Characteristics of international trade settlement documents
Settlement documents are indispensable documents in international trade settlement, generally including financial instruments, invoices, packaging documents, transport documents, insurance policies, certificates of origin, etc., which are transmitted by mail between international, play the role of providing settlement information, as evidence of settlement, and determining the relevant rights and obligations.
As a transitory document, a settlement document is short in length; because it provides information, it belongs to the descriptive part of speech; in order to take into account the definition of rights and obligations, it also often contains normative language. Therefore, the settlement document often omits a lot of information common to the industry, while the key information is expressed in detail.
In the current situation, documentary credit settlement accounts for a large part of international trade settlement, if there is a loss of settlement documents, it may lead to many problems, such as: how to pick up the goods; the funds under the guarantee pick up stagnation; the reissue of transport documents; the reissue of documents of relevant government departments; the discrepancies in the negotiation of letters of credit and the risk of receiving foreign exchange, etc.
Case situation
Our company has a bill settled by L/C normally negotiated by the bank, but due to the reason of the negotiating bank or the courier company, the bill originally should be sent to a bank in India and sent to a bank in Bangladesh was confused. Although the bank on our side hurriedly communicated and resent the documents returned from India to Bangladesh, a bank in Bangladesh insisted that they received all the correct documents, and even though a well-known courier company and a well-known big bank went to the bank in Bangladesh to communicate, they still haven’t got the documents back so far. Seeing that the goods have arrived at the port of destination, the deadline for the use of boxes has passed, the port charges at the port of destination are increasing, and customers are constantly urging for goods, we can only deal with the bill of lading lost by sea.
As the documents are in the negotiation line sent to the issuing bank on the way lost, the original shipping company as long as the negotiation line and the shipper to sign a letter of guarantee to re-issue a set of bills of lading, but the country has a large bank firmly disagree to provide a letter of guarantee, and customers continue to urge the goods, and finally only by our company to provide a letter of guarantee and security, the shipping company to re-issue a set of bills of lading solution. The good thing is that our company has a good relationship with the customer, the goods are also in short supply, the customer is willing to accept the discrepancies in the negotiated documents, so that our company avoided the loss of money and goods.
Of course, due to the provision of a deposit greater than the purchase price and the guarantee period of more than two years, the incident still has an impact on our company’s capital turnover, but also prompted us as exporters to think about the loss of documents in international trade settlement, how to avoid the risk of money and goods and minimize the loss.
Thinking about the loss of international trade settlement documents
1. Funds stagnation response measures
According to Incoterms 2000, in CIF, CFR and FOB conditions, the seller must provide transport documents to the buyer without delay and at his own expense. According to this inference, the risk of losing documents should generally be borne by the seller. The carrier to ensure their rights and interests require the consignee in the absence of the original bill of lading in the case of guaranteed delivery or reissue the bill of lading in the case of a guarantee, and require the bank to provide a guarantee or direct bond. If you consider the funds stagnation, the exporter can take the following measures to solve.
(1) promptly notify the shipping company and its agent. In this case, the shipping company and its agents have a duty of care, can no longer hold the original bill of lading only by the holder of the bill of lading that release the goods, but should require the consignee to provide sufficient evidence to prove that the bill of lading is obtained in good faith. For example, whether the endorsement is continuous? Meet the requirements? Whether the payment of reasonable consideration? First to avoid the risk of loss of goods.
(2) can timely apply to the court for public notice. One can ensure that the rights and interests under the bill of lading is not infringed; Secondly, you can solve the problem of long-term stagnation of the deposit. Because once the court decided to accept the public notice, the transfer of the bill of lading rights during the period are invalid. The legal cost of the public notice procedure is low, and so is the lawyer’s fee. Foreign countries should also have such a procedure, and the expiration of the notice period (generally 60 days) can be applied to the court for a judgment of exclusion.
(3) Communicate with the negotiating bank to provide a bank guarantee, although it is said that large state-owned banks are generally reluctant, but it is not absolute. In addition, we can also choose some international banks with good creditworthiness as the negotiating bank.
(4) Generally speaking, the loss of documents should not affect the port pressure, because the consignee has the obligation to receive the goods and can not refuse to discharge the goods; the carrier also can not refuse to discharge the goods on the grounds that the consignee does not have the original bill of lading, although it has the right to refuse to release the goods. This can avoid some of the risk of increased port charges.
(5) can communicate with the consignee, take the guarantee pickup. That is, in the shipping of goods to the bill of lading has not arrived in the case, the consignee and the bank together to the transport company to provide a written guarantee, request first pick up the goods, to ensure that the bill of lading or the right of goods later, and is responsible for the shipping company to compensate for the losses caused by this. Of course, in general, the bank to protect their own interests will require the consignee to provide it with 100% of the payment of the security deposit.
2. Clear rights and responsibilities to take countermeasures
(1) Rights and responsibilities of the issuing bank
Article 7 of UCP600 specifies the premise of the issuing bank’s responsibility for reimbursement: the documents are delivered to the designated bank or issuing bank, and the second paragraph of Article 35 of UCP600 stipulates that if the designated bank determines that the documents are delivered and sent to the issuing bank, even if the documents are lost, the issuing bank must pay or negotiate. This provision is a new addition to UCP600 compared to UCP500, this provision makes the issuing bank can not be based on the first paragraph of Article 35 – the bank in the transmission of information exemption, to refuse to pay. These two articles establish the issuing bank’s liability for the risk of loss of documents.
So what rights does the issuing bank have in this case? It should be remembered that any liability requires a certain basis and conditions, the issuing bank in the case of lost documents to pay or negotiate, but also must meet the following conditions.
First, the designated bank to deliver a single.
Second, the designated bank in accordance with the method and manner of submission of documents under the letter of credit.
Third, the documents submitted are consistent with the documents. In other words, if the above three conditions are not met, the issuing bank has the right to refuse to pay. In this case, the letter of credit stipulates that the certificate is freely negotiable, and the negotiating bank acts as the designated bank and submits the documents in the manner specified in the letter of credit. In the first two cases, the issuing bank cannot refuse to pay. In the third case, since the negotiating bank has lost the documents in the process of giving them to the issuing bank, it is no longer possible to prove the discrepancies in the documents, and the issuing bank has no basis to refuse payment within 5 working days.
(2) The rights and responsibilities of the designated bank
The first paragraph of Article 35 of UCP600 stipulates that the bank shall be exempt from liability for the consequences of delay, loss, mutilation or other errors in the delivery of documents, letters and documents in transit. The second paragraph also stipulates that if the designated bank confirms that the delivery of the documents match and sends the documents to the issuing bank, even if the documents are lost, the issuing bank must be obliged to pay or negotiate. This provision specifies that the designated bank is exempt from liability for the loss of documents in the process of delivery, and secondly, if the designated bank has made commitments or negotiations to match the delivery, the issuing bank must reimburse the designated bank. Note: Designated bank is exempt from liability for loss of documents and obtain reimbursement from the issuing bank is conditional, that is, the designated bank must deliver the documents in accordance with the manner required by the letter of credit, and to meet the documentary conformity. If the letter of credit requires mailing and the designated bank fails to do so and the documents are lost, the issuing bank is exempt from liability.
(3) Rights and responsibilities of the beneficiary and applicant
The essence of letter of credit is a settlement instrument and means of payment, which is designed to promote the orderly and healthy development of import and export trade. Although the letter of credit is independent of the sales contract between the buyer and seller, the international practice and various rights and obligations under the letter of credit can be finally transferred to the applicant through the medium of the letter of credit application between the issuing bank and the applicant. In the case of lost documents, as long as the beneficiary submits the required documents to the designated bank at the time and place specified in the letter of credit, it has fulfilled all the obligations under the letter of credit, and the issuing bank’s payment responsibility is determined, and then the issuing bank will make the issuing applicant bear the final risk through the agreement between the issuing bank and the applicant, etc.
3. Risk prevention of sending documents
The provisions of Article 35 of UCP600 have significant practical significance, and will play an important role in eliminating misunderstandings and reducing disputes. In this regard, exporters in the actual business processing, in order to prevent the risk of loss of documents need to pay attention to the following matters.
(1) According to paragraph 35 of UCP600, the exporter should request the issuing bank to specify the way of sending documents. With the development of international logistics and courier industry, a large number of science and technology is applied, the possibility of losing documents is getting smaller and smaller, and the security of documents is greatly improved. However, due to various reasons, the loss of documents still happens from time to time. In the face of the above situation, when opening a letter of credit, the issuing bank should stipulate the way of sending documents and the number of times to send them. It is better to send the documents twice, so as to avoid the risk of losing the documents, which is a kind of protection for both the issuing bank and the beneficiary.
(2) As the negotiating bank and the exporter, the main documents should be printed when negotiating the documents in case of accidents, some negotiating banks only keep the copies of invoices and bills of lading due to internal regulations, this practice is questionable. Once the documents are lost, the issuing bank will not be able to meet the requirements of the issuing bank if they ask for a full set of copies of the documents, resulting in the consequences of uncollectible payments. It should be noted that the preservation of copies of documents, the back of certain documents, also need to be copied and preserved, such as bills of lading and insurance policies, in order to prevent the issuing bank can not judge whether the accurate endorsement and thus put forward can not pay the situation occurs.
(3) after sending the documents, should track the postal delivery of documents in a timely manner, find abnormal timely measures to avoid unnecessary delays; in the case of lost documents should contact the courier company as soon as possible to issue a certificate of lost documents, and the copy of the documents will be delivered to the issuing bank in a timely manner. At the same time, the negotiating bank should work with the beneficiary to actively cooperate with the applicant to solve the problem of picking up the goods.
4. Sound management system of relevant documents
If the documents are lost, generally speaking, the enterprise has to bear the risk by itself. Therefore, for enterprises, a sound document management system is essential, which can reduce the probability of lost documents. For the documents under the foreign sales contract, each contract set up a set of folders, all the relevant written documents will be filed, and the full set of documents will be scanned and kept, on the one hand, to prove that they have fulfilled their contractual obligations; on the other hand, if the documents are lost, it is also conducive to take relevant remedial measures.
5. Keep the bill of lading, be prepared for any problems
In international trade, the bill of lading is a very common document, in general, the shipping company usually issues three original bill of lading, which has the same effect, one of the bill of lading after the withdrawal of goods, the other self-lapsing. In view of the bill of lading for the evidence of property rights, its loss after the operation procedures are very cumbersome, and unnecessary losses to foreign trade enterprises, so in the operation of documents, unless the customer requires a full set of bills of lading, foreign trade enterprises are best to keep an original bill of lading, in order to better prevent the risk of loss of documents. In this case, our company sent a full set of bills of lading, and documents lost after the processing of very troublesome, after the occurrence of this case, our company in advance of compliance with the customer to communicate, for the implementation of the contract after no longer send a full set of bills of lading, but to keep a copy, in order to facilitate the smooth development of foreign trade business.
6. Must be based on the market situation, do a good job of customer credit investigation
For foreign trade business, must be at different stages of the customer’s creditworthiness and performance ability to understand and analyze. It is important to note that the customer’s creditworthiness is not static, often some customers in the initial stage of business cooperation are able to perform well, releasing the smoke and mirrors of credibility. Once the time is ripe or the market has changed, they will be driven by the interests and implement malicious fraud. Customers with high creditworthiness are generally able to actively cooperate with the exporter to do the relevant response work to avoid the loss of both sides in the case of lost settlement documents and on the basis of long-term cooperation.
Conclusion
With the development of society, the number of international trade cooperation in China will be more frequent, the scale will be more ambitious, involving more enterprises, international trade is bound to become a powerful support to pull the development of the national economy, promote the development of social prosperity and enhance the international competitiveness of China. However, as a high-risk industry, documents play a very important role in foreign trade, which is both a necessary means of contract performance and an important tool for foreign trade operation management. Due to the language communication barrier between domestic and foreign countries, there is no detailed communication on the specific process of trade settlement, and there are many risks in international trade settlement due to many external factors.
Therefore, the relevant departments need to pay attention to this work, and actively take defensive and control measures, so as to be able to reduce the risk. This paper analyzes the aspects related to the loss of international trade settlement documents, in order to provide some reference.