letterofcredit

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检验证书 Packing List / Wei

6、ght Memo / Specification List Fumigation Certificate熏蒸证明书B/L 按货物是否已装船区分 已装船提单 (Shipped B/L or on Board B/L） 收货待运提单（Received for Shipment B/L） 按提单抬头区分 指示提单（Order B/L） 记名提单（Straight B/L） 不记名提单（Blank B/L or Open B/L） 按无影响结汇的批注区分 清洁提单（Clean B/L） 不清洁提单（Foul B/L）/ unclean / dirty 按收费方式区分 运费预付提单(Freight Pr

7、epaid B/L) 运费到付提单（Freight Collect B/L） 按船舶的经营方式区分 班轮提单(Liner B/L) 租船提单（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 托运人（Shipper）( consignor发货人) 收货人（Consignee） 通知人（Notify Party） ContractBeneficiary（Exporter)Applicant（Impor

8、ter)Negotiating BankAdvising BankPaying 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

9、 exporters country. The advising bank passes 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 a

10、ccept it as it stands or to ask the applicant 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

11、 of the draft. After receiving the documents, 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 b

12、y the issuing bank to ask for reimbursement. 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 negoti

13、ating bank which has paid the beneficiary. 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 o

14、f L/C Payment Advantages for the Exporter 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 m

15、et. If the L/C is not issued as agreed, 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

16、 since the final decision on the documents 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 a

17、rranging the L/C and may be asked to deposit 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 w

18、ill refuse payment to the seller if the 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 provid

19、es a credit facility. 42案例：案例： 我向美出口一批货物，合同规定8月份装船，后国外来证将船期改为不得晚于8月15日。但8月15日前无船去美，我立即要求外商将船期延至9月15日前装运。随后美商来电称：同意船期展延，信用证有效期也顺延一个月。我方与9月10日装船完毕，15日持全套单据向银行办理议付，但银行拒绝收单。问：银行能否拒收单据、拒付货款？分析：分析： 根据信用证国际惯例，不可撤销根据信用证国际惯例，不可撤销L/C非经所有当非经所有当事人同意，不得任意修改或撤销。由此可见，如事人同意，不得任意修改或撤销。由此可见，如开证人和受益人双方撇开开证行而直接对开证人和受益人

20、双方撇开开证行而直接对L/C内容内容进行修改显然属于无效，当然议付行拒绝议付。进行修改显然属于无效，当然议付行拒绝议付。因此，受益人如要求改证，则应先通知开证人，因此，受益人如要求改证，则应先通知开证人，开证人同意后在通过开证行与通知行将修改通知开证人同意后在通过开证行与通知行将修改通知发给受益人，否则无效。发给受益人，否则无效。Give the Chinese equivalents to the following English terms Give the Chinese equivalents to the following English terms and match thei

21、r definitions given below:and match their 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 outw

22、ard collection business of D/P at sight 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 ch

23、ange “D/P at sight” into “D/A at 30 days 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

24、 asked the remitting bank to instruct the 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 r

25、emitting bank required that the collecting 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 s

26、everal years. What are the lessons we can 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 qual