After the documents are sorted into original and duplicate sets, the debit advice and bookkeeping tickets are prepared and despatched. If payment is made against ocean documents, they are forwarded to the bank's foreign correspondent or the person designated by him, the debit advice being enclosed. If payment is made against railroad bills of lading, they are, in the absence of any other instructions, returned to the beneficiary of the credit, against trust receipt, by which he engages himself to return to the department in exchange at the earliest possible moment, ocean bills of lading. In some cases the department is authorized to pay against railroad bills of lading themselves, and then the trust receipt does not provide for return of the ocean bills of lading.
Payments Against Warehouse Receipts Payments against warehouse receipts have certain peculiari ties worthy of notice. The warehouse receipt is submitted to the proper bank officer for approval. In case the warehouse is not known to the department an investigation is made by the credit department, and upon its findings the officer acts.
Except in the few cases where the department is satisfied to accept the statement of the benefidary of the credit that the goods are covered under his open policy, the production of the insurance policy covering the merchandise in question is neces sary before payment. The payment clerk determines whether the description of the merchandise on the warehouse receipt and the invoice as well as the description of the location, agrees with that in the policy. To determine whether the policy covers ade quately the interest of the bank and its correspondent in the mer chandise, the payment clerk may employ an insurance expert. This expert may be a specialized clerk of the department.
As a general thing, policies should be opened in favor of the beneficiaries and of the bank, as their interests dictate. They should provide that if any losses occur they should be adjusted with and payable to the bank. They should bear the trust com raission clause to cover the merchandise through all stages of the transaction and thus avoid the necessity of being signed. The insurance should properly provide cover for to per cent above the invoice value, and in the case of fire insurance should contain the 8o per cent co-insurance clause. A complete description of the quality and quantity of the merchandise widens the covering and is desirable. In case the bank does not appear as the as sured, the assignment of the policy with the indorsement of the insurance company is necessary.
After payment has been effected against warehouse receipt, records are made of the name of the beneficiary and number of the credit, the name of the warehouse, the number of the ware house receipt, description of the merchandise, the number of the units stored, the amount of payments made, and the date when the insurance covering the respective commodity expires. A letter is immediately despatched to the warehouseman advising him of the interest of the bank in the merchandise, requesting him to make no deliveries without proper order from the bank, inquiring as to the condition of the goods stored, and requesting him when rendering bills for storage to send them in triplicate and bearing the bank's credit number which is furnished.
When the insurance expires it is renewed. A special card record of insurance is kept to indicate the amount of the policy, the nature.of the risk (fire, war, explosion, water damage, sprink ler, burglar, etc.), the expiration date, the commodity insured, the beneficiary of the credit, and the name of the broker with whom the insurance order is placed. The dates when the broker
placed the insurance and when the policy was received are also entered on the card. The cards are filed on the basis of expiration dates.
Sprinkler insurance is generally ordered in an amount equal tO 20 per cent of the invoice value of the merchandise. Burglary, theft, and larceny insurance, when required by the terms of the credit or by general instructions from the correspondent, depends for its amount upon the nature of the commodity. If the bank has no specific instructions in this matter, it is guided somewhat by the advice of the beneficiary or the insurance broker as to the general custom.
Before bills representing storage charges and insurance pre miums are paid, the items are checked against warehouse receipts to see that they refer to the proper merchandise and against the insurance card to see that the proper rate is charged and that the computation is correct.
Merchandise held by the bank in warehouse is delivered for the purpose of shipment or resale. When opening a credit pay able against warehouse receipt, the correspondent may give in structions as to the disposition of the warehoused merchandise; but if no such instructions are received, the bank despatches a letter requesting instructions and stating that unless instructions to the contrary are received meanwhile, it will upon request deliver the warehouse receipt to the beneficiary of the credit, when informed by him that he has arranged for forwarding and desires to effect shipment and secure ocean bills of lading. The letter also asks whether the bank is to pay the forwarding charges when ocean shipment is effected.
When the bank has specific instructions the delivery is simple. The warehouse receipt is delivered to the designated person against his receipt, or trust receipt, and an obligation to return to the department the ocean bills of lading. If the bank is au thorized to pay the shipping charges he is so informed. The bank requests prompt advice of removal of the goods from the warehouse, so that it can cancel the insurance and receive a refund of the unearned premium.
If the goods are to be resold, the bank follows the instructions given it. These are of great variety. The commission for effect ing resales is generally greater than for effecting payments. For holding merchandise in warehouse, effecting the necessary pay ments for storage, insurance premiums, and keeping the goods covered, a flat charge is imposed per mille per term.
Advances Against Export Bills Frequently a mercantile house which does most of its busi ness upon a collection basis wishes to realize upon its collection items. To facilitate this operation an account is established from which advances are made to exporters against certain bills, or else the bank accepts drafts drawn against it. The accept ances bear a lower rate than the loans, but the bank's commission charge for accepting absorbs part of this difference. The book keeper who handles the account takes from the foreign collection department items sufficient to cover the draft or loan with a margin for safety; their amount is entered in the advances book, and the collection department's ticket is so stamped that the pro ceeds when received will not be paid to the exporter, but will be credited to the exporter to pay his loan, or cover his acceptance, at maturity. The interest is adjusted at maturity and the com mission is collected either at the time of acceptance or maturity, as the arrangement may be.