【Case Study】

       A foreign-funded enterprise exported goods, and both the sales contract and the letter of credit stipulated CIF conditions. After the goods were shipped, the exporting enterprise obtained a clean bill of lading issued by the shipping company after paying the full freight to the shipping company. However, the document maker omitted the words "Freight Prepaid" on the bill of lading. When the market price fell, the issuing bank refused to pay the payment based on the applicant's opinion, citing that the submitted documents did not match the letter of appointment. This case is analyzed. According to UCP600 regulations, bank payments are subject to the condition that the documents submitted by the beneficiary fully comply with the terms of the letter of credit. Therefore, the required documents to be delivered should be strictly correct and complete, with particular emphasis on document consistency. Only when the documents are consistent can timely collection of foreign exchange be guaranteed. If they do not comply, the bank may refuse payment.

9.1 Performance of Export Contracts 

1、 Stock up         The seller shall ensure that the delivered goods comply with the provisions of the contract and are subject to the relevant laws and regulations of the sales contract. The issues to be noted include: quality, quantity, packaging, and delivery according to the contracted time of the goods.          Goods subject to inspection shall be inspected by the commodity inspection agency or designated inspection agency. If the inspection is qualified, the commodity inspection agency shall issue an inspection certificate or affix an inspection seal on the export declaration form. The shipper shall submit the export report within 60 days from the date of issuance of the certificate. If the export report is overdue, a new inspection application shall be made. 2、 Implement the letter of credit （1） Urge for certification          During the contract period, the buyer's failure to issue the letter of credit in a timely manner constitutes a breach of contract. If the seller wishes to continue the transaction, they should urge the other party to issue the letter of credit. If the signing and performance dates are far apart, the other party can be reminded to open the letter of credit before the opening date. The seller has prepared the goods and is writing to seek the other party's consent to open the letter of credit in advance. The buyer's creditworthiness is poor, so they sent a letter in advance to remind and urge the other party to fulfill their obligations. （2） Verify evidence Credit rating of issuing bank: Especially for letters of credit issued by banks in countries with foreign exchange controls, weak international payment capabilities, or chaotic domestic financial order, the credit status of the bank should be carefully reviewed. （3） Change certificate          If any unacceptable terms are found, they should be promptly submitted to the issuer for modification. If multiple modifications are needed, they should be made at once. If the content of the modification notice forwarded by the notification bank cannot be accepted after review, it should be promptly rejected. It is not allowed to only accept one part and reject the other part. 3、 Charter booking and insurance         When the transaction is made under CIF or CFR conditions, the seller shall promptly handle the chartering and booking work. Export goods need to go through customs declaration procedures before being loaded onto the ship for transportation. For export contracts concluded at CIF price, the seller must promptly submit insurance procedures to the insurance company and fill out the insurance form before shipment.

4、 Voucher preparation and foreign exchange settlement

（1） Document Preparation 

Step 1: Contract Confirmation 

The buyer and seller sign a Sales Contract or Proforma Invoice (PI), specifying terms (Incoterms®, payment method, shipment details).

Step 2: Preparing Export Documents

Commercial Invoice: Details goods, quantities, prices, and payment terms.

Packing List: Lists package dimensions, weights, and contents.

Bill of Lading (B/L) : Issued by the shipping company as proof of shipment and ownership.

Certificate of Origin : Confirms the goods’ manufacturing country (e.g., Form A for GSP).

Inspection Certificate: Required for regulated goods (e.g., food, chemicals).

Insurance Policy: Covers risks during transit (if under CIF/CIP terms).

Step 3: Customs Declaration

Submit Customs Declaration Form and supporting documents to customs authorities.

Pay applicable export duties (if any).

（2）Settlement Process

Step 1: Payment Method Execution 

Letter of Credit (L/C) 

• The buyer’s bank issues an L/C via SWIFT (MT700 format).

• The seller ships goods and submits complying documents to the bank.

• The bank checks documents for discrepancies (UCP600 rules).

• Payment is released if documents are clean.

Telegraphic Transfer (T/T) 

        The buyer wires payment before (T/T in advance) or after shipment (e.g., 30% deposit + 70% before delivery).

Documentary Collection (D/P or D/A)

         Seller sends documents through banks; buyer pays at sight (D/P) or accepts a draft (D/A).

Step 2: Foreign Exchange SettlementThe seller submits export declaration form and commercial documents to the bank.

       The bank verifies documents and converts foreign currency into local currency (complying with SAFE regulations).

Step 3: Post-Settlement 

• Apply for export tax rebates (if eligible).

• File records for compliance audits.

      The main foreign exchange settlement documents include: bill of exchange, commercial invoice, ocean bill of lading, insurance policy, certificate of origin, Generalized System of Preferences documents, inspection certificate, packing list, and weight list.

5、 Claims settlement