There was a time when it was a practice for presenting banks to split.
Letter of Credits: How to Prepare Commercial Invoice
In UCP 600 article 2, the ICC indicates that a "Complying presentation means a presentation that is in accordance with the terms and conditions of the credit, the applicable provisions of these rules and international standard banking practice."
The beneficiary of a documentary credit must, in order to obtain the expected benefits from the bank, prepare the documents required by the L/C in accordance with the hierarchy of L/C terms, the provisions of the UCP 600 and the international standard banking practice partially but widely encoded in the ICC publication ISBP 745.
Below is a walk-through on how to prepare the commercial invoice in accordance with the L/C conditions and the above-mentioned provisions.
Invoice: What do the UCP 600 say?
UCP 600 article 18 is dedicated to the invoice which reads in part:
“a. A commercial invoice:
i. Must appear to have been issued by the beneficiary (except as provided in article 38);
ii. Must be made out in the name of the applicant (except as provided in sub-article 38 (g));
iii. Must be made out in the same currency as the credit; and
iv. Need not be signed.”
UCP 600 sub-article 18(c) states that “The description of the goods, services or performance in a commercial invoice must correspond with that appearing in the credit.”
From these initial indications, we can say that - to set it correctly - an invoice must be issued by the beneficiary to the applicant in the currency of the L/C and that, unless required by the L/C, the invoice does not require either signature or a date. It is also necessary, as is well indicated in sub-article 18(c), that the description of the goods must correspond to what is stated in the L/C. ICC publication ISBP 745 in paragraph C3 states that this “correspondence” is not to be understood in a specular manner. For example, a detailed description of the goods shown in different parts of the invoice is accepted, which, when combined, form a description of the goods corresponding to the L/C. ISBP 745 Paragraph C4 also states that the description of the goods, services or performances must refer to what has actually been shipped or supplied. It is also acceptable to have an invoice showing the entire description of the goods - as indicated in the L/C - and to declare what was actually shipped.
It is also appropriate to point out that UCP 600 sub-article 14 (j) states that "When the addresses of the beneficiary and the applicant appear in any stipulated document, they need not be the same as those stated in the credit or in any other stipulated document, but must be within the same country as the respective addresses mentioned in the credit. Contact details (telefax, telephone, email and the like) stated as part of the beneficiary’s and the applicant’s address will be disregarded. "
UCP 600 sub-article 18 (b) indicates that a bank (A nominated bank acting on its nomination, a confirming bank, if any, or the issuing bank) “may accept a commercial invoice issued for an amount in excess of the amount permitted by the credit, and its decision will be binding upon all parties, provided the bank in question has not honoured or negotiated for an amount in excess of that permitted by the credit.”
Invoice: ISBP 745 ICC viewpoint
Below are further indications - not exhaustive - about the correct setting of the invoice in reference to what is stated in paragraphs C1 - C15 of the ISBP 745:
• It’s possible to submit any type of invoice (commercial, customs, tax, final, consular, etc.) if the L/C requires an invoice without further definitions;
• An invoice marked as "provisional", "pro-forma" or similar expression is unacceptable;
• When an L/C requires presentation of a “commercial invoice”, this will also be satisfied by the presentation of a document titled “invoice”;
• The invoice may include discounts or advance payments even if not shown in the L/C;
• The invoice must indicate the value of the goods and indicate the unit prices if they are shown in the L/C;
• It is not necessary for the invoice to be signed or dated unless it is required by L/C;
• An invoice is not to indicate goods, services or performance not called for in the L/C. This applies even when the invoice includes additional quantities of goods, services or performances as required by the L/C or samples and advertising material and are stated to be free of charge.
Invoice: Originals and copies
Usually, documentary credits require the presentation of the invoice in a number of "originals" and in a number of "copies". But what is meant by "original" and "copy"?
Article 17 of the UCP 600 stipulates that at least one original of each document required by the L/C must be submitted and that it will be considered as "original" a document that appears written, typed, perforated or stamped by the issuer or drawn up on original paper (In these cases it is no longer necessary for the document to be labeled original) or simply that the document has an "original" indication. Sub-article d) of the same article states that: "If a credit requires presentation of copies of documents, presentation of either originals or copies is permitted. Sub-article e) of the same article states that: "If a credit requires presentation of multiple documents by using terms such as “in duplicate”, “in two fold” or “in two copies”, this will be satisfied by the presentation of at least one original and the remaining number in copies, except when the document itself indicates otherwise.”
Below, further information regarding the meaning of "Originals and Copies" is included in ISBP 745:
- Documents issued in more than one original may be marked “Original”, “Duplicate”, “Triplicate”, “First Original”, “Second Original”, etc. None of these markings will disqualify a document as an original.
- If a L/C calls for:
o “Invoice”, “One Invoice”, “Invoice in 1 copy” or “Invoice – 1 copy”, it will be understood to be a requirement for an original invoice.
o “Invoice in 4 copies” or “Invoice in 4 fold” will be satisfied by the presentation of at least one original invoice and any remaining number as copies.
o “Photocopy of invoice” or “copy of invoice” will be satisfied by the presentation of either a photocopy, copy or, when not prohibited, an original invoice.
o “Photocopy of a signed invoice” will be satisfied by the presentation of either a photocopy or copy of the original invoice that was apparently signed or, when not prohibited, a signed original invoice.
- Copies of documents do not require signatures or date;
- The number of originals to be submitted must be at least that required by the L/C, the UCP 600 or the number of originals indicated on the documents itself;
For further details on the meaning of "original" and "copy" it is recommended to consult, in addition to UCP 600 article 17, the Policy Statement issued by the ICC Banking Commission (ICC Document no. 470/871Rev. dated 29.07.1999) “The Determination of an Original Document in the Context of UCP 500 sub-Article 20(b)”, which remains valid under the UCP 600 ICC.
Finally, it is important to remember that, as indicated in the UCP 600 article 3 UCP 600,"A document may be signed by handwriting, facsimile signature, perforated signature, stamp, symbol or any other mechanical or electronic method of authentication."
In conclusion, it should be emphasized that the documents to be presented in the use of an L/C must be prepared in accordance with the terms of the L/C, the provisions of the UCP 600 and international banking standard practice, following its hierarchy. The preparation of the invoice – a document required virtually in all L/Cs - is only apparently simple, as it is necessary - as we have seen - to comply with various regulatory provisions.