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What is document consistency, and how to effectively achieve document consistency?
2024-08-14 09:40
01What is document consistency?
Consistency of documents means that all documents provided by the exporter must strictly comply with the requirements of the letter of credit issued by the issuing bank of the importer, or that all the documents related to the sale of goods produced and provided by the exporter are completely consistent with the requirements of the documents of the letter of credit applied for by the importer, and there is no contradiction.
02 Key points of document consistency
In order to achieve the consistency of documents, the bank must review all documents reasonably and carefully, and ensure that the type, content and number of copies of the documents submitted by the beneficiary, and even the wording of the documents must be completely consistent with the provisions of the letter of credit.
Therefore, if the documents negotiated by the bank are ostensibly consistent with the letter of credit but the goods do not match, the bank will not be liable because it has no way of knowing it; On the other hand, if the actual goods are correct but the documents do not conform to the provisions of the L/C on the surface, the bank will be liable, and the applicant can refuse to pay for the redemption on this basis.
03Case analysis in document consistency
In the actual export business, it is a general practice that the content of the negotiation documents must be strict with the provisions of the relevant letter of credit. However, it is sometimes difficult for the seller to ensure that each negotiation document is exactly the same as the content of the letter of credit to which it relates to it.
The following case illustrates the fact that the exporter was refused payment due to discrepancies in the documents: Chinese company A entered into a contract with company B in West Africa for the sale and purchase of fabrics, and company A sold a batch of cloth to company B at the CIF price terms, and the two parties agreed to pay by letter of credit. After the contract was concluded, Company B opened a letter of credit in accordance with the contract, which stipulated that the delivery quantity of Company A was "about 50,000 yards" and required Company A to provide an insurance policy to insure W· P· A (water damage risk) and WAR RISK.
Since it is customary for Company A to export such goods with ALLRISKS and war risks, Company A has taken out all risks and war risks without carefully reviewing the certificates. After Company A shipped the goods, it submitted documents to the bank to request payment. After reviewing the documents, the bank found that the documents did not match and refused to pay.
There are two discrepancies raised by the bank:
1. The risks in the insurance policy are inconsistent with the provisions of the letter of credit; 2. The bill of lading indicates that the quantity of goods delivered by company A is 44,800 yards, which is inconsistent with the approximately 50,000 yards specified in the letter of credit. Company A argued that the coverage of all risks was greater than that of water damage insurance, which was beneficial to the buyer, Company B. As for the quantity of goods, since the letter of credit stipulates "about 50,000 yards", and does not specify the specific increase or decrease range, the quantity of 44,800 yards in the bill of lading is also in line with the provisions of the letter of credit.
Obviously, in this case, Company A was insured with all risks and war risks, while the L/C required water damage and war risks, and although the coverage of all risks was greater than that of water damage insurance, which was beneficial to Company B, the bank only cared whether the appearance of the documents was consistent with the L/C, regardless of the rights and obligations of the parties, and the bank had the right to refuse payment because the risks of the insurance policy submitted by Company A did not conform to the provisions of the L/C.
As to the issue raised by the bank that the quantity of goods in the bill of lading does not conform to the provisions of the letter of credit, according to Article 39 of (UCP500), when used in the amount, quantity and unit price of the letter of credit, the words "approximately", "largely" or similar words shall be construed as an increase or decrease of not more than 10% in the amount, quantity or unit price of the letter of credit.
Therefore, if the quantity of goods in the bill of lading submitted by company A is between 55,000~45,000 yards, it is consistent with the letter of credit. However, in fact, the quantity of goods indicated in the bill of lading submitted by Company A is 44,800 yards, which does not conform to the provisions of the letter of credit, and the bank has the right to refuse payment. It is explained that in the export business, the documents are inconsistent due to various reasons, and the beneficiary is unable to correct within the specified time limit due to the limitation of time conditions, so it is in a disadvantageous position in international trade.
04 How to effectively achieve the consistency of documents
In international trade in the letter of credit settlement is very common, therefore, Chinese enterprises in the export business should strictly abide by the principle of consistent documents, when receiving the letter of credit opened by foreign buyers, should carefully examine the letter of credit, in order to determine whether the provisions of the letter of credit and the contract are consistent, whether there are soft terms in the letter of credit, whether the provisions of the letter of credit are the seller has the ability to do.
Once any problem is found, the buyer should be notified in time to modify the letter of credit, and there must be no luck. If there is no problem after verification, the documents should be carefully prepared in accordance with the provisions of the letter of credit, so that the documents are strictly consistent, so as to avoid the occurrence of unfavorable situations, prevent problems before they occur, and effectively protect their rights.
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