Chapter 5 Letter of credit.pptVIP

Chapter5 Letter of Credit Lecturer: Wu Ting-ting Contents 5.1 An Overview of L/C 5.1.1 Definition of L/C 5.1.2 Contents of a L/C 5.1.3 Issuance Forms of L/C 5.1.4 Characteristics of a L/C 5.1.5 Parties involved in a L/C By issuing a credit the issuing bank undertakes full responsibility for payment. If a nominated bank determines that a presentation is complying and forwards the documents to the issuing bank or confirming bank, whether or not the nominated bank has honoured or negotiated, an issuing bank or confirming bank must honour or negotiate, or reimburse that nominated bank, even when the documents have been lost in transit between the nominated bank and the issuing bank or confirming bank, or between the confirming bank and the issuing bank.(Art.35) Nominated bank means the bank with which the credit is available or any bank in the case of a credit available with any bank. Unless the credit stipulates that it is available only with the issuing bank, all credits must nominate the bank which is authorized to pay, to incur a deferred payment undertaking, to accept draft or to negotiate. In a freely negotiable credit, any bank can be seen as a nominated bank. 5.2 Procedures of L/C 5.3 Types of L/C Confirmed Irrevocable Credit Straight Credit Anticipatory Credit Transferable Credit Back-to-back credit Revolving credit Reciprocal credit Standby L/C Standby letters of credit Definition: A standby letter of credit is an obligation on the part of an issuing bank to pay a beneficiary in the case of the nonperformance of the applicant. Characteristics Characteristics Standby letter of credit means an issuer on behalf of an applicant that represents an obligation to the beneficiary, pursuant to(依据) a complying presentation: 1.to repay money borrowed by, advanced to, for the account of the applicant; or 2.to make payment on account of any indebtedness undertaken by the applicant；or 3.to make payment on account of any default by the appl