Case Studies

Trade Documentation

Trade in today’s world is a complex activity. Except for the parties involved & exchange of goods a lot of regulatory requirement needs to be met to conduct the trade on a sound pedestal. Business companies have to create various documents carrying out the trade and these documents are submitted to various related agencies for smooth functioning of the trade. We collect/submit various documents to Banks, Insurance Company, RBI, Customs, DGFT, Shipping Companies etc. These documents need to be absolutely correct to mitigate any issues related to goods dispatch/receipt and payment made/receipt.

Documentation is one very critical activity that needs to be done by every business. Unfortunately corporate take it as a non core activity. Our experience with various organizations across the globe reveals the following :

  • Documentation is taken as a compulsory yet reluctant activity for the company because either Government wants it or Bank or Insurance Company wants it and this activity is not performed with due focus
  • Generally the lower rung staff manages the documentation who are not skilled enough to manage the same As a result erroneous documentation happens
  • Overall review of documents prepared is not done by senior officials (because of lack of time) thereby keeping the loopholes open
  • In general companies never realized
    - The efficiency they can create in system with perfection of documentation
    - The cost which could be saved by avoiding imperfect documentation (High banking Charges)
    - Opportunities lost because of smallest mistake in documents/Time delay

We take this opportunity to share a real time case study which encompasses the kind of effectiveness we bring about in our client’s documentation process. We assist our clients in :

  • Standardization of documents (As per regulatory requirement)
  • Save on work duplicity & do away with unwanted documents
  • We help to imbibe the best practices in this process and impart training on the same

Clients: Companies across India whom we have served have come across various issues on the documentation part. These companies span across various industries. They were involved in Export & Import trade

Banking Profile: These companies had a mix of foreign banks, PSU’s & private banks

Expectations: Clarity & streamlining in the overall process of Documentation, specifically in the area of Banking & Regulatory arena, for smoother flow of trade.

Engagement Parameters: Setting up systems & practice in place along with training the staff on maintaining the documents on a more systematic note

Problems Observed: The problems observed across the companies are listed below as excerpts:

  • Export Company in India has received an order against LC for supply of a product is received, in reference to a particular class of product known as Gold Class. The buyer’s bank (Foreign Bank) has inadvertently opened the LC with product name Good Class. The exporter has neglected it and submitted documents preparing invoice for product Gold Class. When the exporter presented documents, the buyer’s bank raised discrepancy in those documents - which was primarily that the product description on the invoice does not match with the LC. This normally appears to be a petty mistake but LC Opening bank has raised valid discrepancy and the exporter in India was forced to allow few thousands of discount to the overseas bank thereby incurring unnecessary losses.
  • Exporter in India declares name of foreign buyer, nature & quantity of goods and price at which export is done in the documents. Nowadays details declared in Shipping Bill are available on a specific domain. On this domain anyone can view details of the Shipping Bill and the trade secret of exporter could be accessed by anyone including their competitors. The exporter (Name is not disclosed to maintain secrecy) approached and requested solution to maintain secrecy of their business. We have suggested documentation and process change which now protect the business interest of the exporter
  • An Indian Importer had regular business relationship and had established a good business track record with his supplier for over one year. The consignment value was partly paid as advance and for the rest LC was issued for due date. The buyer in India was transacting all their business through emails. The Indian importer had done this new deal and had agreed to pay advance for this new deal. Once the deal was concluded, the Indian importer received an email from the supplier where he was informed about a different bank account for remitting the advance. The finance department showed this email to the owner of the company and he approved payment to this new account of the supplier with any verification. The importer’s banker did not conduct any due diligence and completely ignored the inconsistencies observed in the supplier’s bank. The importer bank remitted approximately Rs. One Crore. After a week, the supplier contacted the importer about non receipt of the advance payment. In due course of time, it was found that the email received by the importer was sent by a third part who had fraudulently taken money in their account and withdrawn all funds same day from that Foreign Bank. Now this Indian Importer Company has framed a risk management policy for documentation and examination of documents before any payment release.

Documents being analyzed: The following types of documents are observed for implementing a documentation structure in an organization:

  • General Documents
  • Commercial Documents
  • Statutory Documents
  • Financial Documents
  • Documents at the time of inward realization/ outward payment

Outcome: Our Company was able to imbibe a set structure in these organizations for documentation check & verification. Specifically LC related issues were resolved to a large extent These led to reduction in unnecessary delays in payments, regulatory compliances and unwanted losses because of petty mistakes.