Documentary Credit and Bank Guarantee in International Trade

Multiple choice: 1. D 2. TFTFT 3. CE 4. E 5. ACD 6. CD 7.B D 8. A 9. BC 10. AC

The date of delivery: 2014 dec 21

The loading port: Port of Mar del Plata, Argentina

The port of arrival/destination: Port of Rotterdam

Promissory note (P/N) : 5 200 000*0,25= 1 300 000

I, Ministry Of Agriculture of Czech Republic promise to pay against this promissory note to the order of Productos de Industria Meccanica 1 300 000 USD, ( in figures) one million and three hundred thousand us dolars on the 20th of December 2014. bank acc. of the Ministry of Agriculture of Czech Republic at UniCredit Bank Prague.

Prague 18th Sept. 2014 Ministry of Agriculture of Czech Republic

Per aval: UniCredit Bank


endorsee, endorser,

HSBC Holding plc, Argentina, Buenos aires Productos deIndustria Meccanica,Cordoba,Argentina

Computation of the Discounting

(1 300 000*28 *0,012 ) / 365 = 1196.7 USD interest

1. The required documents are: commercial invoice, certificate of origin, packing list, bill of lading(clean,full set, blank endoresed), insurance policy(blanked endoresed)

2. Who is the issuing bank of the documentary credit? buyer’s bank-UniCredit Bank Prague

3. Who is the applicant in the documentary credit? buyer-Ministry of Agriculture of Czech Republic

4. Who are the contracting parties in the contract of reinbursment? buyer+issuing bank

5. What securities could be involved in the contract of reinbursment? Bill of exchange, promissory note

6. What is a documentary credit by its legal nature? It’s a contract which is a subject to the civil law and to the icc usage ucp 600. Including two contracting parties: the issuing bank and the beneficiary ( supplier)

7. What duties should be performed by the advising bank? The advising bank verifies the authentity of the doc credit and forwards it to the beneficiary.

What is a difference between a letter of credit and the documentary credit? Letter of credit always include the promissory note

8. Which type of documentary credit include two documentary credits as banking undertaking? Please name the actors. Irrevocable Doc. Credit. Actors: Issuing bank, Advising Bank, Beneficiary(seller)

9. What does negotiation in a documentary credit mean? Before deadline of the payment after the examination and acceptence of docs a bank may advance payment to thte beneficiary. Freely negotiable doc credit: any bank may advance if the issuing bank is credit worthy.

10. What is a nomination? Contract of appointment between issuing bank and an involved bank. Types: nomination for advising,for conformation, for payment

11. What is a techincal and legal base of banks cooperation? Technical base: Swift system/electronic massage transfer. Legal: Correspondent banking relationship and ucp 600

What law is to be applied to the ddocumentary credit? The country where the issuing bank is located, laws of Czech Republic

12. Who pays the banking charges of the documentary credit? buyer-ministry of agriculture of czech republic

13. Please define the situation where the banks are empowered to dishonor! Please apply the principles. Not precise specification of place of amount. Evident fraud in doc credit. Moratorium discrepency between docs sent by beneficiary, missing documents, late submission of documents.

14. Why should the documents of title be blank endoresed? Since they serve as securities in the hands of the issuing bank, so they are blank endoresed not to name the bank as owner.

15. Who is the guarantor? Buyer’s bank-Unicredit Bank Prague

16. Who instructs the bank for opening the guarantee? bidder-Productos de Industria Meccanica

17. What law is to be applied to the guarantee? State law of the guarantor

18. Who pays the banking charges of the guarantee? The beneficiary

19. Please put the right wordings of the principle of independence! The banks are dealing with documents and have no regard on the real transaction.

20. What law is to be applied to the promissory note? Place of insurance- Czech law

21. What does abstract nature of B/E mean? It means that B/E is not drawn to special goods.

What does the principle „ with recourse” mean? The bank(HSBC HOLDING) has the right to reclaim the price paid when and of the main obligers

22. Please name all the actors of a P/N! Buyer,seller, collecting bank, remmiting bank

23. The argentinian seller has no money….

a, with recourse?

b, without recourse?

24. Please list the post shipment construction!

25. The Bill of Lading evidence that the loading ended 2 days…

26. If the applicant were ready to accept…. As the documentory credit is independent,irrevocable tool it is independent of the underlying transaction therefor the bank should obey.

27. Which payment method is likely to be used where the documents are not in full complience? Payment at sight

28. Who is going to pay in this new method of payment? Buyer

29. What duty will the bank of the buyer have in this new situation?

a, Give him the documents that are in full complience

b, Issue a new document of title to the goods for the buyer

Application form for the issuance of a Documentary Credit

Applicant: Ministry of Agriculture of Czech Republic

UniCredit Bank, Prague

To (bank of beneficiary) HSBC Holding plc, Argentina, Buenos aires

40A Form of documentary credit: Irrevocable

31D Date and place of expiry: Prague 2014 sept 18

HSBC Holding plc

59 Beneficiary: Productos deIndustria Meccanica,Cordoba,Argentina

32B Currency code and amount: US Dollars 3 900 000

39 Credit amount specification: Not exceeding

41D Available with: HSBC Holding plc

Available by Deferred payment– 90 days

, date of shipment

43P Partial shipment : not allowed

43T Transhipment : not allowed

44E Port of loading: Port of Mar del Plata

44F Port of discharge: Port of Rotterdam

44C Latest date of shipment –

Trade terms (delivery terms) with place : CIF

45A Description of goods and/or services: Electronic Rangefinders

46A Documents required: Signed commerciel invoice-3copies

Packing list-2 copies

Certificate of Origin

Chamber of commerce

Full set of original bill of lading Insurance policy

Clean and board

Made out to order and blank endoresed

Institute cargo clauses „all risks”

Marked freight, prepaid and norify

Stipulating the claims….

47A Additional conditions: 71B: DC Commissions and charges

Presenting banks must send documents to UniCredit Bank All commisions and charges are for the applicants account

In two lots by registered airmail

Further conditions/remarks: Issue a revolving DOC credit

48 Period for presentation: Documents to be presented within 21 days

49 This DC : Is not to be confirmed by the bank of beneficiary

uj dokumentum

Rotterdam 2014 sept 25 Appl: Productos deIndustria Meccanica


Order to issue a bank guarantee

HSBC Holding plc Productos deIndustria Meccanica

Bank guarantee currency: USD 550 000 10%of total price Expiry date: 2014 sept 25

Purpose of guarantee Performance, english

Legal form: guarantee as per icc urdg

Underlying transaction: public procurement procedur for electronic rangefinders

Beneficiary: Ministry of agriculture of czech republic Czech republic

Involvment of third bank: no

Handing over of original guarantee to: beneficiary

Guarantee commission: commission and charges Productos de Industria Meccanica

Rotterdam Productos deIndustria Meccanica

uj dokumentum

UniCredit Bank Productos deIndustria Meccanica

Presentation of documents

Documentary credit-Unicredit bank: full

Transport documents: Bill of Lading

Other documents: Commercial invoice, insurance policy/certificate, certificate of origin, weight lsit/packing list

The utilozed amount of: to be credited to our account

Rotterdam, 2015.01.21 Productos deIndustria Meccanica