letter of credit

1、LETTER OF CREDITLetter of Credit, L/C A document issued by a bank which guarantees the payment of a customers drafts for a specified period and up to a specified amount. Letters of credit are one of the most common and safest methods of payments for international business. Basic Items of L/C：P1381)

2、The type of the L/C2) The number of the L/C, the date of issue, the date of expiry, the place of expiry, and the period of presentation of the documents3) The parties involved with the L/C, such as the issuing bank, the applicant, the advising bank, the beneficiary and so on.4) The types of draft, t

3、he drawer, drawee, the duration to effect payment and so on 5) The description of goods, quantity, unit price, specification, price terms, packing, shipping mark and so on6) The payment currency 7) Terms and conditions of shipment and insurance 8) Full details of the documents required9) Special ter

4、ms and conditions38Parties to a credit 1) Applicant or Opener 2) Opening Bank or Issuing Bank 3) Advising Bank or Notifying Bank 4) Beneficiary 5) Negotiating Bank 6) Paying Bank / reimbursement bank 7) Confirming BankJ three basic parties in L/C business：applicant, opening bank and beneficiary. Typ

5、es of L/Cs - clean credit - documentary credit - irrevocable credit - revocable credit - confirmed credit - unconfirmed credit - sight credit - time/ usance credit 43Documents related Draft B/L Invoice Insurance Policy / Certificate Certificate Of Origin Inspection Certificate檢驗證書 Packing List / Wei

6、ght Memo / Specification List Fumigation Certificate熏蒸證明書B/L 按貨物是否已裝船區(qū)分 已裝船提單 (Shipped B/L or on Board B/L） 收貨待運提單（Received for Shipment B/L） 按提單抬頭區(qū)分 指示提單（Order B/L） 記名提單（Straight B/L） 不記名提單（Blank B/L or Open B/L） 按無影響結匯的批注區(qū)分 清潔提單（Clean B/L） 不清潔提單（Foul B/L）/ unclean / dirty 按收費方式區(qū)分 運費預付提單(Freight Pr

7、epaid B/L) 運費到付提單（Freight Collect B/L） 按船舶的經(jīng)營方式區(qū)分 班輪提單(Liner B/L) 租船提單（Charter Party B/L） negotiable B/L non-negotiable B/L full set of clean on board B/L made out to order and endorsed in blank 托運人（Shipper）( consignor發(fā)貨人) 收貨人（Consignee） 通知人（Notify Party） ContractNegotiating BankAdvising BankPaying

8、BankIssuing BankThe flow chart of a documentary credit4. How an L/C Operates Under the S/C with L/C payment the applicant applies to their bank for a credit in favor of the beneficiary. The issuing bank issues an L/C and forwards it to the advising bank in the exporters country. The advising bank pa

9、sses the documentary credit to the beneficiary after verifying the genuineness of the credit. On receiving the L/C, the exporter checks the terms and conditions of the credit based on the S/C. If there is a discrepancy, the beneficiary may have the option to accept it as it stands or to ask the appl

10、icant to have it amended so as to be in line with the contract. The exporter prepares the documentation as per the terms and conditions of the L/C, and have the goods shipped. The exporter then presents the documents to the negotiating bank for the negotiation of the draft. After receiving the docum

11、ents, the negotiating bank will check the documents against the terms and conditions of the L/C. If all are in order, the above bank will effect payment to the beneficiary. The negotiating bank forwards the documents to the paying bank or the bank authorized by the issuing bank to ask for reimbursem

12、ent. The paying bank, after receipt of the documents from the negotiating bank, will examine them carefully to see whether the documents are in compliance with the terms of the L/C. If the documents conform to the L/C, the paying bank will reimburse the negotiating bank which has paid the beneficiar

13、y. The issuing bank will notify the importer of the arrival of the documents and ask him to pay the bank for the documents. The importer will pay money to the bank and get the documents with which he can claim the merchandise 40Advantages & Disadvantages of L/C Payment Advantages for the Exporte

14、r Disadvantages for the Exporter Shift credit risk from the importer to the importers bank (the issuing bank). An undertaking from the issuing bank that payment will be made under the letter of credit, provided that all terms and conditions of the credit are met. If the L/C is not issued as agreed,

15、you are not obligated to ship against it. Documents must be prepared in strict compliance with the requirements stipulated in the letter of credit. Non-compliance leaves you exposed to risk of non-payment and removes the protection afforded by the issuing bank since the final decision on the documen

16、ts then rests with the importer. 41Advantages for the ImporterDisadvantages for the Importer In L/C transactions, banks deal only in documents, not in goods and services. The goods may not be as represented in the documents.The importer must bear the cost of arranging the L/C and may be asked to dep

17、osit money in a special account as a margin to cover the L/C, which will tie up the importers capital. Reduce your commercial risk by ensuring that your supplier will not be paid until evidence has been provided that the goods have been dispatched. Your bank will refuse payment to the seller if the

18、documents presented do not comply with the terms and conditions of the credit.Conserve your companys cash flow by eliminating the need to make advance payments or deposits.Demonstrate your creditworthiness to your supplier. The L/C with deferred payment provides a credit facility. 42案例：案例： 我向美出口一批貨物

19、，合同規(guī)定8月份裝船，后國外來證將船期改為不得晚于8月15日。但8月15日前無船去美，我立即要求外商將船期延至9月15日前裝運。隨后美商來電稱：同意船期展延，信用證有效期也順延一個月。我方與9月10日裝船完畢，15日持全套單據(jù)向銀行辦理議付，但銀行拒絕收單。問：銀行能否拒收單據(jù)、拒付貨款？分析：分析： 根據(jù)信用證國際慣例，不可撤銷根據(jù)信用證國際慣例，不可撤銷L/C非經(jīng)所有當非經(jīng)所有當事人同意，不得任意修改或撤銷。由此可見，如事人同意，不得任意修改或撤銷。由此可見，如開證人和受益人雙方撇開開證行而直接對開證人和受益人雙方撇開開證行而直接對L/C內(nèi)容內(nèi)容進行修改顯然屬于無效，當然議付行拒絕議付。進

20、行修改顯然屬于無效，當然議付行拒絕議付。因此，受益人如要求改證，則應先通知開證人，因此，受益人如要求改證，則應先通知開證人，開證人同意后在通過開證行與通知行將修改通知開證人同意后在通過開證行與通知行將修改通知發(fā)給受益人，否則無效。發(fā)給受益人，否則無效。Give the Chinese equivalents to the following English terms Give the Chinese equivalents to the following English terms and match their definitions given below:and match thei

21、r definitions given below:a. clean L/C _ b. confirmed L/C _ c. irrevocable L/C _ d. negotiable B/L _ e. order B/L _ f. a sight draft _ g. D/P _ h. a letter of guarantee _i. open account _ j. cash in advance _ 57On May 8, 2005, a remitting bank accepted an outward collection business of D/P at sight

22、with the amount of US$ 80, 000. Instructed by the exporter, the remitting bank mailed the full set of documents together with a collection instruction to the collecting bank in a Middle East country. A week later, the exporter required the remitting bank to change “D/P at sight” into “D/A at 30 days

23、 sight” according to the importers request, despite the remitting banks warning about the high risk of D/A. So the remitting bank sent a modification instruction. However, the collecting bank didnt send them the notice of acceptance. On August 15, the exporter asked the remitting bank to instruct th

24、e collecting bank to return the documents. On August 25, the remitting bank received the returned documents but found that one of the three original bills of lading was missing. The exporter soon learned that the goods had been picked up by the importer. The remitting bank required that the collecti

25、ng bank either send back the documents in full or make payment by acceptance, but the collecting bank paid no attention to it. Furthermore, the exporter was unwilling to settle the problem by legal means. The exporter has still not received the payment after several years. What are the lessons we ca

26、n learn from this case?Case Study64 A Chinese company concluded a contract with a European country for exporting dehydrated carrot flakes of the second grade. The L/C established by the bank of the importing country described the goods as “Dehydrated Carrot Flakes Grade 2”. Before the goods were ready for shipment, the goods of this