08 February 2008

SWIFT Format: Field 46A

Field 46A (Documents required) is also another optional field. However, in most commercial LC, this field is always presents. This is where all the documents required pertaining to that particular trade described in the LC should be expressly indicated.

This includes type of documents, number of copies as well as photocopy or original piece. As a general rule, at least one original of each document stipulated in the LC must be presented (Article 17(a), UCP 600). Documents are categorized as financial documents, commercial documents, transport documents, insurance documents and official documents.

Drafts or Bills of Exchange (B/E) are example of financial documents. These documents are normally provided by the bank, signed by the seller and drawn on the nominated bank or the issuing bank. B/E is a negotiable instrument and transferable in principle. The reason why this document is used in trade is simply because it provides a second legal protection to the acceptor or bona fide holders. In the event of default, the holder shall pursue legal action based on the B/E alone. This is also one of the reasons why freely negotiable LC is becoming so popular worldwide.

Commercial invoice on the other hand is not negotiable but only serves as an accounting document where details descriptions of the goods are indicated. This document normally is prepared by the seller. Packing list is another document prepared by the seller where it indicates how the goods are packed, weight of packaging, number of items per package and marks and numbers.

There are various types of transport documents which largely depend on the mode of transport engaged in moving the goods from the point of origin to the final destination. Multimodal transport is increasingly important in this modern world with the introduction of containerization. Goods can be picked up at the seller’s premise and move on using a combination of different mode of transports. In this case, multimodal transport document is required to be presented. Port to port shipment or inland waterways where goods are moved using vessel require Bill of Lading or Sea Waybill. If goods are transported by air, Air Waybill is required and so on. All these documents are issued by the transport operators.

It is also important to note that while in transit, the goods are exposed to risks, damage or loss. In this instance, insurance coverage against damage or loss to the goods should be procured and should be expressly indicated in the LC.

It is sometimes required by the law of the importing country to declare certain goods of their content, substance or origin to ensure compliance. Therefore, official documents such as analysis certificate, inspection certificate, quality certificate or certificate of origin may be required to be indicated in the LC.

It is worth to remember that only documents related to the trade of the goods should be requested because it will implicate the ability of the seller to prepare, obtain and to present all the documents to the bank to claim for payment.

State clearly what are documents required, how many copies, how many original and how many photocopies. If, documents such as analysis certificate, inspection certificate or quality certificate is required, state clearly who should issue and who should sign them.

07 February 2008

SWIFT Format: Field 45A

Field 45A (Description of goods and/or services) is another optional field. However, in commercial LC, this field is always presents. This is where the goods purchased by the buyer are described as well as indication of trade term used.

The description of goods should not be so excessive and complicated. Although this field provides 100 lines with 65 characters (alpha numeric) per line, but traders are always encouraged to describe the goods as brief as possible.

LC does not guarantee the buyer will receive the goods he ordered. This is not the function of the LC, in short, LC does not guarantee the goods. It serves no purpose at all by excessively describe the goods to the last details.

For example, if buyer is buying cell phone parts of various models and colors for various brands, they need not necessarily be described model by model, color by color or brand by brand in the LC. It is sufficient to indicate for example, ‘…cell phone parts as per pro-forma invoice no 1234 dated 4th February 2008’.

The trade term used or agreed upon by both parties must also be indicated in this field e.g., FOB, CIF, CPT.

06 February 2008

SWIFT Format: Field 44C (Latest Date of Shipment)

Field 44C (Latest date of shipment) is also another optional field. This field may or may not present. If it does not present, the shipment must be made within the validity of the LC.

If this field present, the shipment must be made within the date indicated in this field. The date indicated in this field is the limit within which the shipment must be made by the seller. This date should not exceed the expiry date of the LC.

Evidence of shipment is indicated in the transport documents like multimodal/combined transport document, Bill of Lading, Non-Negotiable Sea Waybill, Charter Party Bill of Lading, Air Transport Document, Road, Rail or Inland Waterway Document, Courier Receipt, Post Receipt or Certificate of Posting.

The date indicated on those documents is deemed to be the date of shipment and it should be within the date indicated in field 44C.

05 February 2008

SWIFT Format: Field 44A (Place of taking in charge...)

Field 44A (Place of taking in charge / dispatch from.. / Place of receipt) is an optional field. This is a field where a place or a point of handing over the goods to the carrier should be indicated. The place or point is depending on the trade terms used e.g. Ex-Work, FCA, FAS, FOB, CFR, CIF, CPT, CIP, DAF, DES, DEQ, DDU or DDP.

Field 44A is appropriate for multimodal transport where the place or point of handing over is any place on land.

Field 44E (Port of loading / Airport of Departure) on the other hand is most appropriate to be used where mode of transport is determined by vessel or aircraft.

Field 44F (Port of discharge / Airport of destination) is also an optional field where a place of actual physical delivery of the goods should be made in the country of the buyer. The same case applies to field 44B (Place of final destination / For transportation to… / Place of delivery).

The appropriate trade terms and fields to be used will be discussed in the coming post.

20 January 2008

LC SWIFT Format: Field 43T (Transshipment)

Field 43T (Transshipment) is an optional field. It may present or it may not present.

Transshipment is shipment of goods in a single journey, from the point of origin to the final destination using a combination of different mode of transport.

Whether or not transshipment is to be allowed or permitted, it is largely depends on the type and nature of the goods and the trade terms used; E term, F terms, C terms or D terms.

Containerized goods are subject to transshipment because they are normally delivered to the carrier at the seller’s premise or at a named place prior to loading on board the vessel. The goods will be transported by a trailer/lorry by road to the port and later loaded on board the vessel at the port of shipment. In this case, transshipment is to be allowed.

On the other hand, petroleum, grains, liquid cargo and other loose products normally will be delivered directly from the depot at the port of loading and on board the vessel. In this instance, transshipment is prohibited. However, this does not mean the transshipment will not take place. The goods may be unloaded and loaded onto another vessel.

Under this field, either ‘ALLOWED’ or ‘NOT ALLOWED’ is to be indicated.

07 January 2008

LC SWIFT Format: Field 43P (Partial Shipment)

Field 43P (Partial Shipment) is an optional field. The presence of this field would depend on the trade agreement between buyer and seller. Partial shipment is, in simple words, delivery of an order in two or more consignments, if allowed and mutually agreed upon by both parties, buyer and seller. The seller has the advantage to ship any quantity or amount lesser than the original order or as indicated in the LC in few shipments until fully delivered to the buyer.

For example, if the amount indicated under field 32B (Currency Code, Amount) is USD10,000.00, the seller may ship the goods worth of USD 3,000.00 in the first shipment, second shipment, USD5,000.00 and third shipment USD2,000.00.

Seller should always request that the LC specify whether partial shipment is allowed in order to avoid unexpected problems. In case partial shipment is allowed, the validity of the LC will not be affected even if a problem arises in meeting the delivery date. The total shipment of USD10,000.00 must be fully delivered within the expiry of the LC.

Under this field, either one of these words:

‘ALLOWED’ or
‘NOT ALLOWED’

should be indicated. If ‘NOT ALLOWED’ is indicated, the seller is to ship the whole order in one shipment only. The word ‘PROHIBITED’ sometimes is used instead of ‘NOT ALLOWED’.





06 January 2008

LC SWIFT Format: Field 42C (Drafts at...)

Field 42C (Drafts at…) is an optional field which means it can present or it may not present depending on the availability of the credit, either by Payment, Acceptance, Deferred payment or Negotiation (Field 41a).

Field 42C should present if the availability of the LC is made by Acceptance or Negotiation (Field 41a). On the other hand, if the LC is made available by payment or Deferred payment, field 42C would not present.

When field 42C presents, field 42D (Drawee) must also present. The Draft must be drawn by the drawer either on the issuing bank or the confirming bank, if any. Therefore, field 42D must present to indicate the Drawee bank. If the LC does not require confirmation by a confirming bank, the Draft must be drawn on the issuing bank. Again, the Drawee bank can either be indicated by full name and address or by indicating the SWIFT address or BIC.

The use of Draft or Bills of Exchange in trade is widely practiced by banks worldwide. The Draft can be drawn at sight or at a determinable future time (tenor/time). Further information on Draft will be posted later.

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