SUBMISSION OF NECESSARY DOCUMENTS BY EXPORTER TO THE NEGOTIATIONG Bank:

As soon as the seller / exporter receives the credit and is satisfied that he can meet its terms and conditions, he is in position to load the goods and dispatch them. The seller then sends the documents evidencing the shipment to the bank.

Exporter will submit those documents in accordance with the terms and conditions as mentioned in L/C. Generally the documents observed by me in the foreign exchange department are:

o Bill of exchange
o Commercial invoice
o Bill of lading
o Certificate of origin
o Packing list
o Clean report of finding (CRF)
o Weight list
o Insurance cover note
o Pre-shipment certificate

SOME DEFINITIONS

Bill of Exchange:

According to the section 05, Negotiable Instruments (NI) Actunconditional order signed by the maker, directing a certain person to pay [on or to the order of a certain person or to the bearer of the instrument. It may be either at sight or certain day sight. At sight means making payment whenever documents will reach in the issuing bank.

Commercial Invoice:

Commercial Invoice issued by exporter is the accounting document by which the seller charges the goods to buyer.

Bill of lading:

A bill of lading is a document usually stipulated in a credit when exporter dispatches the goods. It is an evidence of a contract of carriage, is a receipt for the goods and is a document of title to goods. It also constitutes a document that is or may be, needed to support an insurance claim.

THE DOCUMENTS SENT TO THE ISSUING BANK THROUGH THE NEGOTIATING BANK:

The negotiating bank carefully checks the documents provided by the exporter against the credit, and if the documents meet all the requirement of the credit, the bank will pay, accept, or negotiate in accordance with the terms and conditions of the credit. Then the bank sends the documents to the L/C opening bank.

MAKING THE PAYMENT OF FOREIGN BILL THROUGH THE REIMBURSING BANK:

The L/C issuing bank getting the documents checks immediately and if they are in order and meet the credit requirements, it will arrange to make payment against L/C through reimbursement bank and will send the importer the document arrival notice.

But if there is any discrepancy in the documents, the L/C isssuing bank send message to the negotiating bank to rectify it under irs risks and responsibilities.

POST-IMPORT FINANCING:

If there is no available in cash in importer’s hand, he can rrequest the bank to grant loan against the documents for the purpose of post import  finance. There are two following forms of post import finance available in MTBL Dilkusha Branch.

 LIM (Loan against imported merchandise).
 LTR (Loan against trust receipt).

On the arrival of goods and lodgment of import documents, importeer may request the bank for clearance of goods from the port (custom) and keep the same to bank godown. Propeer sanction from the cxompetent authority is to be obatained before clearance of consignment. For giving these types of loan, officer makes loan proposal and sends it to H/O for approval. After getting approval from H/O, bank grants loan in the form of either LTR or LIM.

Accounting treatnent:

LIM/LTR creation:

LTR/LIM (Importer) A/C

Dr.

PAD A/C

Cr.


After payment of the loan or delivery of goods:

 Party’s A/C

Dr.

LTR/LIM A/C

Cr.

Interest A/C

Cr.


By and large, it is mentioned herewith that bank only deals with the documents, not with goods & services in case of foreign exchange business.