Non-Receipt of Export Proceeds Due To Discrepant Documents

Introduction
Bangladesh has been facing problem on repatriation of export proceeds while doing business
internationally. In most cases, Bangladeshi exporters do not receive full export proceeds. In some
cases, the buyer (importer) release goods without remitting any proceeds. More over
intermediary banks want their corresponding fees. There are several causes for less repatriation
or non-repatriation of export proceeds. The exporters of our country are not able to negotiate
properly for building up an export contract due to poor bargaining power. Exporters are to accept
importer’s proposal no matter how worthless it might be. The buyer establishes various penalty
clauses in Letter of credit or sales/purchase contract. The seller (exporter) could not able to
establish a suitable contract due to lack of knowledge and skill manpower. For these reasons,
sellers are to count several penalties. Sometimes the buyer does not release goods from port
authority due to documentary discrepancies. In some cases, sellers are to leave the goods to the
foreign port because freight charges for returning goods sometimes incurs more than value of
goods. The customs authority of the foreign port calls the goods for auction and thus the exporter
as well as the exporter’s country losses foreign currency in exchange of goods.
Despite the goods physical condition is according to the requirement of the buyer, the buyer’s
bank does not make payment if the documents are not presented as per stipulation. The buyer’s
bank may delay payment, deduct charges citing discrepancies in the documents as bank deals
with documents not goods. Banks do not verify or justify goods. Documents is the shadow of
goods. So, banks checks documents. If the documents are okay then it is deemed that the goods
are okay. Bank makes payment or provide acceptance for payment based on clean and compliant
documents. Otherwise, bank sends notice of refusal, deducts discrepancy charges and other
penalty charges. Bank in its sole discretion may return documents at any time due to
documentary discrepancy. Therefore, preparing and presenting compliant documents is the key
to success of receiving full export proceeds. Preparing compliant document may reduce non-
payment risks, less-payment risks, documents return risks, goods forfeiting risks, customs
clearance problem etc.
Export from Bangladesh, most of the cases the buyer’s bank sends notice of refusal due to
discrepancies in the documents. Buyer and buyer’s bank deduct discrepancy and penalty charges
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for presenting discrepant documents. Sometimes, they return documents without payment.
Wrong documentation, lack of knowledge in preparing a fruitful contract or LC may sometimes
ruin the exporter and its business. Therefore, documentary educated and adequate people are
required for proper documentation and reducing non-payment or less payment risks.
This paper will demonstrate the export documentary risks that are associated in each method of
settlement. It will also illustrate how to reduce risks and prepare compliant documents in order to
receive desire payment.
Objective
There are many reasons for which exporter or exporting country receives less payment or non-
payment instead of full payment. There are some valid causes for making less payment; such as
paying bank charges, corresponding bank charges, foreign agent commission etc. But in addition
of deducting above charges, paying bank deducts discrepancy charge, penalty charge due to
documentary errors. Exporters can correct these errors as from preparing a fruitful export
contract to export documentation, all the steps exist at the counter of exporter. If they properly
prepare these documentation parts, export proceeds may be acquired fully and export failure due
to documentary discrepancies can be prevented.
Therefore, the main objective of the study is “To find out the documentary error, discrepancy
and risks involved in export documentation for which exporter as well as exporting country
receives no payment, most of the cases less payment than its expectation.” Also, aim to find out
risks and red flags in export documentation for each types of method of settlement and
recommend necessary measures for building up an effective contract and decreasing errors in
export documentations to achieve full export proceeds without having any risks on the part of
exporter, exporter’s bank and exporting country.
To accomplish this core objective, following objectives to be undertaken also:
 To analyze each method of payment in the context of export trade in Bangladesh

 To understand the work flow in each payment method against export trade only
 To find out the major documents used in export trade from Bangladesh
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 To know the major export documents preparation rule in the context of local and
foreign regulation
 To evaluate the common documentary discrepancies
 To review the case study in each method of payment
 To summarize the associated risks in each method of payment
Scope:
The scope of this research limited within the documentary part which is prepared and collected
by the exporter. There are many reasons of non-payment or short payment but in this paper,
author has given emphasis on the documentation part only as in the cross-border business
payments are made by viewing of documents only not based on goods. Documents are the
evidence of goods status. If the documents are as per requirement of buyer/buyer’s bank, then it
is understood that the goods are in order. The scope is limited within the finding of documentary
discrepancies, documentation chain, constraints and possible ways to resolve it.
The present study is, therefore, undertaken to identify documentary errors and discrepancies in
each step to mitigate non-payment and money laundering risks.
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Literature Review:
Several authors have analyzed the reason of export failure in international business. They have
analyzed each method of settlement for making payment in international trade. They have
identified the advantages and disadvantage for each method of settlement. They have cited
reasons for non-payment as country risks, foreign exchange risks, bankruptcy of buyer etc but
none have given emphasis on export documentation for which non-payment, short payment
occurred, documents are returned without payment.
Jesse Mora (November 26, 2014) pointed out the cost benefit analysis and liquidity constraint of
the firm for export failure. In this paper, the exporters do not have any liquidity constraint. They
have a great market demand due to low labor cost for making the finished goods. Despite that,
non-payment and less-payment frequently happened due to documentary discrepancies.
edc.ca [export development of Canada] has stated for non-payment in foreign transaction for the
buyer’s financial difficulties. They have pointed out other less frequent reasons as the received
goods are substandard, or simply refusing to accept a shipment at all. They have given emphasis
on sound credit management against non-payment risks.
The above-mentioned risk is associated with open account trading and documentary collection.
In the context of export trade of Bangladesh, exporters are allowed to trade only after receiving
satisfactory credit reports of the buyer. Buyer’s financial position may be assessed by receiving
credit report before shipment. Also, open account trading is not allowed in Bangladesh. In case
of LC transaction, this risk may be completely mitigated by allowing a second confirming bank
for payment. They have not shed light on the documentation part because in the developed
country most of the documents are prepared compliant.
First Intake, Certified Expert in Trade Service, Year 2018, BIBM report has pointed out the
documentary discrepancy for non-payment or less payment but the report has not elaborately
explained the issues.
Since the author has directly involved in this arena over an era, the author is the direct witness of
these issues and thus able to apply his practical knowledge to evaluate a fruitful finding.
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Methodology
The researcher has been working in a bank and scrutinizing export document over the years. He
has found that payments of most documents are not fully repatriated. The major cause of it is
documentary error. Wrong understanding in the documentation process incurs several risks
including payment risks.
The author has found that the documents that are mostly used in the context of export trade in
Bangladesh are discrepant documents. He has defined the documentation process correctly. He
has shown wrong documentation and mis-conceptual risks in the documents. Without proper
knowledge in the documentation process, it is very difficult to prepares or checks documents.
Author has gathered this knowledge from The Institute of London Banking and Finance (LIBF),
UK and Bangladesh Institute of Bank Management, Bangladesh and received expertise
certificates from those institutions.
Therefore, this paper in nature is a research paper which identifies the reason of non-payment or
short-payment due to documentary discrepancies. This report is prepared with the combination
of primary and secondary data.
As a secondary data, the researcher uses official records, local and foreign guidelines,
Bangladesh Bank circulars and as a primary data researcher originates direct interviews with the
Commercial Managers, Document Processing Manager of exporting companies. Data also
collected by handling and in-depth observation of numerous types of documents directly.
Researcher has also collected data from foreign bank SWIFT messages, live SWIFT server,
Online Export Monitoring System of Bangladesh Bank, Foreign Documentary Bill Collection
Register of its Bank.
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Limitations
In order to prepare the paper, the author has given emphasis only on documents based on which
exporter and exporting country receives payment, short-payment and non-payment. There are
other factors which also the reason of short/non-payment and should be taken into consideration
for further flawless investigation report.
The researcher is a certified document checking expert. He has applied his knowledge within the
documents to find the reason. The researcher tried his level best to make this report perfectly but
there are limitations observed by the researcher are given below:
 There was no previous investigation executed in this sector. For this reason, enough data
and procedure not found for reviewing the issue.
 Expiry, Late shipment are discrepancies that are not happened due to wrong
documentation. Therefore, data with these discrepancies should not be remained in the
calculation. Author has tried his level best to filtered them out but cannot able to
eradicate completely.
 Due to lack of protocol, opinions from the head of exporting company have not been
collected.
 Data have not been acquired from Buying house, Shipping company, Customs authority,
Merchandiser who are also the stakeholders in the documentation process.
 Information taken from limited number of exporters for the limited period in order to
drafting the paper.
 There are numerous types of documents used in export trade from Bangladesh. Author
has observed and explained mostly used documents.
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Methods of Payment
In international trade, exporter wants to get payment and importer wants to get the quality goods.
When to make payment or when to ship goods, these are depending on the methods of
payment/settlement. There are four primary method of payments are seen. They are
1. Advance payment
2. Open account trading
3. Documentary credit (DC) /Letter of credit (LC)
4. Documentary collection
At the perspective of exporter, most favorable method of payment is advance payment whereas
least favorable method of payment open account trading. After advance payment, the exporter
choice is documentary credit and then documentary collection. On the contrary, the importer’s
choice is reverse to the exporter’s choice.
Parties Methods of payment

Most Secure More Secure Less Secure Least Secure
Exporter Advance Documentary Documentary Open
Payment Credit Collection Account
Importer Open Documentary Documentary Advance
Account Collection Credit Payment
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Advance payment
Advance payment is the method of settlement which offers the best comfort and least risk to the
seller/exporter. On the contrary, since importer makes payment to the exporter before receiving
goods, it is the most risk associated method of payment for the importer as the exporter may not
ship the goods, or goods that have been shipped are lower quality as expected. Through advance
payment, the exporter reduces its credit risk i.e. non-payment risk as payment is received prior to
the delivering goods or title documents to goods. Advance payment may be executed through
cheque, Telegraphic Transfer (TT) SWIFT message. The exporters of Bangladesh receive most
advance payment through TT.
Characteristics of advance payment method:
Appropriate for: Advance payment is applicable for the exporters whose goods have a high
demand, not easily available in international market or the importers who do not have
satisfactory credit reports or in the new in business. It is also applicable for long standing trade
relationship between exporter and importer who were engaged in other method of settlement and
now enough trust has been grown to pay first before receiving goods. The importer who has
buying house or representative office in exporting country, can monitor exporter and goods may
engage in advance payment relationship.
Risk: Since payment is made prior shipment, there is no non-payment risk for the exporter.
Risks related to receive desired goods is placed on the importer.
Advantages: Cash flow generates prior shipment to exporter’s end. Exporter may procure goods
with the cash flow. In some cases, importer does not send money to exporter. On behalf of
exporter, third party who is ordering customer of payment may send money to exporter. In that
case, exporter may identify ordering customer before realizing the payment and take decision
whether any money laundering risks is associated with this transaction.
Dis-advantages: If exporters are adamant for executing shipment with the advance payment
only, they may lose potential customers who may feel interest in other payment terms. Generally,
all the dis-advantages goes to the account of importer. Exporter may ship short quantity, less
quality of goods. Even exporter may not ship goods against receiving advance payment.
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Work flow in the context of Bangladesh:
1. Buyer and seller agreed in a contract indicating advance payment as the method of
settlement.
2. Buyer makes advance payment through its bank to seller’s bank
3. Upon receipt of the telegraphic transfer (TT), seller’s bank advises the TT to seller and
requests to provide documentary evidences for executing export.
4. Seller who is the client and bonafide exporter submits export contract to its bank and
requests to upload the contract in the Bangladesh Bank Online Export Monitoring System
(OEMS).
5. Seller’s bank checks the export contract and upload it in the OEMS.
6. Seller issues EXP in the OEMS and submits EXP, Commercial Invoice, Packing List,
Advance Receipt Voucher (ARV) etc. to its bank for receiving payment in account.
7. Seller’s bank checks the documents again and credit the TT to seller’s account if found
okay.
8. The bank issues a certificate confirming receiving payment against the EXP as per
guideline of Bangladesh Bank Circular.
9. Upon confirming payment, shipping company issues transport document in the name of
(consignee) buyer. As per Bangladesh Bank Guideline for Foreign Exchange Transaction
(GFET)-1, Version-2018, without receiving payment no transport documents can be
issued directly in the name of buyer.
10. Seller customs the goods, shipped the goods, received bill of export, collect other
shipping documents and sends the title documents (Bill of Lading, Air Way Bill etc.)
including other documents as requested to the buyer. Buyer released the goods with the
transport documents.
11. Seller reports this to the OEMS and submit the documents to its bank.
12. Seller’s bank finally checks all the documents and settle the EXP in the OEMS.
Main documents:
Commercial Invoice, Packing List, Certificate of Origin, Bill of Lading, Air Way Bill, Truck
Receipt are generally seen in export trade of Bangladesh.
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Documents preparation Rule:
There is no uniform guideline for preparing documents which is required in advance payment.
Generally, documents are prepared as per contract and according to the country’s guideline if
any. GFET-1, Version-2018, provided following guidelines:
1. Commercial invoice to be manually signed.

2. Value, Quantity, HS Code, Port of Loading, Port of discharge, Importer’s name,
Exporter’s name, freight declared in the document must correspond with that of
declaration of EXP
3. Commercial invoice may show logical nominal deduction in relation to trade charges.
4. Transport documents can be directly consigned to the buyer subject to receive full
payment in advance by the seller’s bank.
5. Value and quantity of Invoice, packing list, transport documents or other documents must
conform with that of customs bill of export. In case of short shipment, short shipment
certificate to be issued forwarder must be verified by the customs authority. Indication of
short shipment must be mentioned in the back of customs certified bill of export.
Case Study-1 on Advance Payment:
An importer of I country sends payment in advance to exporter of E country for shipment of

readymade garments. Exporter submits sales contract and other necessary documents evidencing
export shipment against the advance payment. Exporter’s bank checks all the contents of the
documents and found clean (not associated with money laundering, in sanctioned list).
Exporter’s bank credits the advance payment to the exporter account and provides a payment
certificate. Exporter procures the goods, performs customs formalities and finally waiting for
shipping instruction from importer. Thereafter, importer gives shipping instruction over email to
exporter to ship the goods to country X (not importer’s country) and requests to prepare bill of
lading in the name of Y instead by importer’s name. These revised instructions were not
available in the sales contract which was submitted to the bank earlier. Seller prepares bill of
lading according to the revised instruction without informing its bank. After finalizing shipment,
seller submits all the documents to its bank. Bank checks the documents and found that the
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shipment has not been executed according to the sales contract and shipment has been made to a
sanctioned country.
Risks/Red Flags:
1. In case of receiving payment in advance, exporter has no payment risks.

2. Bank assumes risk for the clients (exporters) who have received advance payment in their
account but not shipped goods to the importer. Importer may complain for non-shipment.
3. Without bank’s engagement, unilaterally changing of an entity such as destination port,
delivery place and importer name as the ultimate consignee in the transport documents
may trigger as money laundering risks which may adversely affect any innocent party in
the loop.
Case Study-2 on Advance Payment:
An importer of Germany sends advance payment through TT to exporter of Bangladesh for

executing shipment of Socks to the importer. The exporter has trading business but no factory.
The exporter receives the proceeds by submitting necessary document to its bank. As required by
the importer, the exporter procures goods (branded socks) and executes shipment to Germany.
The German port authority checks the goods and founds branded item in the consignment. There
is a rule in the European country that before releasing goods, a notification to be sent to the
brand company. The brand company checks the exporter lists in its record and does not found the
name of exporter who has made shipment of the branded goods. This means that other entity has
imported branded goods without permission of the brand company. This is one kind of offense
according to Intellectual Property Rights (IPR). Later, the goods are burnt out and a legal notice
has been sent to the exporter through Bangladesh Bank.
Risks/Red Flags:
1. Since there is no bank’s involvement, bank has no option to check the issue
2. The Brand Company may claim an amount or filed a case for not respecting Intellectual
Properly Right (IPR).
3. There is no regulation in the GFET-1, V-2018 for regulating this type of trading exporter
in Bangladesh
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Open account trading:
This payment method is the opposite of advance payment method. It offers the least risks to the
importer but a high level of risks to the exporter. Exporter exports goods to importer at a credit
which is usually for 30/60/30 days. Importer sells the goods, increases cash flow and make
payment to exporter. Therefore, the consequence of open account trading is first shipment then
documents and finally payment but the payment is not definite.
Characteristics of open account trading:
Appropriate for: In order to penetrate foreign market, open account trading is a lucrative term
for the importer with a high risk for the exporter. Therefore, it is recommended for the foreign
market which is completely secured. The exporter who has representative office in importing
country, have the ability to monitor goods, sell and ensure payment may engage in open account
trading relationship.
Risk: Since goods are sold at credit and title documents of the goods are delivered before
payment, the exporter incurs a significant risk because the importer may default on making
payment at any time willingly or unwillingly.
Advantages: Banks are not involved in this transaction. Hence, it is free from banking
commission. Importer may penetrate foreign market at a low cost.
Dis-advantages: High non-payment risks for the exporter. Goods may be forfeited without
payment, short or delay payment may be occurred also. Some country’s regulation do not allow
exporter for this transaction.
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Work Flow:
1. The contract indicating method of payment as open account trading is established

between importer and exporter.
2. Exporter submit contract to its bank with a term “TT after shipment” and requested its
bank to upload the contract to the OEMS.
3. Exporter banks checks all the information and uploaded the contract to the OEMS.
4. Exporter issues EXP, customs goods, prepares and collects shipping documents.
5. Exporter hand over the goods to buyer nominated entity according to the agreed terms.
6. Exporter arranges to prepare transport documents such as Forwarder Cargo Receipt, Bill
of Lading, Air Way Bill directly in the name of importer and sends the same after
shipment.
7. Importer’s nominated entity takes delivery of the goods with the transport documents
8. Generally, exporter sells the goods at 30/60/90 day’s credit from the date of shipment.
9. Importer sells the goods and makes payment to the exporter’s bank.
10. Exporter’s bank receives payment and notify exporter regarding payment.
11. Exporter submits all shipping documents in evidence of export and requests its bank to
credit proceeds.
12. Exporter also gets “No Objection Certificate” and/or endorsements of transport
documents in the name of buyer.
13. Exporter hand over the same to buyer nominated entity.
14. Exporter’s bank checks all documents submitted by the exporter and settle EXP in the
OEMS.
Main documents:
Commercial Invoice, Packing List, Certificate of Origin, Bill of Lading, Air Way Bill, Truck
Receipt are generally seen in export trade of Bangladesh.
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There is no uniform guideline for preparing documents which is required in advance payment.
Generally, documents are prepared as per contract and according to the country’s guideline if
any. GFET-1, Version-2018, provided following guidelines:

declaration of EXP
4. GFET-1, 2018 instructs that transport documents which are title to goods may be directly
consigned to the importer subject to receive full payment in advance by the exporter’s
bank. According to the GFET, no transport documents which are document of title can be
prepared in the name of importer before receiving payment. Therefore, In black and
white, open account trading is prohibited in export trade of Bangladesh
conform to that of customs bill of export. In case of short shipment, short shipment
Case Study on Open Account Trading:
Open account trading is the mostly used among the other method of payments in the world. Due
to restriction of our local regulation in preparing of title documents (Bill of Lading) is prohibited
in the name of importer, the open account trading is prohibited in our country. But the exporters
of our country have been doing open account trading in another way which is namely TT after
shipment. Our exporters make agreement with the importer indicating payment term TT after
shipment. They require transport documents as a Forwarder Cargo Receipt (FCR) instead of Bill
of Lading. After preparing goods and passing customs procedure, exporter handovers goods to
importer nominated forwarder. In return, exporter is given FCR which indicates receipt of goods
but not a title document. The goods finally reached to the importer without payment. Exporters
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hold all document at their counter without giving posting in the OEMS and informing its
Authorized Dealer (AD) Branch. Importer sends payment ensuring receipt of goods. This type of
relationship builds up in case of long-standing relationship between importer and exporter.
Risks/Red Flag:
1. Despite long-standing relationship with importers, they may not make payment for any
un-expectable reason (Importer’s bankruptcy, Natural climate etc.)
2. Shipping company and exporter may be liable for engineering of title documents, for not
preparing title documents in the name of AD and for assisting in releasing goods to
importer without payment.
3. Shipping documents are submitted to AD at the last stage i.e payment stage. AML issues
if any can be reported but may not be prevented at the end stage.
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Documentary Collection:
Documentary collection is much similar to LC except the undertaking of any bank. Banks do not
check any document, rather engage themselves in mutual satisfactory settlement between parties
through flowing the documents in a correct manner. In the documentary collection, no bank
gives any undertaking of payment. The consequence of documentary collection is first shipment,
then documents and finally payment. This collection may be done at sight or ussance basis.
Documentary collection at sight may offer reduce risk for both for the importer and exporter. The
importer need not pay to its bank to whom the documents have been sent by the exporter’s bank
until the documents are viewed by the importer at its bank’s office. According to Uniform Rules
for Collection (URC) 522, the exporter is named as Principal, Importer known as Drawee,
Exporter bank who handles the documents for collection known as Remitting bank and the bank
that collect payment knows as Collecting bank. Presenting bank presents documents to the
Drawee.
Characteristics of Documentary Collection:
Appropriate for: It is applicable for the buyer and seller who are engaged in established trade
relationship in secure export market. Documentary collection is applicable for the parities who
want to do less expensive and simple transaction than complex LC transaction.
Risk: Exporter faces substantial risks than importer. Exporter may prepare documents correctly
and sends the documents for collection but finally may not be paid as importer losses his interest
neither in documents nor in goods. Ussance collection is riskier than sight collection for the
exporter. Importer may take delivery of goods by giving acceptance but not making payment
finally.
Advantages: Collection process is simple, not expensive like LC. There are no documentary
discrepancies for the exporter. Importer good wish is good enough for making payment. For,
deferred bill, importer can see the quality of goods before making payment.
Dis-advantages: Exporter does not have any payment undertaking. Goods may be forfeited
despite acceptance by the importer. For sight bill, importer has to make payment first to take
delivery of documents. Importer cannot see the actual quality of goods before making payment.
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Work Flow:
1. The contract indicating method of payment as Documentary Collection is established

between importer and exporter.
2. Exporter submit contract to its bank with a term “Documentary Collection” and requested
its bank to upload the contract to the OEMS.
3. Exporter banks checks all the information and uploaded the contract to the OEMS.
4. Exporter (Principal) issues EXP, passes customs procedure, executes shipment, collect
necessary documents conforms to the contract and submit documents to the Remitting
bank for collection
5. Remitting bank checks the documents with that of contract and forwards the documents
to the collecting bank for payment
6. Generally, for sight bill, remitting bank gives instruction deliver documents against
payment and for deferred bill, gives instruction deliver documents against acceptance.
7. Upon receipt of documents, collecting bank checks documents with that of covering
schedule of the remitting bank.
8. Collecting bank notifies importer (Drawee) regarding documents
9. Before payment or acceptance, drawee get opportunity to view the documents at the
counter of collecting bank
10. For sight bill, drawee makes payment and gets documents for releasing goods.
11. For deferred bill, drawee gives acceptance on the draft gets documents for releasing
goods.
12. Collecting bank notifies drawees acceptance to drawer (principal) through remitting
bank. It’s a buyer’s acceptance not bank’s acceptance. Bank is conveyer only. Bank will
make payment upon receipt of payment from buyer.
13. On maturity drawee makes payment to collecting bank. Collecting bank credits the
proceeds to remitting bank’s nostro account according to the collection schedule.
14. Remitting bank debit nostro account and credit proceeds to the principal after deducting
necessary charges, government levis etc. Thereafter, settle EXP in the OEMS.
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Main documents:
There is no limited document in documentary collection transaction. A short list of them are Bill
of Exchange, Commercial Invoice, Packing List, Bill of Lading, Air Way Bill, Phytosanitary
Certificate, Certificate of Origin, Inspection Certificate, Certificate of Origin GSP Form A,
Weight List, Chemical certificate, Environment Certificate, AZO Free Certificate, Anti mold
Bag Certificate, Various types of beneficiary’s Certificate.
There is no uniform guideline for preparing documents which is required in Documentary

Collection. Generally, documents are prepared as per contract and according to the country’s
guideline if any. There is no prejudice if the documents are prepared as required by the contract
and in accordance with UCP-600. Documents preparation rule may be taken from the Letter of
Credit chapter. In this cases, Contract number to be used in place of letter of credit. Bill of
Exchange to be drawn on importer not to any Bank. GFET-1, Version-2018, provided following
guidelines:

declaration of EXP
9. GFET-1, 2018, Chapter-8: Bill of Lading to be made out to the order of Authorized
Dealer bank of Bangladesh.
The Authorized Dealer further endorse to the order of Collecting/Presenting bank i.e.
importers bank from which importer will receive documents for taking delivery of goods.
Transport documents which are not documents of title such as Air Way Bill (AWB), to be
prepared directly to the importer’s bank. No document can be prepared in the name of
importer.
conform to that of customs bill of export. In case of short shipment, short shipment
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Case Study-1 on Documentary Collection:
A seller has been doing its export business over the years to various buyers all over the world.
He used Advance Payment, Letter of Credit and Documentary Collection as a method of
payment for his business. He never used the term Deliver Document against Acceptance (DA)
under Documentary Collection as a method of settlement.
The seller gets a new buyer for shipment of goods against advance payment. He executes
shipment to the new buyer against advance payment. After executing several shipments, the
buyer asks exporter for executing shipment against DP basis. The seller agrees with the buyer
and executes shipment at DP basis and receiving payment accordingly. All of a sudden, the
seller’s bank informed the seller that they have not been receiving payments of some
consignments. The seller takes up the matter with buyer. The buyer informs that he is out of fund
and is not able to make payment as well as release the goods by making payment at sight. Since
the buyer is not able to make sight payment, he approaches the seller to change the tenor of
payment to DA basis and requested to send revised “Bill of Exchange” @ 30 days sight. Buyer
assures seller that he will release the goods by giving acceptance on Bill of Exchange, sell the
goods, arrange the fund for making payment on maturity. Based on previous relationship and
biased on buyer’s request, the seller tries to pursue its bank to change the term to DA basis.
Seller’s bank describes the risk issues to the seller for DA basis collection but the seller firmly
believes that if the buyer’s bank sends acceptance, the bank must make payment on the maturity
date irrespective of method of payment. Seller argues to its bank that if the bank does not send
revised Bill of Exchange on DA basis urgently, the goods may be auctioned by buyer’s port
authority. The seller also informs its bank that if you do not send the documents for collection on
DA basis, you have to bear all losses against these consignments. After repeated demands from
the seller, seller’s bank sends revised “Bill of Exchange” @ 30 days sight to the buyer’s bank on
DA basis.
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The buyer releases goods by giving acceptance on the “Bill of Exchange” and its bank conveyed
the maturity date through SWIFT to seller’s bank. Seller’s bank informed about the maturity to
the seller.
On maturity, the buyer’s bank does not make payment to the seller’s bank. Upon sending several
reminders, the buyer’s bank informs that since they have not received payment from the buyer,
they are not in a position to make payment. They send the accepted “Bill of Exchange” to the
seller’s bank for taking up the matter with the buyer without any risks and responsibility at their
part.
They close their files accordingly.
Finally, the accepted “Bill of Exchanges” which have been sent on DA basis remains
unpaid due to changing the tenor from “Sight to Deferred”
Risks/Red Flags:
1. Changing the methods of payment from Advance Payment to Letter of Credit to
Documentary Collection meaning that importer push ahead the exporter at risk.
2. Importer may refuse to accept documents and may return the same without assigning any
reason. Exporter may incur financial loses.
3. In case of sight bill where document delivery instruction is “deliver documents against
payment”, importer may reject documents, may not take delivery of documents without
payment but in case of deferred bill where document deliver instruction is “deliver
documents against acceptance, importer may accept bill of exchange, take delivery of
documents and release goods but on maturity may not make payment.
4. According to Foreign Exchange Regulation Act (FERA), exporter may be held liable for
non-repatriation of export proceeds. It is a punishable offense.
5. Money laundering case may be filed against exporter for this offense.
Case Study-2 on Documentary Collection:

An importer gives readymade garments (RMG) order at a very high rate through contract
to the exporter of Bangladesh. Importer placed a condition that the fabric required to
prepare readymade garments to be imported from buyer nominated supplier from a third
country. Importer assures that the quality of the fabrics is much better than other fabrics
and the fabric seller is well known. Therefore, the price of the fabric is much higher and
the goods to be imported through sight LC. The importer of RMG assures the exporter of
Bangladesh that he will replace the contract with LC whenever he hears that the goods
P a g e 20 | 62
are ready for shipment. Despite the higher rate of fabric, a huge profit margin is found
after exporter’s calculation.
The exporter of Bangladesh submits the contract to its bank and says that the contract
will be replaced by LC. The exporter requests its bank to open Back to Back (BTB) LC
against contract for importing fabric as input raw material. Exporter’s bank takes credit
report of the importer and does not found satisfactory. Exporter’s bank does not agree to
execute the deal.
There is long term relationship between exporter and its bank. Exporter pursues its bank
in various ways and gets success at last. Exporter’s bank import fabric by opening sight
LC and makes payment as well. Exporter prepare the goods with the fabric according to
the order and notifies importer over e-mail for LC before shipment. Several times
exporter tries to communicate with importer but failed. The importer is not found any
more. The exporter does not receive any LC yet.
Finally, the high rated imported fabrics goods remain unshipped and unsold in the stock.
Risks/Red Flags:
1. Since exporter’s bank does not get any satisfactory credit report of the importer, the
exporter should not execute the deal
2. Offering higher rate than usual rate is trap
3. Placed order instead of LC also a part of trap
4. According to Chapter-7, GFET-1, V-2018, import to be done at a competitive rate but
in this fabric is imported at a higher rate expecting sell at the highest rate.
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Letter of credit or Documentary Credit:
Letter of credit (LC) or Documentary Credit (DC) both are same term. Generally, a bank that
issues a credit called LC issuing bank gives irrevocable undertaking of payment to the
beneficiary upon presentation of stipulated documents as required by the LC. Therefore, we can
summarize LC as follows:
1. It’s Irrevocable,
2. Independent
3. Documentary and
4. Payment is subject to presentation of credit compliant documents.
According to Uniform Customs and Practice for Documentary Credits (UCP) 600, Article-2,
Credit means any arrangement, however named or described, that is irrevocable and thereby
constitutes a definite undertaking of issuing bank to honor a complying presentation. Therefore,
Standby letter of credit and bank guarantee may be issued subject to UCP 600. Usually, a credit
is issued by a bank but it can be issued by a company or individual in the capacity of issuer. It is
the beneficiary’s responsibilities to accept a credit issued by other parties rather than bank.
Beneficiary is well advised to check the financial standing of the issuer to fulfill the undertaking
it has issued.
As per Bangladesh Bank F.E. Circular No.01 Dtd.25 June 2007, all Letter of Credit transaction
to be done in accordance with UCP 600. Therefore, all discussions are made herewith under the
guideline of UCP 600 and local regulation in force.
Characteristics of Letter of Credit:
Appropriate for: It is appropriate for new customers where buyer and seller are unknown or
there is no long-standing relationship established between them. It is also applicable for the
buyer’s whose credit report is not available or not satisfactory.
Risk: In this method, beneficiary gets definite undertaking of payment; on the contrary applicant
gets quality goods though stipulating various documentary clauses. Therefore, risks are
distributed in both parties.
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Advantages: LC issuing bank makes payment to beneficiary after shipment on presentation of
compliant documents. Beneficiary may negotiate and receive payment from the negotiating
bank. Exporter may mitigate credit risk of LC issuing bank if any through adding the confirming
bank in the LC. There are several payment term, financing facilities and risk mitigation options
are available in the LC transaction.
Dis-advantages: Since payment is subject to presentation of compliant documents, compliant

documents are rarely found. The spirit of LC does not exist for presentation of discrepant
documents. This produces payment risks for the exporter. On the contrary, payment is made
against presentation of compliant document not goods. There is a risk remains for the applicant
who has already made payment but receives low quality of goods. There is no rule for fraud
transaction against LC.
Work Flow: A credit may be issued by more than one bank, may be more complex but author
has described a mostly used basic work flow of a documentary credit.
1. Seller (beneficiary) and Buyer (applicant) makes an agreement indicating method of

settlement as Documentary Credit
2. Applicant requests issuing bank to issue a credit
3. Issuing bank issues a credit and requests a bank to advise the credit to the beneficiary
4. Advising bank advises the credit to the beneficiary
5. Beneficiary checks the LC in accordance with their requirement at their end
6. Upon satisfactory findings, beneficiary submits the credit to the nominated bank where
he has negotiation facility.
7. Beneficiary’s bank i.e. negotiating bank check the credit and upload the same to OEMS
8. Beneficiary issues EXP, passes customs procedure, executes shipment, collect necessary
documents conforms to the LC and submit documents to the negotiating bank for
forwarding/negotiation
9. Negotiating bank checks the documents with that of LC and forward the documents to
LC issuing bank.
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10. LC issuing bank scrutiny the documents and if found as pe LC makes payment for sight
LC or provide acceptance for usance LC and pays on maturity.
If the documents are found discrepant, the bank issues refusal notice within five banking
days and may approach for a waiver to the applicant. It is the sole judgment of the issuing
bank to approach waiver from applicant. However, if waiver found from applicant and
acceptable to issuing bank, it pays to presenter. The discrepant documents may be
returned by the issuing bank at any time after sending notice of refusal.
11. LC issuing bank makes payment to the nostro account of presenting bank by quoting their
bill reference number.
12. Presenting bank who is the beneficiary’s bank debit nostro account and credit proceeds
after deducting necessary charges, government levisetc.. Thereafter, settle EXP in the
OEMS.
Main Documents for LC:
There are numerous types of documents are used in LC transaction. A short list of them are Bill
of Exchange, Commercial Invoice, Packing List, Bill of Lading, Air Way Bill, Phytosanitary
Certificate, Certificate of Origin, Inspection Certificate, Certificate of Origin GSP Form A,
Weight List, Chemical certificate, Environment Certificate, AZO Free Certificate, Anti mold
Bag Certificate, Various types of beneficiary’s Certificate. In this report common types of
documents are taken into consideration for analyzing, which are generally required in most of the
letter of credit in the context of Bangladesh.
They are Bill of Exchange, Commercial Invoice, Packing List, Bill of Lading, Air Way Bill. It is
deemed that who can properly prepare as well as check these types of documents may be able to
prepare and check other types of documents also.
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Bill of Exchange: Bill of Exchange (Draft) is a very common financial documents used in
international trade. Financial document is also a legal document through which beneficiary claim
its payment to the bank as stipulated by the documentary credit (DC) or Letter of Credit LC).
Figure: Example of a Bill of Exchange (Draft) drawn under Letter of Credit
Bill of Exchange
1.Drawn under Letter of Credit No.801310029 Dtd.01Dec2019 of Import Bank N.A., USA
2. Draft No. 0029 3. Date: 20 Dec 2019
4. At Sight or 90 Days Sight or 5. Exchange For: USD12000.00

90 Days from Bill of Lading Date 10 Dec 2019 or
90 Days from Invoice Date 05 Dec 2019
6. Pay this sole of exchange or

Pay this first of exchange (Second of the same is unpaid)
7. To the order of
Export Bank Limited, Dhaka University Branch
8. the sum of “USD Twelve Thousand” only for value received
9. To 10. For and on behalf of

Import Bank N.A., USA
Exporter Limited
Nilkhet, Dhaka, Bangladesh
11. Bank’s Endorsement:

Pay to the order of
(On the back of the draft)
Import Bank N.A., USA
Export Bank Limited, Dhaka University Branch
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Document preparing rule:
1. Generally, letter of credit number, date and bank’s name are mentioned here if credit does
not stipulate otherwise.
2. Unique reference number is allocated by the beneficiary for its convenience. This is an
optional number.
3. Draft must be dated. The date of a draft shall not be dated after presentation or expiry
date of credit.
4. Tenor is one of the most important part of the Draft. Tenor of the draft must be in
accordance with the terms of the letter of credit.
For sight LC tenor must be “At Sight”
For usance LC such as 90 days Sight, Draft must be “90 days sight”
or
90 days after bill of lading date and Bill of lading date 10 Dec 2019 and on-board date 11
Dec 2019 then the draft must be “90 days from bill of lading date 11 Dec 2019. When bill
of lading date and on-board date differs then on-board date to be used for preparing draft
and calculating maturity date.
or
If a presentation consists more than one bill of lading then on-board date of the latest bill
of lading to be taken for preparing draft and calculating maturity date.
or
When a bill of lading indicates more than one on-board notation as an evidence of
transshipment the earliest on-board notation to be used for preparing draft and calculating
maturity date
or
When a bill of lading indicates more than one on-board notation as an evidence of partial
shipment the latest on-board notation to be used for preparing draft and calculating
maturity date
Maturity Date calculation:
90 days after sight: In case of presentation of credit compliant documents maturity date of
the draft to be calculated from the date of presentation to the nominated bank or issuing
bank.
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10 days from/after bill of lading date 04 December 2019 means the maturity date 14
December 2019. When from or after is used to calculate the maturity date then the date is
counted on the following date of the occurrence.
5. Amount: The draft to be drawn in figure with credit currency.
6. If one draft is required then sole of exchange is used. If draft required in duplicate then in
the 1st copy, first of exchange (second of the same is unpaid) and in the 2 nd copy, second
of exchange (first is unpaid) to be used.
7. This is the financing area. If the beneficiary does not receive finance from its bank, the
draft to be to the order of ourselves and beneficiary will endorse in blank. If the
beneficiary receives finance from its bank, the draft to be to the order of its bank and its
bank further endorse to the order of issuing bank from whom it will receive payment. In
the above case, the beneficiary receives finance from Export Bank Limited. Hence, draft
makes out to the order of Export Bank Limited and exporter’s bank endorsed the draft to
the order of Import Bank N.A., USA the LC issuing bank from whom it will receive
payment.
8. Figures to be written in words. In case of conflict between words and figure, words may
be taken into consideration.
9. The party to whom the draft is drawn. Normally it will be the issuing bank but may be
confirming bank and nominated bank as per LC. The drawee of the draft to be according
to the LC field 42C which indicates the name of the drawee of the draft. Except stipulated
otherwise, draft should not be drawn on applicant.
10. The draft must be signed by the beneficiary or on behalf of the beneficiary.
11. It is the back of the draft where endorsement is done by whom on whose order the draft is
drawn. In the above case, the draft is drawn to the order of Export Bank Limited, Dhaka
University Branch. Therefore, the Export Bank Limited, Dhaka University Branch
endorse the draft to the order of Import Bank N.A., USA who is LC issuing bank.
Correction and Alteration of Draft: Any correction of the draft to be authenticated by the
beneficiary with its initial or signature. It is recommended to present a clean draft instead of
corrected draft as legal system of the issuing bank may not allow correction in the draft and
there may be a clause in the LC in this regard.
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Common Discrepancies in the Draft:
1. Wrong letter of credit number, date, drawee, endorsement

2. Words and figure differ
3. Signed without indicating the name of beneficiary
4. Not signed by beneficiary or unsigned
5. Clause as required by the LC not stipulated
6. Not dated or quoted date is after presentation date
7. Issue date of BL quoted instead ofon board date
8. Maturity date can not be established form the draft itself
9. Wrong tenor: presented at sight instead of 90 days sight
10. Quantity mismatched with that of commercial invoice and other documents
Requirement of draft:
1. Draft must be required when LC is available by acceptance

2. Draft may be required when LC is available by negotiation and draft and drawee field is
filled up by LC issuing bank.
3. Draft must not be required when LC is available by deferred payment
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Commercial Invoice
Commercial Invoice represents description and value of goods. Commercial Invoice also called
commercial documents. Commercial Invoice generally prepared by the beneficiary to the
applicant demanding payment according to the terms of LC.
Figure: Example of a Commercial Invoice against Letter of Credit:
1. Commercial Invoice 2. Invoice No.: EXP/0029/193. Page: 1 of 2
8. Seller 4. Invoice Date

Exporter Limited 5. EXP NO.1877/00100/19 Dtd.15.12.2019
Nilkhet, Dhaka, Bangladesh 6. Letter of Credit No.801910029
7. Proforma Invoice No.12345738 Dtd.01.12.2019
9. Applicant/To 10. Other Information:
Importer Limited Vessel:
Los Angles, USA Port of Loading:
Port of Discharge:
13. LC issuing Bank:
Shipping Marks: Country of Origin of goods:
Container Number: 11. Additional Information:
12. Incoterms: CFR Los Angles, Incoterms 2010
14.Description of Goods: 10000 pcs full sleeve shirt USD5.00/pc
Total=USD50,000.00
Composition: 100% cotton, Color: White
15. Total Quantity:10000

Total Carton:40 Ctn
Gross Weight: 830 Kg Net Weight: 800 Kg
This is to certify that the goods are 16. For and on behalf of
free from harmful chemical.
Exporter Limited
P a g e 29 | 62
Nilkhet, Dhaka, Bangladesh
1. The title of the document should be as wanted in the credit but document may bear a
similar title, be untitled or abbreviated to invoice. However, an invoice must not be
identified or should not be titled as “provisional”, “proforma” or similar.
2. Unique reference number and date are mentioned on the invoice. Invoice number and
date also required for reporting in OEMS.
3. If an Invoice consists of more than one page then page number generally required to
identify.
4. Date is not a mandatory part of an invoice but it is usually used and required for
regulatory reporting.
5. Using EXP number and date in the Invoice is a practice in export trade of Bangladesh to
declare EXP’s goods in detail in the Invoice.
6. Letter or credit number if required by the credit.
7. Proforma invoice number if required by the credit.
8. Commercial Invoice to be issued by the beneficiary. Beneficiary may use its letter headed
pad or may write its name and address.
9. Name and address to be mentioned as stated by the credit.
10. Vessel, port of lading, discharge, shipping mark is not a mandatory requirement but if
they are stated, they must not conflict with other documents.
11. Precise information should be used. Additional information may be used subject to the
information does not conflict with the data of other documents.
12. If incoterm is used in the credit as a part of the description of the goods, it must be
mentioned as required by the credit.
13. The shipping mark, container number, seal number to be mentioned if required by the
credit.
14. Description, quantity, unit price and other information which is a part of description of
goods must correspondent with that of the credit.
15. Weight, Carton, Total quantity is not mandatory unless required by the credit but when
such data are mentioned must not conflict with the data that appearing in other
documents.
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16. Commercial Invoice need not be signed or dated if not required by the credit but local
regulation of Bangladesh requires invoice to be signed and dated.
Correction and Alteration:
Correction and alteration in the invoice need not to be authenticated or signed as any
documents which is issued by the beneficiary only need not to be authenticated or signed
when corrected (except draft)but if the commercial invoice requires any certification,
statement or declaration it is to be signed. According to local regulation, since invoice is
to be signed, it is to be authenticated when corrected.
Common discrepancies in the Commercial Invoice:
1. Proforma/provisional/draft invoice presented

2. Not issued by the beneficiary
3. Not issued to the applicant
4. Description of goods not as per LC
5. Showing additional goods not called by the credit
6. Omit to indicate incoterm as per LC
7. Value claimed in the invoice not in credit currency
8. Unit price not as per LC
9. Goods short shipped, over shipped, partial shipped
10. Showing wrong LC number/carton number/issuing bank. Weight differ with that of other
documents
11. Clause required by the credit not mentioned
12. Invoice is certified but not signed
13. Charges breakdown not shown separately as required by the credit
14. Goods shipped exceeds the 5% tolerance limit as approved by UCP
15. Sample and advertisement materials are shown are free of charge not called by the LC
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Requirement of commercial invoice:
In international trade commercial invoice is an essential document. Most of the customs in the
world requires commercial invoice through which they may able to know value, unit price,
product specification, buyer and seller’s information etc. In export trade from Bangladesh,
commercial invoice is a mandatory requirement for regulatory reporting purpose and submitting
to customs.
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Bill of Lading:
Bill of Lading is most used transport document. It is a title document through which applicant
(importer) release goods. Bill of Lading is called in various names such as Ocean bill of Lading,
Marine Bill of Lading, Sea Way Bill etc.
Figure: Example of a Bill of Lading against Letter of Credit:
1. Ocean Seaway Bill of Lading

2. Bill of Lading No.: ONEYDACV222546043. Page: 1 of 1
4.Shipper/Exporter 7. Invoice No. EXP/0029/193

Exporter Limited
8. EXP No.1877/00100/19 Dtd.15.12.2019
Nilkhet, Dhaka
9. Letter of Credit No.801910029
10.Proforma Invoice No.12345738 Dtd.01.12.2019
5. Consignee 11. Pre-carriage By:X-PRESS LHOTSE 075

UNTO THE ORDER OF 12. Ocean Vessel:MOL PARAMOUNT 108E
Export Bank Limited 13. Place of Receipt: CHATTOGRAM
Dhaka University Branch 14. Port of Loading:CHATTOGRAM
6. Notify Party 15. Port of Discharge: LONG BEACH, USA
Importer Limited
Los Angles, USA
16.Description of Goods:Fullshirt Gross Weight: 830 Kg. Measurement: 14 CBM
Composition: 100% Cotton, Color: White 20. SHIPPED ON BOARD
X-PRESS LHOTSE 075
17.Total Carton:40 Ctn CHATTOGRAM PORT
18. Shipping Mark 23 DEC 2019
19. Container No. TCNU5821XX3, Seal No.2345XXYY5
22. NUMBER OF BL: 1/1 21. FREIGHT PREPAID
24. Additional Information: 23. EXPORT SHIPPING LINE

TYPE OF MOVEMENT
FCL/FCL CY/CY AS AGENT
ON BEHALF OF CARRIER
EXPORT GLOBAL SHIPPING COMPANY
P a g e 33 | 62
P a g e 34 | 62
1. This is the naming portion of a Bill of Lading. A Bill of Lading (BL) may be named in
any manner through which it can be assumed that the shipment has been taken place in
the sea. Credit requires BL but documents presented as a Truck Receipt may not be
acceptable.
2. Every BL number is a unique number. There is no uniform convention for naming of a
BL but each shipping company has its own rule for naming BL. For regulatory reporting
to Bangladesh Bank OEMS, BL number is a mandatory requirement.
3. The number of pages should be mentioned and identified.
4. Generally, shipper is the beneficiary of the LC but shipper may be other parties.
5. Consignee is the controller of the goods. Consignee is the party who holds the title of the
goods. Therefore, consignee is the vital in the Bill of Lading. According to our local
regulation (GFET-2018, V-1, Ch-08), all the BLs to be consigned to the order of
authorized dealer (nominated) bank in Bangladesh and further endorsed by the them to
the order of LC issuing bank or as required by the LC. This rule is not applicable for
advance payment method.
6. Notify party is the party to whom the shipping authority notifies regarding the arrival of
goods in the named port of destination. Generally, the applicant, its agent and the issuing
bank are the notify party. Any one as required by the LC may be a notify party but when
the applicant’s name and address are shown as the name and address of a notify party,
they must not conflict with each other.
7. Invoice number and date in the BL is not a mandatory requirement.
8. The option of EXP number and date is not required by the LC. EXP is our local
requirement. Generally, EXP number is found in the LC to identify which EXP’s goods
are shipment thorough the BL.
9. Generally, Letter of credit is to indicate in the BL in order to identify the good of whose
letter of credit are being transferred from one country to another country. It is not a
mandatory point unless required by the LC.
10. LC specifically requires proforma invoice number then it is to be mentioned in BL.
Generally, LC does not require proforma invoice number to mention in the BL.
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11. Pre-carriage is required when goods are carried to the port of loading by another means
of vessel from another place of receipt. Therefore, on board notation should not be in the
pre-carriage vessel.
12. Ocean vessel is a vessel though which goods are shipped from port of loading to port of
discharge. On board notation generally found in the ocean vessel.
13. Place of receipt is a place from which goods are carried to port of loading.
14. Port of Loading is a port from which goods are shipped onboard for purpose of shipment
to port of discharge. For avoiding any confusion, port of loading to be as per LC.
15. Port of discharge is the port where the goods to be shipped. Generally, applicant is
domiciled at the port of discharge. For avoiding any discrepancy, port of discharge to be
as per LC.
16. Description of goods, gross weight, net weight, measurement, composition should be as
required by the LC but must not conflict with that of any documents. Des
17. Number of carton generally found in the BL. This number to be conformed with packing
list or other documents.
18. Shipping mark generally contains the type of goods, instruction for handling of fragile
goods, weight etc. Shipping mark may contain the above information or more
information.
19. Container number, seal number are additional information usually available in
containerized shipment.
20. It is a mandatory requirement. A BL must appear to indicate the vessel name on which
goods have been shipped on board at the port of loading by preprinted wording or an on
board notation indicating the date on which the goods have been shipped on board.
21. Bill of Lading to indicate freight prepaid or freight collect (freight payable to destination)
as required by the credit should correspondent respective incoterms. For example, for
FOB term, BL to indicate freight collect and for CFR terms BL to indicate freight
prepaid.
22. A BL must appear to indicate the number of original issued. For example, 1/1, 2/2 and
3/3. If more than one original is issued then full set of BL to be submitted.
23. A BL must indicate the name of carrier. Carrier, master or agent may sign the BL. If a BL
is signed by the carrier, he must identify himself as carrier. Similarly, a LB is signed by
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the master or agent, he must identify himself as master or agent. If an agent signs a BL,
he must indicate on whose behalf he has signed for. For example, as agent for or on
behalf of carrier/master.
24. There are some additional information are found in the BL. For example, whether the BL
is full container loaded i.e. FCL or shipment effected from container yard (CY) to CY
etc.
25. Terms and condition of carriage: Generally, it is indicated on the reverse of BL. If BL
does not have contract of carriage on the reverse side of BL, it shall indicate an address,
web address, location where the contract of carriage may be viewed. This type of BL is
called short form or blank back BL.
A BL is not to contain any indication of charter party.
Correction rule is similar to the signing rule of BL. Any correction of data is to be
authenticated by the carrier, master or any of their agent. The agent who has made the
correction may be different from the named agent in BL. But the agent has to be
identified as an agent of the carrier or master (captain) of the BL.
Common discrepancies in the BL:
1. Late Shipment
2. Port of loading or discharge not as per LC
3. Straight consigned (absent to order of)
4. No indication of freight collect/prepaid
5. Carrier not named
6. Signing capacity not specified
7. Signed by agent but not named
8. Description of goods not correspondent with invoice or other documents.
9. Showing defective condition
10. BL is subject to charter party
11. Showing shipped on deck
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12. Not showing the number of original issued
13. Vessel name absent
14. Showing intended vessel. Actual vessel not named
15. Correction not dully authenticated
16. BL not independent
17. Weight, measurement differ with that of other documents.
18. Notify party not as required by the credit
19. Stamped on boar notation absent against pre-carriage shipment
20. BL not endorsed or not endorsed to the order of LC issuing bank
Requirement of Bill of Lading:
Bank deals with documents not goods. So, the question is how bank can capture goods without
taking its position. This has been solved by the BL. The BL is the document which represents
the goods. Therefore, the BL is called title of documents. It is vastly used in international trade.
Bank virtually takes position of the goods by holding the position of BL. Importer pays to bank
for taking position of BL and finally for taking position of goods. Now, another question has
been raised that how the title can be transferred. This has been solved through the negotiability
characteristics of BL. Among the transport documents, only BL can be prepared as negotiable
form and the title of BL i.e. the ownership of the goods transfers from one party to another party
through endorsement.
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Air Way Bill: An Air Way Bill (AWB) is one of the transport documents used in international
trade. It is a non-negotiable transport document covering air cargo transportation from one
airport to another airport. Air shipment is more costly but faster than sea shipment. Air Way Bill
is also known as “Air Consignment Note”. Likewise, BL, Bank has no constructive control over
goods in an AWB. If AWB are directly consigned to applicant, consignee (applicant) of the
AWB can clear goods by providing their identification without the need of AWB.
1. House Air Way Bill

4. EXPORT GLOBAL SHIPPING COMPANY (Carrier)
AWB No.: ONEYDACV222546043. Page: 1 of 1
2. Shipper/Exporter Invoice No. EXP/0029/193

Exporter Limited
EXP No.1877/00100/19 Dtd.15.12.2019
Nilkhet, Dhaka
Letter of Credit No.801910029
Proforma Invoice No.12345738 Dtd.01.12.2019
3. Consignee 8. Airport of departure: DAC

Import Bank Limited N.A. Airport of destination: Los Angeles.
Los Angles, USA 11&12. Through: HKG (Hong Kong)
Notify Party 10.If terms and conditions of carriage are not found of the
Importer Limited back of AWB, please visit the website:
Los Angles, USA www.proshadib.com
14. Description of Goods: Full shirt Gross Weight: 830 Kg.
Composition: 100% Cotton, Color: White
Total Carton:40 Ctn
15. FREIGHT PREPAID
6. Goods have been accepted for 5. EXPORT SHIPPING LINE

carriage in good order and
conditions. (13) AS AGENT
ON BEHALF OF
CARRIER
7. Date of Issue: 10 Dec 2019
4. EXPORT GLOBAL SHIPPING COMPANY
9.Original 3 for Shipper
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Documents preparing rule:
1. An AWB may be named as House Air Way Bill, Air Consignment Note or similar name.
2. Consignor or shipper usually the beneficiary of the LC but may be other than beneficiary.
3. Consignee of AWB is determined by the terms of credit. Due to the non-negotiable
characteristics of AWB, It does not require indicating “to order of”. It is prepared directly
consigned to the named entity. In general, the named entities are applicant and issuing
bank. Delivery of air consignment is made to the consignee through identification not
presentation of original AWB.
 If LC requires “to order of a named entity” then the AWB can be prepared in the name
of that entity directly
 IF LC requires “to order” only then AWB can be prepared in the name of LC issuing
bank or applicant. Preparing AWB “to order” without naming any entity may create
discrepancy.
 If LC requires “to a named entity” then AWB must be prepared to the named entity.
Preparing AWB to the order of that entity may create discrepancy.
As per GFET-1, 2018, AWB is made out or directly consigned to the applicant’s bank.
Usually, the applicant bank is LC issuing bank. For this reason, AWB is directly
consigned to the LC issuing bank unless otherwise specified in the LC. An AWB is not
prepared directly to the applicant’s name until the beneficiary receives full export
proceeds.
4. An AWB must indicate the name of “Carrier” either in the body or in the signature line or
in both places without any conflicting.
5. An AWB must appear to have been signed by the carrier or a named agent acting for or
on behalf of the carrier. If the AWB is signed by the carrier, the carrier must be identified
itself as the carrier or if the AWB is signed by the agent, the agent must identify it as the
agent. Any signature by an agent must indicate that it has signed for or on behalf of the
carrier.
6. An AWB must indicate that the goods have been accepted for carriage. “Accepted for
carriage” is not the mandatory requirement. Received for shipment, shipment executed
these types of similar wording also acceptable.
P a g e 40 | 62
7. An AWB must indicate the date of issuance. The date shall be considered as the date of
shipment unless the AWB shows a specific notation of the actual date of shipment. In that
case, the specific notation shall be deemed to be the date of shipment whether it is before
or after the issuance date of AWB. There may be a box in the AWB appearing flight
number and date will not be considered the date of shipment.
For an example, if an AWB indicates issue date 07 Dec but in the box flight date
indicates 10 Dec then the date “07 Dec” to be considered the date of shipmen unless a
specific notation has been found otherwise.
8. An AWB must indicate the airport of departure and the airport of destination conforms to
the credit. If a credit indicates a country name or geographical area, an AWB must
indicate the actual port within the specified country or geographical area with or without
indicating country or geographical area.
The ports may be named as 3 letters of IATA code such as DAC for Shahjalal
International Airport, Dhaka, HKG for Hong Kong airport.
9. An AWB must be original for consignor or shipper or sender whether or not credit so
requires. Presenting an AWB indicating original for consignor or shipper or sender serves
the purpose of requirement “full set” AWB by a credit.
10. An AWB must contain the terms and condition of carriage which would not be examined
for compliance. An AWB may also make reference to another source containing the
terms and condition of carriage.
11. An AWB indicating transshipment is acceptable provided that the entire carriage is
covered by one and the same AWB.
12. If a credit prohibit transshipment, an AWB showing transshipment is allowed provided
that the entire carriage is covered by one and same AWB.
13. An AWB not to show defective condition of goods or packaging. For example: There are
several leakages in the packaging are not sufficient for air journey. The condition must be
expressly declared. Packaging may not sufficient or similar wordings does expressly
declare defective conditions. If a credit requires clean AWB, the AWB may not show
clean. Not showing clean in the AWB is not expressly declares a defective condition.
14. Goods description in AWB may be in general terms but must not conflict with other
documents or with the description of credit.
P a g e 41 | 62
15. Freight related information required by the credit or shows in other documents need not
to show as identical in the AWB but must not conflict. For example, credit requires
showing “Freight Collect” in AWB. The AWB may show “Freight payable at
destination”. The requirement of freight charges to show in the AWB may be satisfied by
the preprinted notation.
16. If a credit requires cost additional to freight are not acceptable, AWB must not show the
costs which are additional to freight but “cost for delay in unloading goods” or similar
wordings does not indicate costs additional to freight.

Correction rule is similar to the signing rule of AWB. Any correction of data is to be
authenticated by the carrier or any of their agents. The agent who has made the correction
may be different from the named agent in AWB. But the agent has to be identified as an
agent of the carrier of the AWB.
Common discrepancies in the BL:
1. Late Shipment
2. Airport of departure or destination not as per LC
3. Consignee not as per LC
4. Not shows the indication of freight
5. Carrier not named
6. Signing capacity not specified
7. Signed by agent but not named
8. Description of goods not correspondent with invoice or other documents.
9. Showing defective condition of packaging
10. Not showing goods have received for carriage or similar wordings
11. Not showing original 3 for shipper or similar wording
12. Correction not dully authenticated
13. Weight, measurement differs with that of other documents.
14. Notify party not as required by the credit
15. Cost additional to freight mentioned
16. Not mentioned “10 days free from demurrage at destination port” as required by the
credit.
P a g e 42 | 62
Requirement of AWB:
AWB is not a negotiable document. It does not require endorsing for transfer of ownership of
goods. Usually, LC issuing bank issues delivery order in the name of applicant for releasing
goods. AWB is not required to surrender to release goods. Goods are delivered to the named
consignee on identification. In case of late shipment, often LC requires goods to be shipped by
Air at beneficiary’s cost. AWB evidences received the goods for shipment.
Nonpayment due to discrepancy:
Case study no.01:
Truck Receipt: It is not a document of title. It evidences the carriage of goods from place of
receipt to place of delivery. In cross border trade, Truck receipt generally used between
Bangladesh and India. Bangladeshi exporter, export goods through truck from Bangladesh land
port to India land port. The exporter arranges necessary documents and submits to its bank. The
exporter’s bank forwards the documents to LC issuing bank in India. Applicant’s bank that is the
LC issuing bank checks documents at their end, raise discrepancy if any within five banking
days. The bank in its sole discretion seek waiver from applicant. If applicant refuses to waive the
discrepancy, the LC issuing bank returns the documents without payment to the presenter, the
exporter’s bank. Finally, exporter’s bank returns the documents to exporter. The EXP of relative
documents remains pending in the Bangladesh Bank Online Export Monitoring System. The
EXP can be cancelled if the exporter can able to return the goods. In land trade by truck between
Bangladesh and India, the Indian importer may release goods without the need of original
documents. In a similar way, Bangladeshi importer may release goods without the need of
original documents. But due to low bargaining power of Bangladesh and high diplomatic power
of India, Bangladeshi importer cannot able to grasp the goods without payment. On the contrary,
the LC issuing bank, importer’s bank of India returns the documents and closes their file without
payment to exporter’s bank in Bangladesh by showing discrepancy only. Here the vital point is
“DISCREPANCY’ i.e. DISCREPANT DOCUMENTS. If the documents do not have any
discrepancy, the importer’s bank in India has to make payment without seeking any waiver or
asking anything to applicant.
P a g e 43 | 62
Risks/Red Flags:
1. Discrepant documents may be returned by the LC issuing bank at any time after sending
refusal notice. The LC issuing bank need not to know the goods status.
2. Beneficiary’s bank has no constructive control over goods through Truck Receipt.
Therefore, document must be compliant against shipment through truck otherwise goods
may be forfeited and documents may be returned without payment.
P a g e 44 | 62
Determination of original, copy and number of documents to be presented
1. If a credit requires document without stipulating number of original or copy, meaning

that at least one original document must be presented.
2. If a credit requires the number of original required, at least the number of original to be
presented.
3. If a credit requires presentation of “copies of document” then it means the credit requires
copy documents but original may be presented if original is not prohibited for
presentation by the credit.
4. If a credit requires “in triplicate”, “in three-fold” or “in three copies” then at least one
original and the remaining number of copies will satisfy the requirement.
5. A presentation is not to include any original transport document if credit states the
disposal instruction for all original documents.
But
If the credit do not states the disposal instruction for original transport document, a
presentation may include original transport documents.
Original Determination: A document to be treated as an original through original signature,

mark, stamp, or label of the issuer of the documents unless the documents indicates that it is not
original. It is not a point of determination that whether such authentication (signature, mark,
stamp, or label) has been applied in the document in manual or facsimile form.
A document to be treated as original if it appears to be “Written i.e. hand written” or “typed,
perforated, stamped, by the document issuer’s hand” or “original stationary such as letter head
pad of document issuer” or “states/marked/appeared that it is original” or “does not state that it is
copy”.
P a g e 45 | 62
Usage:
Sl. Credit Requires Requirement stands for What may be

1 Invoice At least one original May be
presented more
than one original
including copy
2 Three Invoices At least three originals May be
Invoice: Three Original presented more
than 3 originals
including copy
3 5 copies of Invoice At least 5 copies without original 5 originals may
be presented
5 copies of Invoice, original At least 5 copies without original Only 5 copes, no
prohibited original allowed
4 Invoice in Triplicate One original and two copies 3 original may be
presented
5 Full Set Bill of Lading Number of BL it indicates to be If BL indicates 3,
presented. then 3 original to
be presented
2/2 Bill of Lading 2 original BL If BL indicates 1
then 1 original or
Number is not matter; full set is indicates 3 then 3
the criterion. original may be
presented.
2/3 Bill of Lading 2/3 Bill of Lading requires 3/3 BL may be
presented
2/3 Bill of Lading, 1/3 2/3 Bill of Lading requires Evidence for
original to applicant sending 1/3 BL
may require by
credit
Copy of BL required, No original can be presented May be
Original to be sent to presented more
applicant copies than
required
Copy of BL required, no Copy BL required Original & copy
instruction for original both may be
presented
P a g e 46 | 62
Check List for Export Documents drawn under LC
Based on the discrepant document’s scenario, following check list has been prepared to check
the LC related documents before presentation the documents to bank counter. This will decrease
a number of discrepancies.
Letter of Credit (LC) No. & Date :

Value of LC including amendment & tolerance (b) :
Presented documents value (c) :
Balance value of LC (d) : d = b-c; Must not be negative
Note: It is well recommended that number of submitted documents is equal to required

documents. Documents submitted more or less than it requires may create discrepancies.
Documents required as per LC Required Number Submitted Number

Original Copy Original Copy
Bill of Exchange (Draft)
Commercial Invoice
Packing List
Transport Documents (BL, AWB etc.)
GSP Form-A
Certificate of Origin
Inspection Certificate
Applicant’s Approval
Beneficiary’s Declaration
Courier Receipt
Phytosanitary Certificate
Canada Customs Invoice
AZO Free Certificate
Test Report
P a g e 47 | 62
P a g e 48 | 62
Note: The following documents need to be corrected or necessary amendment for the LC is
required for the documents which answers are “NO”.
SL Particulars Tick as
No. appropriate
YES NO
GENERAL
01 Is the L/C freely negotiable or restricted with the exporter’s
bank?
02 Are beneficiary’s name and address in the LC math with
that of name and address of exporter?
03 Are the applicant’s name and country on the documents
same as stated in LC?
04 Have the alterations, if any, in the documents been properly
authenticated by the issuer, except those issued by the
beneficiary?
05 Is balance available under LC for this export documents?
06 Has the documents been presented within the stipulated
period / expiry date of the LC?
07 Has the shipment been executed within validity date for
shipment?
08 Whether the LC does not require any documents that can
not be full filled by the beneficiary?
09 Whether the payment is conditional in fulfillment of certain
conditions?
10 Is data on a document does not conflict with the data of
other documents?
11 Is the value of documents correspondent between “Bill of
Exchange” and “Commercial Invoices”?
P a g e 49 | 62
EXP FORM
01 Has the value of the EXP matched with commercial
invoice?
02 Has the EXP been signed as per GFET by the authorized
person of the company?
03 Does the EXP information conforms with the guideline of
statistics department of Bangladesh Bank?
04 Does the EXP information conforms with that of Bill of
Export.
Note: If the answer is yes for any particular following documents then the documents may be
considered as discrepant documents and need to be corrected.
SL No. Particulars Tick as
appropriate
YES NO
BILL OF EXCHANGE / DRAFT
01 Is the Bill of Exchange dated?
02 Is the Bill of Exchange drawn & signed by the Beneficiary
of the LC?
03 Is the Bill of Exchange drawn on the party (drawee)
indicated in the LC?
04 Does the Bill of Exchange bear the amount in words and
figure correctly and is it in the same currency as in the LC?
05 Are the currency and amount consistent with those of the
Invoice?
06 Is the Bill of Exchange made to the order of exporter’s lien
bank?
07 Does the Bill of Exchange bear that it is drawn under the
subject LC issued by Issuing Bank, if required by LC?
08 Does the Bill of Exchange meet all other LC requirements?
P a g e 50 | 62
INVOICE
01 Is the invoice made out in the name of the LC applicant or
as per LC?
02 Is the invoice made out in the same currency as the LC?
03 Are unit price and quantity as per LC?
04 Do value and quantity match with bill of export/ or Short
(Excess) Shipment Certificate?
05 Does the LC call for signed invoice and has the invoice
been signed by the beneficiary?
06 Do the description of the goods & incoterms declared in the
invoice agree with those in the LC?
07 Do the shipping marks on the invoices agree with those on
transport documents?
08 Do the gross and net weights if shown on invoices agree

with those on transport documents and packing list?
09 Does the Invoice stipulate certification(s) where there is
such requirement in the LC?
10 Does the commercial invoice meet all other requirements of
the LC?
TRANSPORT DOCUMENTS (Bill of Lading / Air Way Bill /
Truck Receipt / Railway Receipt etc.)
01 Has the full set of Transport Document been submitted?
02 Does the transport document indicate the port of loading,
discharge and final destination as per LC terms?
03 Is the transport document properly consigned to exporter
bank as per GFET?
04 Does the transport document bear “On Board” notation or
similar expression?
05 Does the transport document indicate “freight Prepaid” or
“freight collect” or similar wording in accordance with the
P a g e 51 | 62
terms of the LC?
06 Does the transport documents bear the capacity of the issuer,
name of the carrier and is signed in accordance with the
UCP-600?
07 Does the description of the goods declared on the transport
documents agree in general terms with those on the
invoices?
08 Are the gross and net weights in the transport document
same in the Invoice, Packing List, Weight Note or any other
documents presented under the LC?
09 Are the name(s) and address of the notifying party(s)
identical with those in the LC?
10 Does the transport document bear the license number and

expiry of its issuer?
11 Does the transport document meet all other terms of the LC?
PACKING LIST
01 Are the quantity of goods and number of packages in the
packing list identical with other documents?
02 Are the gross & net weights in the packing list identical with
other documents?
03 Do the particulars given in the packing list agree with the LC
and other documents?
04 Does the packing list meet all other requirements as per LC?
CERTIFICATE OF ORIGIN
01 Is the Certificate of Origin issued by the party as stated in
the LC?
02 Does the Certificate of Origin meet all the requirements of
the LC?
INSPECTION CERTIFICATE
P a g e 52 | 62
01 Is the inspection certificate issued by nominated party and
signed by nominated person(s) correctly as per LC?
02 Does the inspection certificate include information as
required by the LC?
03 Is other information of the inspection certificate identical to
those of other documents?
OTHER DOCUMENTS
01 Have all other documents as required by the LC been
submitted?
02 Are the submitted documents as per terms of the LC?
P a g e 53 | 62
Data Analysis:
EXP is an export declaration form prescribed by Bangladesh Bank. Every exporter is to declare
commercial invoice value, quantity, freight, port of loading, port of discharge, HS Code of
goods, LC/Contract number, Transport Document number, importer and exporter’s name,
exporting country name etc. The exporter is to upload this information in the Bangladesh Bank
Online Export Monitoring System (OEMS) while passing the goods through customs. The
exporter submits EXP along with documents to its Authorized Dealer (AD) bank for
collection/negotiation. Upon receipt of documents, Bank lodgments the documents to its register
and gives duplicate posting of the EXP in OEMS. After receiving proceeds, AD branch will give
triplicate posting of the EXP in OEMS. This procedure can be summarized below:
 Issuance of EXP: Bangladesh Bank may know the amount and quantity that the
exporters are going to export.
 Duplicate EXP: Bangladesh Bank may know the amount and quantity that have
been exported
 Triplicate EXP: Bangladesh Bank may know the amounts that have been
repatriated.
 Duplicate-Triplicate= Due amount of EXPs that have not yet been repatriated.
The author has downloaded the EXP register in CSV format from Bangladesh Bank Online
Export Monitoring System. All types of export data against documentary collection,
documentary credit, advance payment, TT after shipment and other information are found mixed
in the EXP register. The data have been filtered, sorted and then appended in the below table:
P a g e 54 | 62
Figure: Less repatriation of foreign currency against all types of payment methods
Authorized Numbe Export amount Proceeds Less repatriation % of Less

Dealer r of in USD for the Repatriation amount in USD repatriation
Code No. EXPs period 2018 amount in USD Z=(X-Y) L=(Z*100)/X
(X) against EXP for the
period 2018 (Y)
1877 4867 166,422,744.54 159,950,736.79 6,472,007.75 3.89%
1880 3337 117,646,014.67 116,514,204.52 1,131,810.15 0.96%
1886 3140 85,328,057.16 84,469,909.71 858,147.45 1.01%
1883 2555 57,728,254.33 56,508,376.41 1,219,877.92 2.11%
1890 891 13,735,900.24 13,557,726.83 178,173.41 1.30%
Total 14790 440,860,970.94 431,000,954.26 9,860,016.68 2.23%
Calculation: Less repatriation i.e. % loss of foreign currency (L) = [(X-Y)*100]/X =%
The above table has been filled up with the information of five AD branches containing 14790
numbers of EXPs against which exporting country Bangladesh has received export proceeds.
The total export amount USD440,860,970.94 and total repatriation amount USD431,000,954.26.
Therefore, total deductions amount of five branches USD9,860,016.68, equivalent BDT82.52

crore meaning that exporting country has received less amount BDT82.52 Crore against export
of 05 AD branches in one year.
Total deduction amount over export in one-year BDT82.52 Crore which is 2.23% on export
amount.
P a g e 55 | 62
Authorized dealer (AD) is allowed by Bangladesh Bank to handle foreign currency. While AD
branch sends documents to abroad as per LC intending to collect export proceeds, the branch
lodgments the bill in their Foreign Documents Bill Collection Register (FDBC). In the register,
they take note of LC Number, Documents/Bill Value, Bill type (Sight or Ussance), Discrepancy
Date, Maturity Date, Payment Received Amount etc. The author has filtered the LC related data
from FDBC register. Each bill may contain several numbers of EXP. The data have been filtered,
sorted and then appended in the below table:
Figure: Less repatriation of foreign currency against LC only
Authorized Number Export amount Proceeds Less % of Less
Dealer of against LC in repatriation repatriation repatriation
Code No. export USD for the amount in USD amount in USD L=(Z*100)/X
bill period 2018 against the export Z=(X-Y)
against (X) bill for the period
LC 2018 (Y)
1877 751 33,254,808.55 32,866,487.27 388,321.28 1.17
1880 960 75,866,291.88 74,779,423.35 1,086,868.53 1.43
1886 392 28,164,536.70 27,827,145.44 337,391.26 1.20
1883 55 1,808,761.13 1,797,203.95 11,557.18 0.64
1890 132 4,670,543.87 4,604,869.48 65,674.39 1.41
Total 2290 143,764,942.13 141,875,129.49 1,889,812.64 1.31
Calculation: Less repatriation i.e. % loss of foreign currency (L) = [(X-Y)*100]/X =%
The above table has been filled up with the information of five branches containing 2290
numbers of LC related export documents against which exporting country Bangladesh has
received export proceeds. The total export amount against LC is USD143,764,942.13 and total
repatriation amount USD141,875,129.49.
Therefore, total deductions amount of five branches is USD1,889,812.64, equivalent BDT15.82

crore meaning that exporting country has received less amount BDT15.82 Crore against export
LC of 05 AD branches in one year.
Total deduction amount over export in one-year BDT15.82 Crore which is 1.31% on export
amount.
P a g e 56 | 62
Letter of credit is definite undertaking of payment. There is a wrong conception among the
exporters if one’s shipment is made against LC, payment is definite according to the definition of
the LC. Bangladesh Bank guidelines GFET-1, 2018 Chapter 8, has also given emphasis for
executing export against LC. But shipment against LC without presentation of compliant
document is not a definite undertaking of payment.
Payment/Acceptance against Letter of Credit must be made within 05 (five) banking days by LC
issuing bank if the documents are found credit compliant. Following table shows one-year export
data against sight LC only where payment is deferred for long time due to presentation of
discrepant document. Following table is appended by the sight LC’s data which have been
filtered from the FDBC register.
Figure: Major percent of LC documents are paid exceeding 05 banking days.

AD Number of bills paid within the days against Sight bill under LC
0-05 11-20 21-30 31-40 41-50 51-60 61-70 71 Total Percentage of

Code
Days Days Days Days Days Days Days Days Bills bills paid
No.
Number of Bills within 10 days
1877 157 199 54 23 21 25 10 21 510 30%
1880 82 182 64 16 3 2 1 2 352 23%
1886 117 98 43 21 18 30 17 43 387 30%
1883 2 21 6 1 1 2 3 18 54 4%
1890 0 6 3 0 0 0 0 0 2 0%
Calculation:
Various types of export data against documentary collection, documentary credit sight and
usance, advance payment, TT after shipment are found mixed. Among them only sight
documentary credit related data have been filtered and exhibited in the above table.
P a g e 57 | 62
Author has found column (0-05) days i.e 05 banking days for receiving payment against
compliant document = Documents sending date – Payment Received Date – 5 days as transit
days.
In the above table, it is found that:

1. 30% bills are paid to 02 AD branches within 05 banking days
2. 23% bills are paid to 01 AD branch within 05 banking days
3. 4% bills are paid to 01 AD branch within 05 banking days
4. No bills are paid to 01 AD branch within 05 banking days
5. Payments of above 70% documents are received more than 05 banking days. Therefore,
the major percentage of documents is discrepant.
Now, to reach to the conclusion, it is to check the rest 30% documents which payments have
been received by five banking days. For the calculation of rest 30% documents, author has
furnished the following table.
Figure: Percentage or number of compliant documents against LC.

Status of bills, payments of which are received within 05 banking days
AD Number of Number of Paid Paid documents Number of

Code Bills which Bills against without are checked and compliant
payment which LC raising any found discrepant documents
have been issuing Bank notice of
D E=C-D
received by firstly raised discrepancy
05 banking Discrepancy
(C=A-B)
days (A) then paid (B)
1877 157 120 37 37 0
1880 82 26 56 56 0
1886 117 73 44 44 0
1883 2 1 1 1 0
P a g e 58 | 62
The column A of above table represents the number of bills payment of which received by the
beneficiary’s bank within five banking days following the day of presentation of the documents
to the LC issuing bank or to the bank as required by the LC. Colum B represents the number of
bills against which the applicant’s bank has raised discrepancies but made payment within the
five banking days. Hence, the column represents discrepant documents. Column C represents the
number of bills which have been paid by the applicant bank within five banking days without
raising any discrepancy. These numbers of paid documents have been scrutinized by the author
to determine whether the documents are discrepant or not. Column D shows the data of
documents which have been scrutinized by the author and found as discrepant.
Therefore, according to the calculation, all the documents discrepant.
P a g e 59 | 62
Findings:
In the case of Advance Payment:
1. Buyer may claim for non-receipt of consignment for shipment to another parity who has
not remit proceeds or who is not a party of sales contract.
2. Shipment to another party or another destination that was not a part of sales contract may
trigger money laundering risk by executing shipment to sanction country.
In the case of Open Account Trading:
1. TT after 30/60/90 days of shipment is an open account term as this term allows to ship or
handover goods to buyer or buyer nominated entity without payment. Payment remitted
after 30 or 60 or 90 days of shipment evidenced by Bill of Lading or AWB. In this
30/60/90 days times goods remain under control to buyer not to the port authority. In fact,
goods kept to the port authority for a longer period of time causes a huge port demurrage.
2. Generally, this type of business is done with the buyer to whom the seller has long term
relationship. Despite the relationship, payment Is uncertain.
In the case of Documentary Collection:
1. Lack of knowledge may result in building relationship with shell companies, shell banks
triggers money laundering risks.
2. For sight bill, payment is uncertain not goods
3. For time bill, payment and goods both are uncertain.
4. In the Documentary Collection, acceptance is provided by the buyer. Buyer’s bank
conveys acceptance to the seller’s bank. If buyer makes payment to its bank then its bank
may make payment to seller’s bank. Therefore, despite acceptance, payment and goods
both are uncertain. Goods may be forfeited without payment.
5. Documents under Documentary Credit if accepted by the LC issuing bank it must be paid
but documents under Documentary Collection if accepted by buyer may not be paid
despite acceptance.
P a g e 60 | 62
In the case of Letter of Credit:
1. In the context of export trade in Bangladesh, all the documents are discrepant.
2. Discrepancies in the documents results non-payment, short payment, delay payment etc.
3. Shipment against LC does not have no meaning as discrepant document damages the
spirit of LC
4. Payment is ensured for credit compliant document irrespective of goods position i.e.
whether the goods is lost in transit or burnt out but for discrepant document issuing bank
may return the documents by raising a simple discrepancy.
5. For discrepant documents, penalty can be charged, payment can be delayed which
outcomes loss of foreign currency and loss of interest.
Summary: If variables such as low bargaining power, nonexistence of export-oriented

environment, corruption, poor infrastructure which hinders export, do not exist or remain in an
appropriate manner then “Lack of proper knowledge in export documentation may be
pointed out as the only key factor that makes the export vulnerable in the context of export
trade from Bangladesh.”
P a g e 61 | 62
References:
1. ICC Uniform Customs and Practice for Documentary Credits

ICC Publication N° 600 - ISBN 92-842-1257-X
Copyright© 2006, International Chamber of Commerce
2. ICC International Standard Banking Practice for the Examination of Documents Under
Documentary Credits 2013 Revision for UCP 600
ICC Publication N° 745E - ISBN 978-92-842-0188-4
Copyright© 2013 - International Chamber of Commerce (ICC), Paris
3. Guide to Documentary Credits- Fifth Edition- Gary Collyer

Copyright© ifs University College 2015
4. For EXP data: Bangladesh Bank Online Export Monitoring System under the
URL: https://exp.bb.org.bd/ords/f?p=112:1:700161762487
5. ONE Bank Limited Centralized Trade Processing Center (CTPC), Dhaka

Export Document Scrutiny Unit Foreign Documentary Bills Collection (FDBC)
Register
6. Society for Worldwide Interbank Financial Telecommunication (SWIFT) server of ONE

Bank Limited, CTPC, Dhaka
7. Guideline for Foreign Exchange Transaction (GFET), Volume-1, Version-2018 available

at: https://www.bb.org.bd/aboutus/regulationguideline/foreignexchange/fegvol1.php
8. Foreign Exchange Regulation ACT (FERA), 1947
P a g e 62 | 62

Non-Receipt of Export Proceeds Due To Discrepant Documents

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Introduction

To accomplish this core objective, following objectives to be undertaken also:

 To analyze each method of payment in the context of export trade in Bangladesh

2. Open account trading

3. Documentary credit (DC) /Letter of credit (LC)

Parties Methods of payment

Characteristics of advance payment method:

1. Commercial invoice to be manually signed.

Case Study-1 on Advance Payment:

An importer of I country sends payment in advance to exporter of E country for shipment of

1. In case of receiving payment in advance, exporter has no payment risks.

Case Study-2 on Advance Payment:

An importer of Germany sends advance payment through TT to exporter of Bangladesh for

Characteristics of open account trading:

1. The contract indicating method of payment as open account trading is established

1. Commercial invoice to be manually signed.

Case Study on Open Account Trading:

Characteristics of Documentary Collection:

1. The contract indicating method of payment as Documentary Collection is established

Documents preparation Rule:

There is no uniform guideline for preparing documents which is required in Documentary

6. Commercial invoice to be manually signed.

Case Study-1 on Documentary Collection:

They close their files accordingly.

Case Study-2 on Documentary Collection:

Characteristics of Letter of Credit:

Dis-advantages: Since payment is subject to presentation of compliant documents, compliant

1. Seller (beneficiary) and Buyer (applicant) makes an agreement indicating method of

Main Documents for LC:

Figure: Example of a Bill of Exchange (Draft) drawn under Letter of Credit

2. Draft No. 0029 3. Date: 20 Dec 2019

4. At Sight or 90 Days Sight or 5. Exchange For: USD12000.00

6. Pay this sole of exchange or

8. the sum of “USD Twelve Thousand” only for value received

9. To 10. For and on behalf of

11. Bank’s Endorsement:

Export Bank Limited, Dhaka University Branch

1. Wrong letter of credit number, date, drawee, endorsement

1. Draft must be required when LC is available by acceptance

Figure: Example of a Commercial Invoice against Letter of Credit:

1. Commercial Invoice 2. Invoice No.: EXP/0029/193. Page: 1 of 2

8. Seller 4. Invoice Date

Composition: 100% cotton, Color: White

15. Total Quantity:10000

Correction and Alteration:

Common discrepancies in the Commercial Invoice:

1. Proforma/provisional/draft invoice presented

Figure: Example of a Bill of Lading against Letter of Credit:

1. Ocean Seaway Bill of Lading

4.Shipper/Exporter 7. Invoice No. EXP/0029/193

5. Consignee 11. Pre-carriage By:X-PRESS LHOTSE 075

24. Additional Information: 23. EXPORT SHIPPING LINE

Correction and Alteration:

Common discrepancies in the BL:

Requirement of Bill of Lading:

1. House Air Way Bill

2. Shipper/Exporter Invoice No. EXP/0029/193

3. Consignee 8. Airport of departure: DAC

6. Goods have been accepted for 5. EXPORT SHIPPING LINE

Correction and Alteration:

Nonpayment due to discrepancy:

Case study no.01:

1. If a credit requires document without stipulating number of original or copy, meaning