Not mentioning L/C no. on invoice is not a discrepancy, says expert

We have inadvertently omitted to mention the LC number on the invoice. Can the LC issuing bank refuse the documents presented only on the grounds that the LC number is not mentioned on the invoice?

No. Para (viii) of the ‘Preliminary Considerations’ of the 2023 edition of the International Standard Banking Practices for examination of documents under UCP 600, (International Chamber of Commerce Publication no.@821E, known as ISBP) says that a request to insert the credit number is usually at the instigation of the issuing bank in order to facilitate the collation documents should one or more documents become detached from the presentation.

Provided all the stipulated documents are received by the issuing bank, the absence or mistyping of a credit number does not constitute a reason for refusal. The exception to this position is where it is the requirement of the importing country that the credit number is stated on one or more documents. In such circumstances, the credit must clearly indicate that this is the reason for the number to be shown on that or those documents.

Para 6.07(b) of the FTP says that for services, including software units, sale in DTA in any mode, including on line data communication, shall also be permissible up to 50% of FOB value of exports and/or 50% of foreign exchange earned, where payment of such services is received in foreign exchange. Does it mean that an EOU can sell services in DTA only in foreign currency?

In my opinion, the words ‘where payment of such services is received in foreign exchange’ qualify the words ‘50% of foreign exchange earned’ and not the words ‘sale in DTA’. It means that any payments received in INR through export of services (e.g. from exports to Nepal or Bhutan) will not be counted for the purpose of determining the 50% DTA sale entitlement and not that the DTA sale must be made in foreign currency. 

Any other interpretation does not make sense because the EOU seller and the DTA buyer are both residents and there ought to be no compulsion for them to deal in foreign currency. The said Para 6.07(b), however, needs to be redrafted to be clear in this matter and also because it talks of FOB value of exports, which has no relevance in the context of export of services. The DGFT should look into the matter.

We have just received our LOP and executed the B-17 bond for our new EOU. We want to know when we should debit the bond account and when we should take credit in the bond account.