Article 18

URC 522 Article 18: “Payment in Foreign Currency” – Detailed Explanation

by

ARTICLE 18 PAYMENT IN FOREIGN CURRENCY

Clause: “In the case of documents payable in a currency other than that of the country of payment (foreign currency), the presenting bank must, unless otherwise instructed in the collection instruction, release the documents to the drawee against payment in the designated foreign currency only if such foreign currency can immediately be remitted in accordance with the instructions given in the collection instruction.”

Explanation: This clause outlines the procedure for handling documents under a collection instruction when the payment is to be made in a foreign currency. The presenting bank, which is the bank handling the documents on behalf of the exporter or seller, is responsible for ensuring that the documents are only released to the drawee (the buyer or importer) if the payment is made in the foreign currency specified in the collection instruction. The key point here is that the foreign currency must be available for immediate remittance according to the instructions given in the collection order. If the collection instruction specifies a payment in a foreign currency, the bank cannot release the documents to the drawee for payment in local currency unless explicitly instructed otherwise.

Example: Let’s consider an example where an exporter in Germany sells goods to an importer in India. The sales contract states that the payment will be made in US dollars (USD). The exporter sends the shipping documents to their bank in Germany, which in turn sends them to the presenting bank in India with a collection instruction stating that the payment must be made in USD.

When the Indian importer (drawee) approaches the presenting bank in India to obtain the shipping documents, the bank must ensure that the payment is made in USD as per the collection instruction. The bank will only release the documents to the importer once the USD payment is confirmed and can be immediately remitted according to the instructions provided by the exporter’s bank.

If the importer attempts to pay in Indian Rupees (INR) instead of USD, the presenting bank must refuse to release the documents unless the collection instruction specifically allows for payment in INR. This ensures that the exporter receives the payment in the agreed foreign currency, protecting their financial interests in the transaction.

This explanation and example should help clarify how Article 18 of URC 522 operates in practice, ensuring that the payment terms in a foreign currency are strictly adhered to, unless otherwise specified in the collection instruction.

UCP600 Article 18: Commercial Invoice – Detailed Explanation with Examples

by

UCP600 Article 18: Commercial Invoice

Clause a.i

Clause: “A commercial invoice must appear to have been issued by the beneficiary (except as provided in article 38).”

Explanation: This means the invoice should be issued by the seller or the exporter named in the letter of credit (LC). The beneficiary is typically the party that receives payment under the LC.

Example: If a company “ABC Exporters” is the beneficiary under the LC, the commercial invoice should clearly state that it is issued by “ABC Exporters”. This ensures that the document matches the details provided in the LC.

Clause a.ii

Clause: “A commercial invoice must be made out in the name of the applicant (except as provided in sub-article 38 (g)).”

Explanation: The invoice should be addressed to the buyer or the applicant named in the LC. This ensures that the goods are billed to the correct party.

Example: If “XYZ Importers” is the applicant under the LC, the commercial invoice should be addressed to “XYZ Importers”. This confirms that the goods are invoiced to the correct buyer.

Clause a.iii

Clause: “A commercial invoice must be made out in the same currency as the credit.”

Explanation: The currency used in the commercial invoice should match the currency specified in the LC. This avoids any confusion or discrepancies in the payment amount.

Example: If the LC specifies the payment in USD, the commercial invoice must also be issued in USD. This consistency ensures there are no issues with currency conversion.

Clause a.iv

Clause: “A commercial invoice need not be signed.”

Explanation: Unlike some other documents, a commercial invoice under UCP600 does not require a signature to be valid. This simplifies the document preparation process.

Example: An invoice issued by “ABC Exporters” to “XYZ Importers” does not need to have a signature at the bottom to be acceptable under the LC terms.

Clause b

Clause: “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.”

Explanation: Banks involved in the LC process can accept a commercial invoice that shows an amount higher than the LC amount. However, they must ensure that the amount they honor or negotiate does not exceed the LC amount.

Example: If the LC amount is $50,000 and the commercial invoice shows $52,000, the bank can still process the invoice but will only honor or negotiate up to $50,000. The bank’s decision to accept the invoice is binding on all parties involved.

Clause c

Clause: “The description of the goods, services or performance in a commercial invoice must correspond with that appearing in the credit.”

Explanation: The goods, services, or performance described in the commercial invoice must not exactly match but it should correspond to what is specified in the LC. This ensures that there are no discrepancies between what was ordered and what is billed.

Example: If the LC describes the goods as “1000 units of Model X smartphones,” the commercial invoice states below are acceptable –

  1. 1000 units of Model X smartphones
  2. 1000 units of smartphones (model x)
  3. model x smartphones (1000 units)

this need not be mentioned in a single sentence. It can be mentioned in different places of invoice also like in goods description field it is mentioned as ” 1000 units of smart phone” and somewhere else in the invoice it is mentioned as “model x”. Then also it is acceptable. Invoice should cover all the words of goods description which is mentioned in the LC in any of the places. If invoice mentions “1000 units of smart phone” but it does not mention “model x” in anywhere then it will be Discrepant.