Commodity Trading
Reading a rebar mill test certificate before you pay
The mill test certificate is the only document that tells you what is inside a bundle of steel. Here is what to check, line by line, before the documents go to the bank.
Commodity Trading
Letters of credit: the discrepancies that delay commodity cargoes
Most refused presentations under a letter of credit come down to a handful of avoidable mistakes. Knowing the rules in UCP 600 is the cheapest insurance a trader can buy.
A letter of credit promises payment against documents, not against goods. If the documents comply, the bank pays. If they do not, the seller is left holding a cargo that is already at sea and a buyer who may now want a discount. Under UCP 600, the issuing bank has up to five banking days after presentation to examine the documents, and the clock only helps the party that got them right.
The discrepancies we see most often
- Late presentation. Unless the credit says otherwise, documents must be presented within 21 calendar days after the date of shipment, and never after the credit expires. Slow couriers and late certificates are the usual cause.
- Late shipment. A bill of lading dated after the latest shipment date in the credit is a discrepancy that no other document can cure.
- The description of the goods. The commercial invoice must describe the goods as the credit does. Other documents may use general terms, but nothing may conflict.
- Conflicting data. Data in different documents need not be identical, but it must not contradict. A different weight on the certificate of quantity and the bill of lading is a classic refusal.
- The bill of lading itself. It must show the goods shipped on board, be signed by the carrier, the master or a named agent, and be clean, with no clause declaring the cargo or packing defective.
- Insurance. If the credit is silent, cover must be at least 110 per cent of the CIF or CIP value, in the currency of the credit, effective no later than the date of shipment.
How to avoid them
Draft the credit before it is issued. Most problems start with a clause that cannot be met: a certificate the inspection company does not issue, a port that is not on the vessel's route, a shipment window that is too tight. Ask for amendments early, when they are cheap.
Then check every document against the credit and against each other before presentation, using ISBP 821 as the reference for how banks read them. A second pair of eyes on the document desk costs an afternoon. A refused presentation can cost the margin on the cargo.
Our trade finance team prepares and checks document sets for every cargo we ship, whether the payment runs through our partner banks or the buyer's.
