Benefit of Including Proforma Invoice As Integral Part Of LC

[Md.zakir Hossen]

Let us think about the Article no4(b) of UCP 600.

It is a common Practice for the bankers to include the Proforma Invoice as an integral Part of the Credit.
Bankers said that they remain in the safe side by incorporating such a sentence in the Credit.They also say that UCP only discourage such an attempt but not restrict such attempt.

Can you tell why the drafting group did not restrict such incorporation but only discourage?
And what safety the Applicant or Issuing Bank hold by incorporating such a vague sentence?

[shahriar]

commentary on ucp600

"The current wording is stronger to discourage the incorporation of copies of contracts, proforma invoices, etc., as an integral part of a documentary credit. The Drafting Group recognized that there is nothing that can be stated in the rules that would prohibit a documentary credit from being issued with one or more of the attachments mentioned in this sub-article. An advising bank can elect not to a advise a documentary credit sub-article 9 (e)), and if one or more of these attachments is included, this may be a reason for such an action. It should also he noted by applicants that the attaching of a proforma invoice or contract as an integral part of the documentary credit offers limited protection with regard to the goods and their standard or quality. Such issues are resolved by requiring the necessary documents and the data that is to appear therein. "

here is one more thing. it is important how one is including the Proforma Invoice in the credit. the common practice is to mention the Proforma invoice no. and declare it as an integral part. while it appears from various icc publication that Proforma Invoice become an integral part of the credit only when send in paper to the advising bank. therefore its a big question what are the merchandise that are to be shipped against a letter of credit which has no or limited description of goods with a PI no. where no proforma invoice is send to the advising bank

regd

shahriar

[Md.zakir Hossen]

the wording in sub-article 4 (b) uses "should discourage" rather than "must not" in relation to the attachment of proforma invoices or contracts because banks allow such actions to take place and advising banks comply with that request in advising the credit. Banks should question what the applicant is seeking to achieve through such a request and offer a better and more logical alternative through the structure of the credit and the documents called for.


Possible solution: where banks have clients that request such an attachment, discussions should be held with their customer to look at the reason(s) and see whether the client is better served by calling for specific documents and the right data content.

[shahriar]

is it the client who is responsible for this? i dont think. they give us a proforma invoice only. i think its the bankers who try to reduce their job by integrating a proforma to the letter of credit

regd

shahriar

[nesarul]

Dear zakir bhai,
I agreed with you.
This was the reason to mention the word "should discourage" rather than"must not"......
REGARDS
NESAR

[Md.zakir Hossen]

It is the Desk officer who is responsible and have to bear the consequence if arise in future. I also include this sentence in some cases though I know that there is no advantages.Interesting is that in this cases I do not send the PI through mail as original Credit send in SWIFT FORMAT.

But I believe that this should not continue.

[Mehdi]

Trade practice cannot be restricted by making rules. Isn't it?