through the underlying contract and the draft LC carefully and try to answer
the following:
a. Whether this LC transaction will comply with the Regulatory (FEMA)
guidelines?
b. Whether the terms and conditions in the draft protect the bank and the importer
client?
c. Any inconsistent terms.
d. Any risky conditions that could have been avoided.
e. Any condition deactivating UCP Rules and its impact.
2. Any other observation from you: (Please record)

2
 Case study No.1: Structuring import transaction through LC:

Underlying contract:

(Purchaser of the Equipment)

ABC INDIA LTD
213 SECOND FLOOR
OCEANIC TOWER
NARIMAN POINT MUMBAI 400021 INDIA
June 10th 2021

PURCHASE ORDER
To (Manufacturer of the equipment)
Mitsubishi Corporation Ltd.,
Marunouchi Park Building
Industrial Infra Group
6TH FLOOR 2-Chome, Chiyoda-ku,
Tokyo, 100-8086

Ref: PO No.1234/2021-22

This has reference to our project team meeting with your representative on June 5th 2021 in
India for finalizing the terms of our purchase order.
We are pleased to confirm placing order for supply of the following equipment from your
company on the following terms and conditions:
Description of Equipment to be purchased: Generator, heater and reactor for power plant with
accessories. Model 106A – High end terminal. (Details as per Annexure I for specifications)
Value of equipment and accessories: USD 44 mn (USD forty-four million only)
Terms of Delivery:
1. Shipment to be completed within 6 months from date of receipt of documentary credit
2. Price inclusive of delivery of the equipment at our work site and installation and
commissioning.
3. Applicable Terms of delivery: INCOTERMS 2020 – CIP Unit No.12. Halol Industrial
Estate. Gujarat, India
4. Payment terms:
a) 10% of the value as advance payment – Manufacturer to issue an advance payment
guarantee for this value with the expiry date 30 days from the date of shipment agreed
between the parties.
b) 80% of the value against presentation of shipping documents with a credit period of 24
months from date of despatch/shipment.
c) 10% retention money will be released after 6 months from satisfactory installation and
commissioning of the equipment.
5. Consignment will be delivered at Nagoya and shipped from Osaka to Mundra Port and
final destination to be Halol Gujarat India. Transport document should not indicate any
additional charges over and above freight charges. In case of need, certain parts can be by air
consignment.

3
6. Other terms and conditions:
a) Consignment before shipment to be inspected by authorized representative of the
purchaser or TPI identified by both the purchaser and manufacturer.
b) Packing should be in sea worthy condition.
c) Certificate of origin issued by Chamber of Commerce, Tokyo, Japan stating that the
goods are of Japanese origin
d) Insurance to cover all risks covering strike, war and other usual risks. Insurance to be
covered from seller’s factory to buyers’ work site.
e) It is agreed between both purchaser and manufacturer that manufacturer will execute
the shipment as per the schedule. Last date of shipment will be 15th Dec 2021. In case of
any delay in shipment it is agreed that there will be LD charges at 0.025% per week delay
not exceeding 2.5% of the transaction value.
f) Purchaser will be establishing a documentary credit for the total value of transaction
consisting of three different stages of payment.
g) Purchaser has agreed to pay interest for the credit period at LIBOR + 20 basis points.
Interest to be released on half yearly basis and LIBOR will be re-fixed for the ensuing half
year on the basis of the prevailing LIBOR for 6 months as on the last day of the previous
half year.
h) In case of ‘force majeure’ both the parties have the right of cancelling the order. In such
case purchaser will forgo the advance payment.
i) It is also agreed that the manufacturer should inform the purchaser the shipment details
immediately once shipment is complete by email to projects.abcindia.co.in.

Manufacturer is advised to send the duplicate copy of this purchase order duly acknowledged
by the authorized signatory. Scanned copy can be forwarded through email.

For ABC India Ltd

Senior Vice President (Projects) CEO (Finance)

E & O E.

Confirmed as per minutes agreed on 12/06/2021.

For Mitsubishi Corporation Tokyo

Vice President (Industrial Infra group)

*****

4
 Draft for approval

Msg sender reference: 20210613NBOIINMMY01000006962

Sender sequence number: 6962
Msg type: MT 700
Receivers address: BOTKJPJTXXX
----------------------------------------------------------------
27: Sequence Total:
1/1
40A: Form of documentary credit:
IRREVOCABLE
20: Documentary credit number:
ILC196210310
31C: Date of issue:
210613
40E: Applicable Rules
CURRENT VERSION OF UCP AND URR
31D: Date and place of expiry:
211230
JAPAN
50: Applicant:
ABC INDIA LTD
213 SECOND FLOOR
OCEANIC TOWER
NARIMAN POINT MUMBAI 400021
INDIA
59: Beneficiary:
MITSUBISHI CORPORATION
MARUNOUCHI PARK BUILDING
INDUSTRIAL INFRA GROUP
6TH FLOOR 2 CHOME CHIYODA-KU
TOKYO
32B: Currency code, Amount
USD
#39,600,000#
41D: Available with… By
BOTKJPJTXXX
BANK OF TOKYO MITSUBHISHI UFJ LIMITED
7-1 MARUNOUCHI 2CHOME CHIYODA-KU
TOKYO
NEGOTIATION
42C: Drafts at
REFER FIELD NO.47A. (1)
42M: MIXED PAYMENT DETAILS:
REFER FIELD NO.47A. (1)
42A: Drawee – BIC
BIC: NBOIINMYXXX
NATIONAL BANK OF INDIA
OVERSEAS BRANCH NARIMAN POINT BRANCH
MUMBAI 400021 INDIA

5
 43P: Partial shipments
ALLOWED

43T: Transhipment
ALLOWED
44A: Place of Taking in Charge/Dispatch from/Place of
receipt…
NAOYA JAPAN
44E: Port of loading /airport of departure:
OSAKA JAPAN
44F: Port of Discharge/Airport of Destination:
MUNDRA INDIA
44B: Place of final destination/for transportation to/
Place of delivery:
HALOL GUJARAT INDIA
44C: Latest date of shipment
211215
45A: Description of goods or/services
STANDARD GENERATOR HEATER AND REACTOR FOR POWER
PROJECT AND ACCESSORIES WITH FREE SPARES MODEL 106A
HIGH END TERMINAL AS PER PO NO 1234 DATED 10TH JUNE
2021(CIP HALOL INDIA)
46A: Documents required:
FOR STAGE I – FOR PAYMENT OF USD 35,200,000 (80 PCT OF
PURCHASE ORDER VALUE AGAINST SHIPMENT
1) SIGNED COMMERCIAL INVOICE IN TRIPLICATE CERTIFYING
THAT THE SHIPMENT IS AS PER PO NO 1234 DATED 10TH
JUNE 2021 INDICATING THE BREAK UP SEPARATELY
PROPORTIONATE ADVANCE PAYMENT, RETENTION MONEY AND
AMOUNT OF CLAIM.
2) FULL SET OF ‘CLEAN SHIPPED ON BOARD’ OCEAN / MARINE
BILL OF LADING WITH 3 NON NEGOTIABLE COPIES, DRAWN
TO ORDER OF NATIONAL BANK OF INDIA MARKED FREIGHT
PAYABLE AT DESTINATION, NOT INDICATING ANY
ADDITIONAL CHARGES OVER AND ABOVE FREIGHT CHARGES,
NOTIFY PARTY APPLICANT WITH ADDRESS INDICATING 14
DAYS FREE DETENTION PERIOD AT THE PORT OF
DISCHARGE. AIR WAY BILL CONSIGNED TO NATIONAL BANK
OF INDIA ACCEPTABLE IN LIEU OF BILL OF LADING.
3) CERTIFICATE OF ORIGIN ISSUED BY THE CHAMBER OF
COMMERCE STATING THAT GOODS ARE OF JAPANESE ORIGIN
4) PACKING LIST IN TRIPLICATE CONTAINING DETAILS OF
EACH PACKING INCLUDING NET WEIGHT, GROSS WEIGHT
5) TEST CERTIFICATE ISSUED BY TPI/ APPROVED INSPECTING
AGENCY CERTIFYING THAT THE EQUIPMENT AND
ACCESSORIES ARE AS PER PO NO 12345 DATED 10TH JUNE
2021.
6) INSURANCE DOCUMENT COVERING ALL RISKS FOR 110% OF
CIP VALUE FROM WARE HOUSE TO WORKSITE.

6
 STAGE II – 10% RETENTION MONEY (USD 4,400,000)
1) BENEFICIARYS INVOICE CLAIMING THE RETENTION MONEY.
2) CERTIFICATE OF SATISFACTORY INSTALLATION AND
COMMISSIONING OF THE EQUIPMENT.

47A: Additional Conditions

1) DRAFT TO BE DRAWN PROPORTIONATELY FOR 80% OF SHIPMENT

VALUE (NOT EXCEEDING USD 35,200,000) PAYABLE AT 24
MONTHS FROM DATE OF SHIPMENT AND DRAFT FOR 10% (USD
4,400,000 REPRESENTING RETENTION MONEY TO BE DRAWN
AT SIGHT.
2) 10% ADVANCE PAYMENT USD 4,400,000 WHICH WILL BE
REMITTED SEPARATELY NOT COVERED IN THIS DOCUMENTARY
CREDIT. COMMERCIAL INVOICE SHOULD BE DRAWN FOR 100%
OF THE SHIPMENT VALUE SHOWING THE PROPORTIONATE BREAK
UP OF ADVANCE PAYMENT, RETENTION MONEY AND BALANCE
80% OF THE RESPECTIVE SHIPMENT VALUE CLAIMED.
3) SHIPMENT DETAILS SHOULD BE EMAILED TO APPLICANT
IMMEDIATELY AFTER SHIPMENT AND CERTIFICATE TO BE
FORWARDED WITH EMAIL COPY ALONGWITH DOCUMENTS
PRESCRIBED UNDER FIELD NO.46A.
4) AGE OF THE VESSEL SHOULD NOT MORE THAN 15 YEARS AND
THE VESSEL SHOULD BE FIT FOR SEA VOYAGE.
5) THIRD PARTY DOCUMENTS NOT ACCEPTABLE
6) LD CHARGES AT 0.025% PER WEEK FOR DELAYED SHIPMENT
WILL BE DEDUCTED FROM THE FINAL PAYMENT SUBJECT TO
A MAXIMUM OF 2.50% OF THE TRANSACTION VALUE.
7) ALL SHIPPING DOCUMENTS MUST QUOTE THE LC REFERENCE
NUMBER.
8) ALL DOCUMENTS MUST BE IN ENGLISH.
9) IN CASE OF DISCREPANT DOCUMENT ISSUING BANK WILL
DEDUCT USD 150 PER DISCREPANT DOCUMENT. BY
INRODUCING THIS CONDITION ISSUING BANK IS NOT BOUND
TO ACCEPT DISCREPANT DOCUMENTS.
10) ARTICLE 35 AND 37.C. NOT APPLICABLE FOR THIS
TRANSACTION.
11) DOCUMENTS WILL BE ACCEPTED AS PRESENTED.
71B: Charges
BANK CHARGES OUTSIDE THE INDIA WILL BE TO THE ACCOUNT
OF BENEFICIARY
48: Period of presentation
21DAYS FROM DATE OF SHIPMENT BUT NOT LATER THAN THE
EXPIRY DATE
49: Confirmation Instruction:
CONFIRM
58A: Requested Confirmation Party: FI BIC
BOTKJPJTXXX
BANK OF TOKYO MITSUBHISHI UFJ LIMITED
7-1 MARUNOUCHI 2CHOME CHIYODA-KU

7
 TOKYO

78: Instruction to the paying/accepting/negotiating bank:

ON RECEIPT OF CREDIT COMPLIED DOCUMENTS WE WILL
PROVIDE REIMBURSEMENT TO THE CLAIMING BANK ON THE DUE
DATE AS PER THEIR INSTRUCTION
57A: Advise through bank:
BIC BOTKJPJTXXX
BANK OF TOKYO MITSUBISHI UFJ
TOKYO JAPAN
72: Sender to Receiver information:
BNF/ADV
GBAB010

**draft for approval **

8
Case study No.2. Export transaction.

(Some of the following questions may appear to be basic. Please answer)

1. Name of the issuing bank
2. Name of the advising bank
3. Name of the confirming bank, if any
4. Type of LC
5. Value of LC
6. Date of issue
7. Date of expiry
8. Last date of shipment
9. Presentation period
10. LC expires at
11. Commodity covered under this LC
12. Documents required
13. Any inconsistency in the terms of the credit
14. Any risky condition
15. If I am your customer and you are my banker what will be your advice on
executing this export order?

*****

9
FOR TRAINING PURPOSE
BHARATH BANK
214 M G Road, Bangalore 580 024
Account
M/s. Sunlight Agro Traders
242 Richmond Circle, Bangalore 580 025
DATE: April 7,2021
Our Ref: No.2019071234H
LC No: LCCB942439393
Issuance Date: April 6 2021
LC Amount: USD 960,000

LETTER OF CREDIT OPENED BY: SUISSE CREDIT CAPITAL LTD

LONDON GB
BY ORDER OF: RAHIM TRADERS
23 MAHAMUDPUR BAZAR
SATKHIRA SADAR
SATKHIRA BANGLADESH

NOTIFICATION OF DOCUMENTARY CREDIT

WE ENCLOSE A SWIFT MSG ADVISING THE ISSUE OF THE ABOVE DOCUMENTARY CREDIT
WITHOUT ANY ENGAGEMENT ON OUR PART. PLEASE ADVISE THE ENCLOSED CREDIT TO THE
BANEFICIARY
IN CASE THE TERMS AND CONDITIONS DO NOT MEET WITH YOUR REQUIREMENTS, PLEASE
COMMUNICATE DIRECTLY TO THE APPLICANT SEEKING SUITABLE AMENDMENTS.
WE ACCEPT NO RESPONSIBILITY FOR ANY ERRORS, OMISSIONS AND DELAYS IN THE
TRANSMISSION.
PLEASE NOTE:
1. WHERE THE TERMS AND CONDITIONS OF THE LETTER OF CREDIT CONFLICTS WITH
THE LOCAL EXCHANGE CONTROL REGULATIONS, THE LATER WILL PREVAIL.
2. IF IN CASE THIS LC IS RESTRICTED TO OUR COUNTERS FOR NEGOTIATION, WE MAY
AT OUR DISCRETION NEGOTIATE DOCUMENTS DRAWN IN STRICT COMPLIANCE
TO TERMS OF CREDIT, PROVIDED DOCUMENTS ARE ROUTED THROUGH YOUR
BANKER TO US (IN CASE YOU ARE NOT CURRENTLY BANKING WITH US).
3. OUR ADVICE/CONFIRMATION/NEGOTIATION OF THIS CREDIT IS SUBJECT TO THE
CONDITION OF SANCTION IMPOSED BY UN, EU, US, OFAC, HKMA, RBI AND ANY
OTHER AUTHORITIES.
WE AND OTHER CONNECTED PARTIES TO THE TRANSACTION SHALL BE UNABLE
IN RELATION TO THIS DOCUMENTARY CREDIT TO PROCESS OR ENGAGE IN
TRANSACTIONS IF THE SAME INVOLVES SANCTIONS IMPOSED BY UN, EU, US, OFAC,
HKMA, RBI AND ANY OTHER AUTHORITIES.
WE AND OTHER PARTIES CONNECTED TO THIS TRANSACTION SHALL NOT BE
LIABLE FOR ANY LOSS, DELAY AND DAMAGE DUR TO THE ABOVE.
PLEASE CONTACT US IF ANY CLARIFICATION IS REQUIRED. WE HAVE NOT ADDED
OUR CONFIRMATION TO THIS CREDIT AND CONSEQUENTLY THIS CREDIT
CONVEYS NO ENGAGEMENT / RESPONSIBILITY ON OUR PART.
4. THE OUR BANK HAS PROFESSIONALLY TRAINED SPECIALISTS WHO CAN HELP YOU
IN SECURING CLEAN PAYMENT UNDER DOCUMENTARY CREDIT TRANSACTIONS.
5. OUR ADVISING CHARGES INR 1500 PLUS IGST INR 270 MAY PLEASE BE CREDITED TO
OUR ACCOUNT.

THIS IS A COMPUTER GENERATED ADVICE. NO SIGNATURE IS REQUIRED.

AB BANK, CTU
NARIMAN POINT MUMBAI 400 021

****

10
--------------------------------------------- Message Header ----------------------------------------------
Swift output FIN 710 Adv Third or Non-Bank Doc credit
Sender SBLTGB2LXXX
SUISSE CREDIT CAPITAL LTD
LONDON GB
Receiver ACBLINBBX
MUR 1511130155BT200303
---------------------------------- Message text---------------------------
27: SEQUENTCE OF TOTAL
1/1

40A: FORM OF DOCUMENTARY CREDIT

IRREVOCABLE ADDING CONFIRMATION

20: SENDERS REFERENCE NO

511C7893459

21: DOCUMENTARY CREDIT NUMBER

LCCB942439393

31C: DATE OF ISSUE

210406

40E: APPLICABLE RULES

UCP LATEST VERSION

31D: DATE AND PLACE OF EXPIRY

210930 OUR COUNTERS

52A: ISSUING BANK

CITY COMMERCIAL BANK LLP
GAMBIA
CORRESPONDENCE ADDRESS
1938 MCRAE LANE MUNDELIN
ILLINOIS US

50: APPLICANT
RAHIM TRADING COMPANY
24 MAHAMUDPUR BAZAR
SATKHIRA SADAR
SATKHIRA BANGLADESH

59: BENEFICIARY - NAME AND ADDRESS

SUNLIGHT AGRO TRADERS
242 RICHMOND CIRCLE
BANGALORE 560 025

32B: CURRENCY CODE, AMOUNT

CURRENCY: USD (US DOLLAR)
AMOUNT: #960,000#

41D: AVAILABLE WITH - BY

SBLTGB2LXXX
SUISSE CREDIT CAPITAL LTD
LONDON GB
NEGOTIATION

43P: PARTIAL SHIPMENTS

ALLOWED

11
43T: TRANSHIPMENT
ALLOWED

44A: PLACE OF RECEIPT

APMC WAREHOUSE BANGALORE

44F: PLACE OF DESTINATION

DHAKA BANGLADESH

44C: LATEST DATE OF SHIPMENT

210915

45A: DESCRIPTION OF GOODS & / OR SERVICES

DRY CHILLIES OF BEST QUALITY 600 M T USD 1600 PER MT
AS PER PURCHASE ORDER NO 106EXP DATED 10TH MAR 2021

46A: DOCUMENT REQUIREMENTS

1. BENEFICIARY’S COMMERCIAL INVOICES IN TRIPLICATE CERTIFYING THE

GOODS ARE AS PER SUPPLY CONTRACT NO.106EXP DTD 10 MAR 2021
CERTIFIED BY CUSTOMS AT BORDER.
2. FULL SET TRUCK RECEIPTS CONSIGNEE COPY MARKED FREIGHT PREPAID
ISSUED TO ORDER AND ENDORSED IN THE NAME OF CITY COMMERCE BANK
LLP GAMBIA LTD NOTIFY PARTY APPLICANT.
3. PACKING LIST IN TRIPLICATE.
4. CERTIFICATE OF ORIGIN ISSUED BY CHAMBER OF COMMERCE CERTIFYING
THAT GOODS ARE OF INDIAN ORIGIN.
5. CERTIFICATE FROM THE BENEFICIARY CONFIRMING WHETHER SHIPMENT IS
PARTIAL OR FINAL.

47A: ADDITIONAL CONDITIOINS

1. ISSUING BANK INSTRUCTION

A. ALL DOCUMENTS MUST BE WRITTEN IN ENGLISH.

B. THIRD PARTY DOCUMENTS NOT ACCEPTABLE
C. NEGOTIATING BANK / CONFIRMING BANK SHOULD FORWARD ALL THE
DOCUMENTS IN ONE LOT THROUGH DHL OR EQUIVALENT COURIER TO
THE ISSUING BANK TO THE FOLLOWING ADDRESS:
CITY COMMERCE BANK LLP GAMBIA CORREPONDECE ADDRESS 1938 MCRAE
LANE MUNDELIN ILLINOIS US

2. SUISSE CREDIT CAPITAL LTD INSTRUCTIONS:

A. AN AMOUNT OF USD65 WILL BE DEDUCTED FROM THE AMOUNT PAYABLE

IN CASE OF DISCREPANT DOCUMENT
B. ALL DOCUMENTS MUST BE SENT IN ONE SINGLE LOT THROUGH COURIER
UNDER OUR REFERENCE NUMBER 511C7893459 TO THE FOLLOWING
ADDRESS:
SUISSE CREDIT CAPITAL LTD BANK STREET LONDON
(ATTENTION)
GLOBAL TRADE SERVICES – LETTER OF CREDIT DEPARTMENT
C. PAYMENT WILL BE EFFECTED AS PER YOUR INSTRUCTIONS AFTER OUR
SWIFT ADVISING THE ISSUING BANK THAT DOCUMENTS ARE IN STRICT
COMPLIANCE WITH CREDIT TERMS.
D. ALL PARTIES TO THIS LETTER OF CREDIT ARE ADVISED THAT THE US
GOVT HAS IN PLACE CERTAIN SANCTIONS AGAINST CERTAIN
COUNTRIES, INDIVIDUALS, ENTITIES AND VESSELS. IF ANY OF THE
PARTIES OR INSTITUTIONS IS CONNECTED WITH ANY OF THE PARTIES

12
 UNDER SANCTION WE RESERVE OUR RIGHT OF HONOURING OUR PAYMENT
OBLIGATION.

71B: CHARGES:
BANK CHARGES OUTSIDE BANGLADESH AND GB WILL BE FOR THE ACCOUNT OF
THE BENEFICIARY

48: PERIOD FOR PRESENTATION

21/ DAYS

49: CONFIRMATION INSTRUCTION

WITHOUT

78: INSTR TO PAN BANK:

AS PER ISSUING BANK
QUOTE:
UPON RECEIPT OF DOCUMENTS / CLAIMS COMPLYING WITH OUR CREDIT TERMS
AND CONDITIONS YOU ARE HEREBY AUTHORISED TO CLAIM REIMBURSEMENT ON
DUE DATE BY THE DEBIT OF OUR ACCOUNT HELD WITH YOURSEVLES THREE
WORKING DAYS AFTER YOUR SWIFT ADVICE TO US.

57A: ADV THRU BANK

BHARAT BANK OF INDIA
BBINCH234XX

--------------------------------------------------------------

13
 CASE STUDY No. 3. ON ISBP 745

While examining the documents received under a letter of credit, issuing bank
has pointed out following discrepancies. Please comment whether the
discrepancies are valid.

1. DRAFT:
a) Company’s name not appearing along with the signature of the authorized
signatory
b) LC reference number is inserted in handwriting and without
authentication of the issuer.

2. COMMERCIAL INVOICE:
a. Invoice includes ‘free samples for display and distribution and not having
any commercial value’. Inconsistent with description in Field No.45A.
b. Correction in the description of goods not authenticated.
c. Invoice not signed. (Invoice was having the following statement at the
bottom) “This document has been generated by electronic means and
requires no signature”.
d. Invoice is drawn for USD 1.10 mn whereas LC is for USD 1.00 mn. Invoice
overdrawn.
3. BILL OF LADING:
a) Carrier not identified.
b) Bill of lading indicates ‘freight payable as per charter party’. (LC calls for
bill of lading). LC does not permit Charter Party bill of lading.
c) Notify party address is not written. Only the name of the notify party is
stated.
d) The word ‘clean’ appearing in the bill of lading is cancelled.
4. Certificate of Age of vessel
a) Certificate is not having a specific declaration about the age of the vessel.
It has only the year in which the vessel was built.
b) Certificate
5. Certificate of Origin
a) Certificate of origin not dated.
b) Certificate of origin is certified by ‘World Trade Centre’ and not by
Chamber of commerce. LC calls for certificate of origin issued by Chamber
of Commerce.
6. Insurance Policy.
a) Insurance policy is dated after the date of shipment. (Though the coverage
is from ware house to work site in India)
b) Insurance policy states sum assured in a different currency than the
currency of LC. Currency of sum assured is in INR. (equivalent to USD)

14
7. Inspection certificate
a) Dated after the date of shipment and does not indicate whether goods were
inspected before shipment.
b) Certifying authority has certified that this consignment is unfit for human
consumption

****

15
 Case study No.4 – Demand Guarantees subject to URDG 758

Note: A draft copy of advance payment guarantees to be established on account of

import of capital equipment from Germany is presented for your examination. You
are advised to specifically note down the following issues:

1. Whether this guarantee complies with RBI Regulation (both under FEMA on
import of goods and services and Guarantees and Bankers co acceptance
guidelines?
2. Whether the contents of this guarantee satisfy Art 8 of URDG 758.
3. Classification of this guarantee – either performance or financial.
4. Expiry date relates to any obligation on the part of the beneficiary/
5. Whether the content of this guarantee will help us to check compliance of the
obligation of the beneficiary?
6. What are the documents to be presented for invoking this guarantee?
7. Whether the beneficiary to present any proof of non-performance?
8. Any other specific comments on the structure of this guarantee?

*****

16
Demand Guarantee draft for discussion

Msg sender reference: 200812191925NBFFGERM00006962

Sender sequence number: 6962
Msg type: MT 760
Receivers address: CARBBINDXXX

--------------------------------------------------------------
27: Sequence Total:
1/1

20: Transaction Reference number:

PG123456210310

23: Further identification

ISSUE

31C: Date of issue:

xxxxxx

40C: Applicable Rule

URDG

77C: Details of guarantee

WE, NOBLE BANK TOKYO HEREBY IRREVOCABLY UNDERTAKE TO

PAY TO YOU, ABC POWER LTD, 1234 MITTAL CHAMBERS,
NARIMAN POINT, MUMBAI 400021 INDIA (THE BENEFICIARY)
ANY SUM OR SUMS NOT EXCEEDING AN AGGREGATE OF USD
4,400,000 (USD FOUR MILLION FOUR HUNDRED THOUSAND
ONLY), REPRESENTING 10 PCT ADVANCE PAYMENT FOR THE
TOTAL ORDER/CONTRACT PRICE FOR SUPPLY OF EQUIPMENT AND
ACCESSORIES FOR POWER PROJECT BY MITSUBISHI
CORPORATION, MARUNOUCHI PARK BUILDING,INDUSTRIAL INFRA
GROUP, 6TH FLOOR 2 CHOME CHIYODA-KU, TOKYO THE
APPLICANT), AT THIS OFFICE ON YOUR FIRST DEMAND ON US
IN WRITING, COMPLYING WITH ALL THE REQUIREMENTS
HEREIN, QUOTING OUR REFERENCE GUARANTEE NO.
PG123456210310 STATING THE AMOUNT PAYABLE AND THAT THE
APPLICANT FAILED TO SUPPLY THE EQUIPMENT ON OR BEFORE
xxxxxxx. THE SIGNATURES APPEARING THEREON TO BE DULY
CONFIRMED BY THE BENEFICIARYS BANK.

THIS UNDERTAKING IS NOT ASSIGNABLE.

OUR LIABILITY HEREUNDER SHALL BE LIMITED TO A SUM OR

SUMS NOT EXCEEDING IN AGGREGATE USD 4,400,000.

17
 OUR LIABILITY IS VALID FROM THE DATE OF ISSUE I.E., FROM
xxxxxxxx AND SHALL EXPIRE ON xxxxxxxx EXCEPT IN RESPECT
OF ANY WRITTEN DEMANDS FOR PAYMENT COMPLYING WITH ALL
THE REQUIREMENTS HEREOF RECEIVED BY US AT THIS OFFICE
ON OR BEFORE xxxxxx, AFTER WHICH DATE THIS UNDERTAKING
SHALL BECOME NULL AND VOID WHETHER RETURNED TO US OR
NOT.

OUR LIABILITY UNDER THIS UNDERTAKING SHALL BE REDUCED

BY ANY AMOUNTS DEMANDED IN ACCORDANCE WITH THE TERMS
HEREOF.

THIS UNDERTAKING SHALL BE GOVERNED BY AND CONSTRUED

ACCORDING TO THE LAWS OF JAPAN, THE COURTS OF WHICH
COUNTRY SHALL HAVE SOLE JURISDICTION TO ADJUDICATE ON
ANY AND ALL CLAIMS DIRECTLY OR INDIRECTLY RELATING
HERETO AND YOUR ACCEPTANCE OF OUR UNDERTAKING SHALL BE
YOUR CONFIRMATION THAT YOU SUBMIT TO THE JURISDICTION
OF THE COURTS OF JAPAN IN THIS REGARD

72: SENDER TO RECEIVER INFORMATION

//BENCON//

**End of Report**

18
 Case study No.5

Demand Guarantees – certain issues.

1. Can a non-banking institution issue a guarantee?

2. Whether a guarantee can be issued without adoption of URDG.
3. Supporting document is in Arabic. Demand is in English. DG is silent about the
language of the documents. Can it be treated as a valid demand?
4. DG prescribe the demand to accompany a statement indicating applicant’s
default. Instead of a separate statement of default, beneficiary included this
details in its demand itself. Issuing bank insists a separate statement of default.
Whether IB’ demand is in order?
5. Whether guarantee can have a grace period for claiming the amount. Whether
URDG permits such grace period/ claim period?
6. DG will be issued from Ethiopia. Beneficiary requests the applicant to get it
confirmed by a bank in Europe or UK.
7. Guarantee has expired on 30th May 2021 in Uzbekistan. Unexpectedly there was
a political crisis and the issuing bank could not function. Your claim was
presented by your bank on time. Please note that the claim should be made at
the issuing bank’s counter. What will be fate of this claim? What will be the
impact of force majeure clause?
8. When a claim is made to the issuing bank (guarantor) by the beneficiary, is it the
responsibility of the issuing bank to refer the claim to the applicant and get its
concurrence before encashment?
9. Can there be a stage, wherein the applicant protests the claim of the beneficiary?
If it can be, what will be the position of the guarantor (issuing bank)?
10. Whether the beneficiary is to prove his claim by any document or a simple
demand will be sufficient?
11. Demand is made by the beneficiary through an unauthenticated tele-transmission
with a note that written demand will be submitted within 2 days. Can the
guarantor process this claim on the basis of the unauthenticated message?
12. Issuing Bank receives a claim with all the required original documents from the
beneficiary. When the Issuing bank claims the payment from the ‘instructed
party’ (applicant) is it necessary to forward all the original documents received
from the beneficiary?
13. Guarantee was issued by a bank in USD. Valid claim was made by the beneficiary
to the issuing bank on time through its bank. Due to the US sanction, this bank is
not able to settle the claim in USD. Can the issuing bank settle the claim in any
other currency? If your answer is ‘yes’ the conversion rate will be decided on the

19
 basis of rate prevailing which day - either date of receipt of the claim or date of
settlement of the claim.

14. Beneficiary has presented its claim to the issuing bank. In the demand notice,
beneficiary has given the option to the issuing bank either to honour the payment
on the due date or extend the validity of the guarantee. Expiry date of the
guarantee 30th May 2021. How much time, the issuing bank can take to decide?
Suppose if the issuing bank decides not to extend the guarantee and wants to pay
the beneficiary on the last day under this extend or pay arrangement are they
bound to pay interest for the suspension period?

*****

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 Case study No.6
Court intervention in Bank Guarantees and LC transactions.
1. ABC India Ltd, Delhi has entered into multiple contracts with Indian Railways
for executions of different projects. ABC India through its bank had executed
Performance Guarantee in favour of Indian Railways for certain projects. Some
of projects executed by ABC India on account of Indian Railways were not
covered under any guarantee.

Indian Railways invoked one of the guarantees with the issuing bank. The
contract or the work order covered under this particular guarantee had been
executed properly by ABC India and it was holding the discharge certificate from
Indian Railways. When the issuing bank sent intimation to ABC India about the
invocation, ABC produced the discharge certificate issued by Indian Railways
under this particular work order for which the referred guarantee was issued.
Issuing bank rejected the claim presented by Indian Railways quoting the
discharge certificate issued by the beneficiary of the said guarantee to the
applicant which specifically referring the completion of the work order for which
the guarantee was issued.

Indian Railways informed the issuing bank that they have the right to invoke the
claim under the referred guarantee on the basis of a clause in the Contract which
entitled them to encash any of the bank guarantees to set-off “any moneys… due”
under that contract or any other contracts.
What will be your reaction if you are the issuing bank?

2. In another case, Bank A has issued a guarantee with expiry date as 30th Nov
2020 and the claim period 3 months from the expiry date. Today issuing bank
received invocation of claim through the presenting bank. Can the issuing ban
reject the claim since it is presented beyond the claim period?

Court intervention in Documentary Credit transaction.

3. Documentary credit provides partial shipment. There were three stages of partial
shipment and drawings. First and second set of documents were discrepant. But
the discrepancies were accepted and payment was honoured by the issuing bank.
Documents presented under the third shipment was having the same
discrepancies like the earlier two shipments. Issuing bank refused payment citing
the discrepancies.
Nominated bank and the beneficiary protested issuing banks action of refusing
the payment for the third shipment for the same discrepancies which were earlier
accepted by the issuing bank while honouring the earlier claims.
Whether nominated bank is in order in protesting the refusal of issuing bank?

*****

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 Case study No.7 on SBLC

FOR TRAINING PURPOSE ONLY ORIGINAL

NATIONAL BANK OF INDIA

BANK STREET MUMBAI

IFN 700 ISSUE OF DOCUMENTARY CREDIT

DATE 15062021 13:15
NON NEGOTIABLE
SESSION HOLDER 15062021 13:15
SENDER UNIQUE REF NO 200812191925SBH00001000006962
SEQUENCE 789
DELIVERY STATUS Sent in SFMS
Message Header
Sender ABC DEVELOPMENT BANK
NARIMAN POINT 601 MITTAL TOWER
MUMBAI 400021
Receiver BBININBB603
NATIONAL BANK OF INDIA
37 BANDRA KURLA COMPLEX
BANDRA MUMBAI
27: Sequence of Total: 1/1
40A: Form of documentary IRREVOCABLE STANDBY LETTER OF
credit CREDIT
E: Applicable Rules UCP LATEST VERSION /ISP 98
20: Documentary credit 1234SBLC7890
number:
31C: Date of issue: 20210615
D: Date and place of expiry: 20211215
D: Date and place of expiry: NEGOTIATING BANK
51A: Applicant Bank IDBMMYIN377
50: Applicant: ABC STEEL INDUSTRIES LIMITED
EQUINOX BUSINESS PARK
LBS MARG KURLA (W) MUMBAI
59: Beneficiary: BHARAT OIL AND GAS CORPORATION
LTD, REGISTERED OFFICE
17 JAMSHEDJI TATA ROAD
MUMBAI 400020
32B: Currency code, Amount INR
B: Currency code, Amount 25,00,00,000
44C: Latest date of shipment 20211130

22
46A: Documents required: 1. DRAFT AT SIGHT DRAWN ON
ISSUING BANK FOR 100% VALUE
OF THE CREDIT / CLAIM
2. CERTIFICATE OF DETAILS OF
DESPATCHES MADE BY THE
BENEFICIARY TO THE
APPLICANT WHERE APPLICANT
HAS FAILED TO HONOUR ITS
PAYMENT OBLIGATION
3. COPY OF INVOICES FOR WHICH
CLAIM LODGED BY THE
BENEFICIARY.
47A: Additional Conditions 1. WE, ABC DEVELOPMENT BANK
MUMBAI AS ISSUING BANK
UNCONDITIONALLY AND
IRREVOCABLY ISSUE THIS
STANDBY LETTER OF CREDIT IN
FAVOUR OF THE BENEFICIARY
AS A SECURITY FOR THE DUE
FULFILLMENT OF PAYMENT
OBLIGATION BY THE
APPLICANT TOWARDS SUPPLIES
MADE BY THE BENEFICIARY
STARTING FROM 1ST JUNE 2021
TO 30TH NOVEMBER 2021.

2. ANY CLAIM UNDER THIS

STANDBY LETTER OF CREDIT TO
BE LODGED BEFORE 15TH DEC
2021

3. NOTWITHSTANDING WHATEVER
CONDITIONS STATED ABOVE
OUR LIABILITY UNDER THIS
STANDBY LETTER OF CREDIT IS
RESTRICTED TO INR TWENTY-
FIVE CRORES ONLY AND THIS
STANDBY CREDIT IS VALID
UPTO 15TH DEC 2021.

4. WE ARE LIABLE TO HONOUR ANY

WRITTERN CLAIM SERVED ON US
AT OUR COUNTERS UNDER THIS
CREDIT IF IT IS SERVED ON
OR BEFORE 15TH DEC 2021
FAILING WHICH BENEFICIARY
WILL FORFEIT ALL ITS RIGHTS
AND ISSUING BANK WILL BE
RELIEVED OF ITS LIABILITY
UNDER THIS CREDIT.

23
 57A: Advise through bank: NBIN0014125

72: Sender to Receiver UNLESS EXPRESSLY MODIFIED THIS

information: CREDIT IS SUBJECT TO UCP 600
(2007 REVISION)/ISP 98.

**End of Report**
ORIGINAL

FOR NATIONAL BANK OF INDIA

SD/---

AUTHORISED SIGNATORY/IES

Questions:
1. This SBLC is subject to either UCP or ISP 98, Which will be preferred.
2. If you prefer UCP what advantage you have?
3. Funding against this SBLC can be allowed?

*****

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 Case study No.8

Case studies on Documentary Credit

With specific application of UCP 600 & ISBP 745

1. One of the documentary credits called for ocean bill of lading as an evidence for
shipment. This credit was subsequently amended to include ‘airway bill’ instead
of bill of lading and partial shipment ‘not allowed’. This amendment was issued
on 15th Sep 2020. Issuing bank receives a set of documents with bill of lading for
the first consignment under partial shipment.
a. Does it mean that the beneficiary has rejected the amendment? Can the
documents be rejected?
b. Second consignment was through air and the beneficiary presented
documents with airway bill. Can the beneficiary present airway bill for
the second shipment?
c. What is the fate of the amendment and when it will be effective? Does it
mean that beneficiary has accepted the amendment for the second
consignment?

2. Documentary credit permits partial shipment. LC value is for EUR 100,000/. This
credit was subsequently amended with two conditions:
a. partial shipment not allowed and
b. credit value enhanced to EUR 150,000/.
Beneficiary presents documents for EUR 125,000/. Please comment whether the
beneficiary has accepted or rejected the amendment.

3. Credit under Field No.46A states as “one set of original negotiable documents
must be couriered to the applicant directly within 3 days from date of shipment”.
Credit does not call for any certificate from the beneficiary to confirm this
condition. Whether beneficiary has to present a certificate as an evidence for this
condition? If beneficiary not submitting certificate to this effect whether
documents can be rejected?

4. Credit calls for ‘Packing list’ as one of the documents. Beneficiary presented a
document with full details of packing but the document is not titled as ‘Packing
list’. Whether bank can accept this document as Packing list?

5. In one of the LCs, expiry date is mentioned as 15 August. LC is silent on last date
of shipment. LC has the ‘presentation period’ as 10 days from date of shipment.

25
 What will be the last date of shipment? Since 15th August was a declared holiday
can the shipper submit bill of lading with ‘on board’ date as 16th August. In such
case what will be the expiry date of this LC.

6. If the draft is to be drawn at 60 days’ sight what should be the due date under the
following circumstances:
a. The issuing bank receives documents on July 10th.
b. Applicant accepts the documents on July 15th.
c. If the documents are discrepant and the applicant has accepted the
discrepancies on 25th July?

7. Under one draft /invoice, there are two sets of bills of lading presented by the
beneficiary.
1st set of bill of lading 2nd set of bill of lading
Date of Issue 10th Sep 15th Sep
On board date 11th Sep 16th Sep

LC calls for draft to be drawn at 60 days from the bill of lading date. For
calculating the due date which date will be taken into account?

8. In another case, under one draft one set of bill of lading was presented and you
observe two on board notations (on the same vessel) with dates. (11th July 2020 /
Kolkata and 16th July 2020 / Chennai). For calculating due date which date will
be taken into account?

9. In the documentary credit, the description of goods is stated as “1000 M Tons of

CR steel coil GO and 1200 M Tons of CR steel coil NGO”. Credit permits partial
shipment. Tolerance on quantity + or – 5% allowed. When the documents are
submitted, you observe in the invoice following description: ‘1000 M Tons of CR
steel coil GO and 1310 M Tons of CR steel coil NGO”. Will it be treated as a
discrepancy?

10. Beneficiary of a letter of credit requests the advising bank to confirm the letter of
credit. LC was issued by one of the reputed leading sound bank with good
rating. Beneficiary is also having a good rating in his country. Whether the
advising bank can add confirmation at the request of the beneficiary? If they add
confirmation, whether they will get protection under UCP?

11. Our client has received a LC for desptach of CR steel to Suzuki Motors, Tokyo.
Buyer’s authorized representative has inspected the consignment and advises the
beneficiary to organize for an inspection certificate from a different agency other
than that stipulated in the LC. He also provides a letter for accepting this revised
document in lieu of the stipulated document in the LC. This waiver letter is
addressed to the issuing bank. Bene have submitted the required documents

26
 under this letter of credit through your bank. You have forwarded the documents
to the issuing bank for acceptance. Issuing bank rejects the documents pointing
out the variation in the inspection certificate as a discrepancy. Are they in order
in rejecting this set of documents in spite of the authority given by the applicant?
12. Letter of credit prohibits partial shipment. Shipment is to Bangladesh by truck.
LC stipulates presentation of truck receipt. Beneficiary presents two separate
lorry consignment notes evidencing despatch of consignment by two different
trucks on the same day from the same place of ‘taking in charge’ for the same
destination. Whether documents are in order?
13. In one of the LC transactions, partial shipments were allowed. Two sets of
documents with discrepancies accepted by the Issuing bank and the applicant.
These two sets of documents were having discrepancies like late shipment and
late negotiation. When the third set of documents was presented under the same
Letter of credit with the same discrepancies, the Issuing Bank rejected the
documents pointing out the discrepancies, which were on earlier occasions
accepted by them. Negotiating Bank and the beneficiary of the Letter of Credit
objected the rejection quoting the earlier two acceptances of documents with the
same discrepancies. Whether the LC Issuing bank can unilaterally select some
transactions for payment and reject certain transactions?

14. Value of Documentary Credit is EUR 500,000/. Partial shipment not allowed.
Tolerance 0/0. Invoice drawn for EUR 480,000/. Whether the invoice, which is
drawn for the lesser amount, will be treated as discrepancy?

15. In your letter of credit, there is a requirement for presentation of certificate of

origin from the ‘exporting country’. You have the following information:

 Components are from Korea

 Assembled and shipped from Singapore
 Exporter is in India

Which of the above country will be treated as exporting country for the purpose
of Certificate of Origin’? If the certificate of origin is undated will you accept it?

16. In one of the documentary credits following conditions are stated:

Field No.45A: 600 M. Tons of CR steel coils at USD 800 per M. Ton as per
contract number A 12964 dated 15th March 2020.

Field No.47A: Additional conditions

+ Bill of lading to indicate the credit number and contract number A 12946.

27
Issue:

Beneficiary while going through the conditions found that two different
contract numbers are stated in the description of goods and in the additional
condition. Beneficiary felt that there should be a mistake in referring the
contract number in the bill of lading and wrote the contract number as A 12964
in both the documents. (Bill of lading and in the invoice).

Issuing Bank refused to honour the documents stating the following

discrepancy:

“Bill of lading showing contract number as 12964 instead of 12946. We refuse

to accept the documents. Documents are held at your risk and responsibility”

Please comment whether the issuing bank’s rejection is valid.

*****
Prepared by:
K.Parameswaran, Consultant & trainer
International Trade and Finance
karthikeyap@gmail.com
09820601546

*****

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