Concept of Complying Presentation
Definition under UCP 600
A complying presentation, as defined under Article 2 of UCP 600, refers to a document presentation that fulfills all of the following conditions:
- It strictly complies with the terms and conditions of the Letter of Credit
- It conforms to the applicable provisions of UCP 600
- It follows International Standard Banking Practice (ISBP)
Only a complying presentation allows the issuing bank to proceed with lodgment and payment.
Pre‑Lodgment Checks by the Bank
Before lodgment of import documents, the issuing bank must perform a series of essential verifications to ensure accuracy, validity and risk control.
Completeness of Documents
The bank must confirm that:
- A full set of documents as required under the LC has been received
- No mandatory document is missing or replaced
Validity of Negotiation and Shipment
The bank must verify that:
- Documents have been negotiated within the beneficiary’s country
- Negotiation occurred on or before the LC expiry date
- The date of transport documents does not exceed the shipment date stated in the LC
Value and Credit Integrity
The bank must also ensure that:
- The amount drawn does not exceed the LC amount
- The credit has not been modified with special instructions affecting its value or nature
Documents Forming Part of Import Bills
Import bills typically include the following core documents:
Bill of Exchange
Commercial Invoice
Insurance Documents
Bill of Lading or Other Transport Documents
Additional Documents as Required by LC
Each document must be independently examined for compliance.
Scrutiny of Bill of Exchange
Verification Points
The Bill of Exchange must be checked to ensure that:
- It is drawn by the correct beneficiary under the LC
- It is drawn under the proper credit
- Its face value conforms with LC terms
- Invoice and bill amounts are identical
- Figures and words match exactly
- It is properly endorsed and legally valid
Errors in the Bill of Exchange may render the entire presentation unacceptable.
Scrutiny of Commercial Invoice
Invoice Examination Criteria
The commercial invoice must confirm that:
- Goods are correctly invoiced by the LC beneficiary
- Invoice is issued to the applicant named in the LC
- Description of goods exactly matches LC terms
- Invoice is properly signed
- Import license number and Bangladesh Bank registration number are included correctly
Scrutiny of Bill of Lading and Transport Documents
Shipment and Endorsement Requirements
The Bill of Lading must be:
- Clean and marked “Shipped on Board”
- Showing freight prepaid where required
- Properly endorsed in favor of the issuing bank
- Corresponding with invoice details by marks and quantity
Additional Transport Compliance Checks
The bank must also verify that:
- Ports of shipment and destination match the LC
- Shipment date falls within LC validity
- Consignee name is correct
- Document is signed by authorized carriers
- No clause indicates defective goods or packaging
- Goods are not shipped on deck unless allowed
- The document is not stale
Lodgment of Import Bills
Operational Steps in Lodgment
Once documents are found compliant, the bank proceeds with lodgment through the following steps:
Intimation to Importer
The importer is informed about the receipt and acceptance of documents.
Arrangement of Funds
Foreign currency funds are arranged or purchased from the Head Office.
Currency Conversion
Foreign currency is converted into local currency at the applicable selling rate.
Register and Form Updates
The bank records entries in:
- PAD Register
- LC Register
- LCAF
- IMP Form (duly signed by importer)
Accounting Treatment for Lodgment
Primary Accounting Entries
At the time of lodgment, the following entries are passed:
- Debit: PAD Account
- Credit: Head Office Account
Adjustment of Liabilities
To convert contingent liability into funded exposure:
- Debit: Banker’s Liability
- Credit: Customer’s Liability
This marks the official recognition of importer’s obligation.
Retirement of Import Bills
Calculation of Importer Liability
At retirement stage, the bank calculates:
- Total bill value
- Interest amount
- Applicable charges and commissions
All details are updated in the PAD register.
Accounting Entries for Retirement
Upon payment by importer:
- Debit: Customer Account
- Debit: Margin Account
- Credit: PAD Account
- Credit: Income Account
Endorsements at Time of Retirement
Mandatory Endorsements
Before releasing documents, the bank endorses:
- Draft as “Received Payment”
- Invoice as “Certified invoice value for USD …”
- Transport documents as “Deliver to the order of …”
These endorsements authorize customs clearance.
Bill of Entry and Post‑Import Compliance
Meaning of Bill of Entry
The Bill of Entry is a customs document that proves goods have entered the country against specific foreign exchange remittance.
Key Information in Bill of Entry
It includes:
- Commodity description
- Mode of shipment
- Declared value
- Import duty details
- Importer name
- Vessel name
- HS Code
The importer or authorized representative prepares and submits this document.
Importance of Proper Lodgment and PAD Management
Effective execution of lodgment and PAD procedures:
- Ensures compliance with foreign exchange laws
- Protects banks from financial risk
- Enables smooth customs clearance
- Prevents audit irregularities and penalties
Lodgment and PAD administration are therefore core functions of import finance operations.
