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In case the goods (as stated on the Invoice) corresponds with or briefly matchs that stated in the credit terms and given that the rest of the documents have been complied with the credit terms then no discrepancies will be raised, then payment by the Issuing bank must be effected as per nominated bank instructions.
In case the Invoice mismatch or does not correspond with the credit terms (for ex. LC issued for blue shirts - Invoice showing green shirts or blue Jackets) , it can then be quoted as a discrepancy - and the issuing bank will seek applicant's acceptance or presenter(nominated bank)'s disposal instruction of documents. (whichever is earlier).
BANK DEALS IN DOCUMENTS NOT IN GOODS ,BUYER CAN GO FOR AS LEGAL PROCEEDINGS
According to my opinion banks are dealing only documents not goods.now document will be discrepant.it can either accept by client or return to seller for rectification.any serious discrepant s are in the taking place bank can advise to client for returning the documents because of not matching with LC condition.banks only provide guarantee on payment if the documents are complied with LC condition.
A major discrepancy thus the funds cannot be released to the beneficiary unless they receive the acceptance from the buyer
In normal as per UCP, Banks deal with documents and not with goods. in the meantime if an Islamic bank opened an LC under Murabah then it deal with goods too, there are three days time to claimand revert to the bank if any damage or any mismatch as per the promiss to puchase signed prior to opening the LC. Period of time will be as per banks policy but there is a chance to revert
As mentioned in UCPDC article5 Banks deals only with documents but not goods.So if the buyer receives the goods which not per LC then he need to take up the issue directly with seller. In case the goods mentioned in commercial invoice also mismatch with LC then issuing bank may sent MT/letter of refusal to presenting bank mentioning Good discreption not as per LC.
Documents becomes discrepant. Bank will raise discrepancy as "Goods discreption is not as per LC term"
either returned them or raise the difference note to explain the issue
1. Documents become discrepant.
(Discrepancy : Good description not as per LC field 45A)
2. Discrepancy charges needs to be paid as per LC terms.
If the commercial invoice states goods description which is not indicated in letter of credit, bank has to raise discrepancy as "Goods discreption is not as per LC term"
Many manufacturers lack clear documentation of receipt of shipments. This can cause problems when the business has to prove that there was a shortage in shipment or that the shipment does not meet quality specifications, or when other problems exist.
Upon receiving purchased goods or even services from a supplier, it is important that the shipment is checked to make sure that the correct quantity and quality was received. A receiving report should immediately be completed which indicates:
This receiving report can be of great help to the bookkeeper in maintaining accurate records, and when paying the bills.
Some conditions for using spot checks, or sampling, are as follows:
The procedure for correctly sampling material and conducting spot checks is somewhat complicated, however, and involves looking up figures in statistical tables. One principle, of course, applies: a larger sample size, or spot checking more items, will naturally increase chances of finding defective parts, if they exist.
For example, a certain manufacturer receives a shipment of 450 components: Part B-250. Defects in these parts are unlikely to be detected during manufacturing operations. Usually about two or three defective B-250 parts are found in every 100. The purchasing manufacturer may feel that up to 3% defective parts are acceptable, but if there are more, the supplier should take the shipment back to remove the bad pieces. A table like the one shown below can be used to decide how many pieces have to be checked to gain reasonable assurance that the defect rate is 3% or less. Such tables can be found in many quality control books.
Looking at the line in the table for a Lot Size of 401 to 500, it can be seen that a sample of 70 pieces should be selected. In this sample, there should not be a single defective piece. If one should be found, the more detailed check can be used and a larger sample of 160 could be selected.
If more than three parts are found defective in the larger sample, then the probability is quite high that there are more than 3% defective and that the shipment does not meet quality standards.
Report To Accounts payable
To assure that payment will be made only if the merchandise which the vendor bills has been received in the proper quantity and of acceptable quality, the person making out the check should compare:
These documents should therefore be filed together so they are available when bills are being paid.
FOLLOW-UP
Good purchasing procedures require follow-up evaluation of suppliers, and sometimes even of individual purchases. You should consider whether or not your purchasing objectives have been met and whether you are buying the best overall value in terms of the best quality, prices and service. Did the supplier provide on-time delivery and quality as promised? Were there any considerations which were forgotten in deciding upon the purchase? Did you buy the most economical quantity? Did the supplier satisfactorily resolve any problems which may have cropped up? These are some of the questions you should be asking yourself at this time.
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