Documents Under Letter of Credit

Documents under Documentary Credit (letter of credit) are broadly  classified into four categories namely

1. Financial Documents: Bill of Exchange

Financial documents perform the function of obtaining finance, collection of payment etc. The most common financial document used is a Bill of Exchange.

Bill of exchange has three primary parties namely Drawer, Drawee and Payee and has following five important characteristics :

  • It is an instrument in writing
  • It is an unconditional order signed by maker (Drawer)
  • It is a direction given to a specific person (Drawee)
  • It is a direction to make payment of a specific or fixed amount
  • It is made payable to a certain person or to his order or bearer

Type of Bill of Exchange

  • Sight Bill of Exchange: Under such a Bill of Exchange the drawee
    has to make payment on presentation/ sight/ demand
  • Usance Bill of Exchange: The drawee is directed to make payment
    after a stated number of days

2. Commercial Documents

Commercial documents are those that provide the applicant with the information that it needs regarding goods shipped, their unit prices, the packing conditions, weights and data concerning the quality or standard of the goods that have been shipped.  Some of the commercial documents required under LC are:

  • Proforma Invoice
  • Commercial Invoice (UCP 600 Article 18)
  • Consular Invoice
  • Customs Invoice
  • Legalised Invoice
  • Combined Certificate of Origin and Value
  • Packing List
  • Weight Certificate
  • Certificate of Analysis and Quality
  • Certificate of Inspection
  • Health Certificate

3. Transport Documents

Whenever a documentary credit is issued covering a shipment or dispatch of goods, a form of transport document will be required to evidence the occurrence of that event. Each form of transport document will have its own characteristics with regard to function and content.

Based on Mode of transport, below articles of UCP 600 will be applicable:

  • More than one mode of transport – Article 19
  • By sea – Articles 20, 21 and 22
  • By air – Article 23
  • By road, rail or inland waterway – Article 24
  • By courier or post – Article 25

Type of Transport Documents are:

  • Bill of Lading
    • Received for Shipment Bill of Lading
    • On Board Bill of Lading
    • Short Form Bill of Lading
    • Long Form Bill of Lading
    • Clean Bill of Lading
    • Claused Bill of Lading
    • Through Bill of Lading
    • Straight Bill of Lading
    • Charter Party Bill of Lading
    • Container Bill of Lading
    • Combined Transport Bill of Lading
    • Lash Bill of Lading
    • Crocka Bill of Lading
    • House Bill of Lading
  • Airway Bill
    • Air Consignment Note
    • House Airway Bill
  • Postal Receipt
  • Combined Transport Document
  • Inland Waterway Transport Documents
  • Road Transport Documents
  • Rail Transport Documents

4. Risk Covering Documents: Insurance Policy (UCP 600 – Article 28)

Documents represent the insurance cover against transit risks. In international trade, marine insurance is the most common document obtained either by exporter or importer for the safety of goods. Type of insurance documents are

  • Specific Policy
  • Open Policy
  • Insurance Cover Note

Above is the summary of documents required under the Letter of Credit. Will be publishing articles on each of these documents separately.

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