Foreign Trade - in Your Opinion, Why the Bank of Oman Did Not Clear the Payment

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FOREIGN TRADE

CASE 1 (10 Marks)

THE MAGIC OF LETTER OF CREDIT:

Mother Choice is a Murnbai based export organisation specialising in the export of handsmoked children wear. Its owner is Mrs. Shruti Sharma who possesses post—graduate qualification in business management. The business is ten years old. It has nieched a good market for its items in USA and Japan. Only recently, Mrs. Sharma has upgraded the technology in her factory. The orders are adequate to keep her busy round the year.

Mrs. Sharma is seen in high spirits these days. She has negotiated a good order with Dubai based importer M/s Green Channels. Its MD Sheikh AI—Makhdoom, recently paid a visit to the office and factory of Mother Choice. He instantly liked the handsmokcd dresses for children. He placed a huge order with Mother Choice suggesting some changes such as long sleeves and lining and that the dresses shall not bear stars and crosses.

Sheikh Al-Makhdoom agreed to open a L/C. The order was placed on 28th August 2003 and the goods were to he delivered by 1st November 2003. An export contract was signed for US $ 30,000 covering 3,000 pieces. On 29th September ’03, the Bank of Oman, the issuing bank, sent an irrevocable L/C at sight to United Commercial Bank, the negotiating bank. L/C contained the following terms:

(1) Shipment:

— Port of departure — Mumbai.

— Port of arrival — Dubai.

— Partial shipment — allowed.

— Transshipment — allowed.

— Shipment Expiry — 1st Nov. ‘03

Shipment documents should be presented to the issuing bank within the validity period of credit i.e. 1st Nov. ‘03.

(2) Special instructions:

- Commercial invoice should mention manufacturer’s name.

- A copy of government approved inspection certificate.

- Two copies of negotiable bill...