I understand that more than 75% of documentary presentation are rejected by the issuing bank. Experts, please let me know what makes the issuing bank to reject the documents?. Is it so difficult for an exporter to prepare the documents as per credit terms?
Can you provide me some insight on this.
Reasons for rejection of trade documents in LC
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Doc rejection under LCs
There are many reasons for rejection, ranging from the logical to the unethical. The opening bank may reject documents for the foll valid reasons:
i) LC number and date not mentioned on documents, if required by the LC. Name of opening bank not mentioned/incorrectly mentioned.
ii) Bill of Lading / Airway Bill incorrectly issued AND/OR not bearing the required declarations as per LC. BL not consigned as per LC terms / notify parties not as per LC.
iii) Commercial Invoice not mentioning the proper description of goods as per LC. [as per field 45A]. Price and quantity variation more than permitted by the LC.
iv) Insurance certificate (if asked for), not correctly issued.
v) Late shipment / shipment after expiry of LC / late presentation of documents.
and so on.....
While the above is only illustrative, banks may sometimes reject documents on flimsy grounds, such as spelling mistakes, etc. When the buyer (applicant) is influential and fears loss due to adverse fluctuation in prices between the time the contract was signed and when goods are shipped, they may ask opening bank to reject documents on not entirely correct grounds.
UCP 600 has of course, done quite a lot to iron out the grey areas, but we do come across rejections on occasion that do not entirely subscribe to the spirit of LCs.
i) LC number and date not mentioned on documents, if required by the LC. Name of opening bank not mentioned/incorrectly mentioned.
ii) Bill of Lading / Airway Bill incorrectly issued AND/OR not bearing the required declarations as per LC. BL not consigned as per LC terms / notify parties not as per LC.
iii) Commercial Invoice not mentioning the proper description of goods as per LC. [as per field 45A]. Price and quantity variation more than permitted by the LC.
iv) Insurance certificate (if asked for), not correctly issued.
v) Late shipment / shipment after expiry of LC / late presentation of documents.
and so on.....
While the above is only illustrative, banks may sometimes reject documents on flimsy grounds, such as spelling mistakes, etc. When the buyer (applicant) is influential and fears loss due to adverse fluctuation in prices between the time the contract was signed and when goods are shipped, they may ask opening bank to reject documents on not entirely correct grounds.
UCP 600 has of course, done quite a lot to iron out the grey areas, but we do come across rejections on occasion that do not entirely subscribe to the spirit of LCs.