CASE STUDY 1:

Unique Exporters have tendered a SIGHT export bill for EUR 56000 on
15.01.2016. You have purchased the bill on 16.01.2016 and credited the
rupee equivalent after deducting interest at 12% and other charges of
Rs.3200. Bank charges overdue interest at 16%. The bill is realized and
your nostro account is credited with EUR 55800 on 22.02.2016. You have
passed necessary entries in your books on 25.02.2016. The exchange
Rates for EUR / INR prevailing on different dates are follows:

Exchange Rate:
Date Bill Buying Bill Selling TT Selling
15.01.2016 70.30 70.85 71.00
16.01.2016 69.20 69.70 70.10
22.02.2016 69.10 69.60 69.90
25.02.2016 70.20 70.70 71.00

a) What is the net amount the exporter receives on 16.01.2016?

b) What is the amount recovered by the bank from the exporter on
25.02.2016?

(a)16.01.2016
EUR 56,000 @ 69.20 (Bill Buying Rate) Rs. 38,75,200
Less–Interest @ 12% per annum for 25 days (NTP) Rs. 31,851
on Rs. 38,75,200
Less – Bank Charges Rs. 3,200
Net amount credited to the exporter Rs. 38,40,149

(b) 25.02.2016
Overdue Interest for 12 days @ 16% on Rs. Rs. 20,385
38,75,200
Amount less realized – EUR 200 @ 71.00 (TT Rs. 14,200
Selling Rate)
Total amount to be recovered from the Rs. 34,585
exporter
CASE STUDY 2:
Your branch has discounted a usance export bill for an amount of USD
86,000 on 14/06/2015 due for payment on 30/07/2015.The rate of
interest for post shipment rupee credit was 12% p. a. and for overdue
period @ 15% p.a. A commission of Rs.1500 and courier charges of
Rs.1000 were also collected additionally. A packing credit liability of
Rs.39,10,560 (inclusive of up to date interest) granted against this export
was outstanding in your books.
(i) What is the net amount the exporter is receiving on 14/06/2015?
(ii) In case the bill is returned unpaid on 16.08.2015 and you recover the
amount to the debit of customer’s current account on the same day what
is the net amount you recover? The collecting bank abroad has asked you
to remit USD 250 towards their charges.
The Exchange Rate prevailing on different dates for USD/INR were as
follows:
Date Bill Buying Bill Selling TT Selling
14.06.2015 61.30 61.70 62.00
30.07.2015 62.10 62.35 62.60
16.08.2015 61.80 62.10 62.40

(a) 14th June 2015

US$ 86,000 @ 61.30 (Bill Buying) Rs. 52,71,800
Less Interest @ 12% for 46 days on Rs. 52,71,800 Rs. 79,727
Less Commission + Courier Charges Rs. 2,500
Less Packing Credit Rs. 39,10,560
Net Amount payable to the exporter Rs. 12,79,013

(b) 16th August 2015

Bill amount – US$ 86,000 @ 62.40 (TT Selling) Rs. 53,66,400
Overdue interest for 46 days @ 3% on 52,71,800 Rs. 19,932
Overdue interest for 17 days @ 15% on 52,71,800 Rs. 36,830
Foreign Bank charges US$ 250 @ 62.40 (TT Selling) Rs. 15,600
Total amount to be recovered from the exporter Rs. 54,38,762
CASE STUDY 1(A)
Reliance Exporters have tendered a 30 days SIGHT export bill for EUR
75,000 on 15.01.2016. You have purchased the bill on 17.01.2016 and
credited the rupee equivalent after deducting interest at 10% per
annum, courier charges of Rs.1200 & handling commission @ 0.125%.
Bank charges overdue interest at 14%. The bill is realized and your
nostro account is credited with EUR 74,900 on 20.03.2016. You have
passed necessary entries in your books on 25.03.2016. The exchange
Rates for EUR / INR prevailing on different dates are follows:

Exchange Rate:
Date Bill Buying Bill Selling TT Selling
15.01.2016 70.30 70.85 71.20
17.01.2016 69.20 69.70 70.30
20.03.2016 69.10 69.60 70.25
25.03.2016 70.20 70.70 70.85
Note: Amounts to be rounded off to the nearest rupee

a) What is the net amount the exporter receives on 17.01.2016?

b) What is the amount recovered by the bank from the exporter on
25.03.2016?

(a)17.01.2016
EUR 75,000 @ 69.20 (Bill Buying Rate) Rs. 51,90,000
Less – Interest @ 10% for 55 days (30 + NTP) on Rs. 78,205
Rs. 51,90,000
Less – Courier Charges Rs. 1,200
Less – Commission @ 0.125% on 51,90,000 Rs. 6,488
Net amount credited to the exporter Rs. 51,04,107
Notional Due Date is 12th March 2016
 (b) 25.03.2016
Overdue Interest for 8 days @ 14% on Rs. Rs. 15,925
51,90,000
Amount less realized – EUR 100 @ 70.85 (TT Rs. 7,085
Selling Rate)
Total amount to be recovered from the Rs. 23,010
exporter

CASE STUDY 2(A):

Your branch has discounted a usance export bill for an amount of USD
70,000 on 14/06/2015 and the due date of the bill is 50 days from the
date of shipment. The Bill of Lading was issued on 01/06/2015 and the
onboard notation shows the date as 03/06/2015.The rate of interest for
post shipment rupee credit was 11% p. a. and for overdue period @ 13%
p.a. The bank commission @ 0.150% and courier charges of Rs.1000
were also collected additionally. A packing credit liability of Rs.30,08,575
(inclusive of up to date interest) granted against this export was
outstanding in your books.
(i) What is the net amount the exporter is receiving on 14/06/2015?
(ii) In case the bill is returned unpaid on 16.08.2015 and you recover the
amount to the debit of customer’s current account on the same day what
is the net amount you recover? The collecting bank abroad has asked you
to remit USD 300 towards their charges.
The Exchange Rate prevailing on different dates for USD/INR were as
follows:
Date Bill Buying Bill Selling TT Selling
14.06.2015 61.30 61.70 62.00
23.07.2015 62.10 62.35 62.55
16.08.2015 61.80 62.10 62.40
 (a) 14th June 2015
US$ 70,000 @ 61.30 (Bill Buying) Rs. 42,91,000
Less Interest @ 11% for 39 days on Rs. 42,91,000 Rs. 50,434
Less Courier Charges Rs. 1,000
Less Commission @ 0.150 on 42,91,000 Rs. 6,437
Less Packing Credit Rs. 30,08,575
Net Amount payable to the exporter Rs. 12,24,554

(b) 16th August 2015

Original Bill amount – US$ 70,000 @ 62.40 (TT Rs. 43,68,000
Selling)
Overdue interest for 39 days @ 2% on 42,91,000 Rs. 14,813
Overdue interest for 24 days @ 13% on Rs. 36,679
42,91,000
Foreign Bank charges US$ 300 @ 62.40 (TT Rs. 18,720
Selling)
Total amount to be recovered from the Rs. 44,38,212
exporter

CASE STUDY 3:
You have issued a Letter of Credit for USD 18,500 (CIF) at the request of
your customer favouring Zenith Traders, Frankfurt for import of Sewing
Machines from Germany. The LC is valid for negotiation till 30.01.2015
and the goods should be shipped on or around 20.01.2015. Among other
requirements LC calls for on board bill of lading.
You receive documents from negotiating bank in Germany wherein you
find the following:
a) The Bill of Lading bears a pre-printed date at the bottom reading
as 14 January 2015. Whereas there is a rubber stamp affixed
reading as “ Shipped on Board 15 January 2015”
b) Bill of Lading shows Goodwill Traders as the shipper of the goods
 c) Insurance Policy is dated 16 January 2015
d) Part-shipment effected
e) While the descriptions of the goods shown in LC is “ 100 Nos of
Sewing Machines” the BL shows “ 10 Boxes containing Sewing
Machines”
Please comments on the above observations in terms relative
provisions UCP 600.

Answer key:
a) A Bill of Lading containing a super imposed notation showing on
board notation indicating the date of shipment will be considered
as the actual date of shipment. Hence the actual date of shipment
in the cited case is 16 January 2015. As shipment permitted in the
LC is between 15 January 2015 and 25 January 2015 (on or about
20 Jan 2015) this is acceptable. (Art 3 & 20)

b) The shipper or consignor of the goods indicated in the transport

document need not be the beneficiary of the credit. Hence this is
acceptable (Art 14 k)

c) The date of insurance document must be no later than the date of

shipment. However, if the document states that risk is covered
from the date of shipment it is acceptable. Therefore in case the
insurance policy contains a clause showing that cover is effective
from 15 January 2015 it is acceptable (Art 28 e)

d) Partial drawings or shipments are allowed unless specifically

prohibited in the LC. As far as the LC does not contain a clause
indicating that part shipment is not allowed it is not a discrepancy
(Art 31)
 e) In documents other than the commercial invoice the description
of the goods may be stated in general terms not conflicting with
their description in the credit. Hence it is acceptable (Art 14 e)

CASE STUDY 4:
Chase Manhattan Bank New York issues an irrevocable letter of credit at
the request of Galaxy Traders, USA favouring Vishal Enterprises, New
Delhi. Swift message was received by Reliable Bank, New Delhi for
advising the LC to the beneficiary. As the SWIFT code did not match
Reliable Bank could not ensure the authenticity of the message received.
However, they have forwarded the LC message to Vishal Enterprises duly
indicating in their covering letter that they are unable to authenticate
the LC.
Having not heard anything thereafter for the next 15 days, Vishal
Enterprises contacts Reliable Bank to find out whether authentication is
received or not. Only then Reliable Bank informs that the LC advised by
them could be treated as authentic message as they have since received
necessary clarification from Chase Manhattan Bank.
a) Whether reliable Bank was in order in advising the LC with a
notation that ‘Authentication is called for’?
b) Delay in communicating about the authentication on their part is
justified?
Your bank received documents drawn under the said LC and forwarded
them to Chase Manhattan Bank seeking payment. You receive a message
from them that payment refused for following discrepancies:
c) LC prohibits part-shipment whereas 2 bills of lading date
14/01/2015 and 15/01/2015 evidencing shipment by the same
vessel viz. Mangaldeep presented.
d) LC expired on 26.01.2015 whereas your banks covering schedule is
dated 27.01.2015
e) Bill of lading contains a clause reading “ Transhipment may take
place”
 Narrate whether issuing bank is in order in refusing payment. Quote
relevant UCP provisions.

Answer keys:
a) If a bank is requested to advise a credit but cannot satisfy itself as
to the apparent authenticity of the credit besides informing the
issuing bank accordingly, may advise such credit to the beneficiary
duly noting that that it has not satisfied with the authenticity of the
credit thus received. Therefore Associates Bank is in order in
advising the credit

b) In case of non-receipt of response from the issuing bank delay in

conveying the message by the advising bank confirming
authenticity is understandable. However, any laxity on the part of
advising bank in not taking the matter promptly with the issuing
bank is not acceptable

c) As the goods are shipped in the same vessel even though there are
two BLs it cannot be treated as part shipment. Hence it is not a
discrepancy. 15/01/2015 will be construed as the actual date of
shipment

d) In case the negotiating bank incorporated a certificate in its

covering schedule stating that 26.01.2015 was a public holiday the
issuing bank is bound to honour the negotiation or the negotiating
bank may indicate that the documents were received by them
within the validity of LC or within the last date for presentation
under the LC

e) Though transshipment is not permitted, a clause reading that

transshipment may take place does not amount to transshipment
CASE STUDY 5:
General Traders with a net worth of over Rs.60 crores has been having
a satisfactorily conducted current account with you for the last 5 years.
They have identified a business opportunities abroad for export of their
products. Also the firm is successful in finding a prospective buyer in
Australia. What are the issues they should discuss with the buyer
before proceeding further?

Answer key:
The issues to be discussed are:
 Specific details of the goods to be supplied and quantity thereof –
perishable or tailor made etc.
 The total value of the goods to be exported
 Mode of shipment – by sea or air
 Who will pay freight charges – INCO Term to be used
 Arranging of insurance – INCO Term to be used
 Shipment date
 Mode settlement – advance payment, Documentary Collection
(DP/DA Bills) or LC (Sight or Usance)
 Document required in addition to Draft, Invoice and transport
documents.
 Name of the bank through which the documents to be routed
 Confidential report on the buyer
 Pre-shipment and post-shipment finance requirement
 Any guarantees to be issued – advance payment or performance etc.
 Requirement of buyer’s or supplier’s credit
 Do they have any selling or marketing agent in the country of import

CASE STUDY 6:
A packing credit liability of Rs.96,38,000 (inclusive of interest) is
outstanding against a specific export order. The clients submit to you
the related export bill for USD 2,05,000. They expect the Rupee to
weaken substantially in the next 20 days and therefore request you to
send the document on collection basis without converting the Foreign
Currency (USD 2,05,000) into Rupees for liquidation of the packing
credit. Can you accede to their request? Is there any other method
through which you can assist the customer and clear the PC liability?

Answer key:
Packing credit cannot remain outstanding in the books of bank after the
goods are shipped. Bank should therefore grant post shipment credit
and clear the packing credit liability once the goods are exported. In
order to accommodate the request of the exporter bank may consider
granting a Rupee-Advance (post-shipment credit) of approximate rupee
equivalent of USD 2,05,000 (not less than Rs.96,38,000) without
converting the foreign currency into rupees and clear the packing credit
liability. The bill amount will be converted into rupees whenever the
rate improves thereafter to the satisfaction of the exporter or upon
realization of the bill amounted towards the amount outstanding and
appropriate towards the Rupee-Advance. The balance amount if any
may be credited to exporter’s account.

CASE STUDY 7:
Against an import Letter of Credit opened by you at the request of your
customer viz. Global Traders favouring International Exporters for USD
68000 available by sight draft you have received the following
documents drawn under the said LC:
a) Draft showing Global Traders as drawee
b) A chartered party Bill of lading dated 10.09.2014
c) Commercial Invoice which does not bear any signature
d) LC expires on June 15, 2014; whereas the covering schedule of the
nominated bank is dated June, 17, 2014.
e) Certificate of Origin issued by International Exporters
Narrate your observation in respect of each of the above documents in
terms provisions contained under UCP 600.

Answer keys:
a) Draft should be drawn on the issuing bank and not on the
applicant (Art 6), hence it is a discrepancy
b) Unless LC specifically permits presentation of Chartered Party Bill
of Lading it is not acceptable (Art 19)
c) Commercial Invoice need not be signed (Art 18) unless LC
specifically calls for signed commercial invoice it is acceptable
d) Nominated Bank shall have five banking days following the date of
presentation to determine whether the documents presented are
in order or not and then forward them to the issuing bank. (Art 14
b). Also if the expiry date of a LC falls on a public holiday the
expiry day will be extended to the following banking day (Art 29
a). However, the nominated bank must state in their covering
letter that documents are presented within the expiry date.
e) Unless it is indicated in the LC as to who should issue the
Certificate of Origin, it will be accepted as presented (Art 14)