COMMERCIAL CREDIT DEPARTMENTS Import Commercial Credit Department In a bank doing a large foreign business under commercial credits the business of issuing the credits and handling the trans actions under them divides itself naturally into the two divisions of imports and exports. The departments handling these divi sions are commonly called "import commerdal credit depart ment " and " export commercial credit department," respectively.
The work of the import commercial credit department con sists of the issuance of the letters of credit, the handling of the documents and drafts drawn under the letters, the collection of such items at maturity, and the incidental correspondence. The internal organization of the department will logically follow these subdivisions of the work.
The Issuance of Import Credits When an application for a credit is received from a customer or from a bank for one of its customers, an offering slip is prepared stating the liabilities of the client in this line. In case of a guar anteed credit, the total liabilities of the guarantor, that is, all the credits that have been opened, even if they are for account of various parties, must be taken into consideration. The offering slip must show clearly the conditions under which the credit is opened, such as the tenor of the drafts, clean or documentary, whether documents are to be delivered against payment or trust receipt, or whether the merchandise is to be stored and insured in the bank's name and the documents turned over to it. These slips are passed upon first by the officers of the foreign division and by the officer in charge of the bank's interests in the federal reserve district where the client is located and later at the officers' meeting.
Under a ruling of the Comptroller of the Currency, one na tional bank cannot guarantee to another bank the obligations of its custoiners. When, therefore, the bank receives an applica tion for a commercial credit from a national bank for one of its clients, the bank fills out a special form of application and the importer signs a separate spedal form of obligation.
The customer's agreement, with a copy of the credit annexed, is next filled out. The credits opened by mail are then typewrit ten from these agreements, credits opened by cable requiring no written instruments, as the correspondent or branch notifies the beneficiary of the conditions of the credit. Original and dupli
cate instruments are delivered with the agreement to the party for whose account the credit is opened, or to the guarantor if it is a guaranteed credit, unless the bank is instructed to deliver the original to a specified party or to forward it to the beneficiary.
Upon return of the agreements the signatures are verified. After this verification the receipt of every guaranty is acknowledged and accepted, in order to make it binding.
As a rule the bank does not insert the details of the sale in the credit instrument, as the shipment, price, quality, and quan tity are matters of contract between vendor and buyer and cannot be controlled by the letter of credit. The letter of credit covers the financial part of the transaction in a general way, and neither the bank nor its correspondents can be held responsible for any particular arrangements. The findings of the Federal Reserve Board on this point are as follows: Credit letters ordinarily do not allude to the sales contract between buyer and seller, for the issuing bank has no direct con cern in terms of this document or in any controversies which may arise over the merchandise. Moreover, the banker negotiating the drafts under the letter would look with disfavor upon the indusion of commercial details which he is unable to verify. In fact, a credit, burdened with such stipulations, would prove of little value, as foreign banks generally refuse to negotiate the drafts. On the other hand, some banks feel obliged to protect the interests of their dients, and this explains the considerable num ber of institutions reporting that they do refer to the sales con tract in their letters of credit. Such mention is made to a varying degree. In some cases the terms of the credit merely follow the stipulations of the contract in a general way. Other banks go to the extent of specifying the grade, quantity, and price of the mer chandise. One bank protects itself by requesting " a declaration, furnished by the accredited party, that the goods were shipped in accordance with the terms of the contract between the buyer and seller. "1 The following records would be kept of the credit issued: 1. A numerical entry in a daily record of credits issued.