Chapter 5 6 7 Letter of Credit(ed).pptVIP

6. Contents of an L/C First part: Kinds of credit L/C amount in figures and words L/C number Date of issue Expiry date and place of the credit Issuing bank’s name and address Applicant’s name and address Beneficiary’s name and address Advising bank’s name and address Second party: 1) bill of exchange clause: drawer/drawee/amount/tenor/draw clause 2)shipping documents clauses: indicate full details of the shipping documents, such as commercial invoice, insurance policy, B/L 3)goods clause: description/quantity/unit price of goods as well as price terms 4)transportation clauses: port of loading/discharge/destination, the latest date of shipment, and partial shipment or transshipment allowed or prohibited 5) other or special terms and conditions Third part 1)the instructions to negotiating bank 2)the issuing bank’s undertaking clause 3)the issuing bank’s name and signature 4)this documentary credit is subjected to UCP 600 L/C is opened by airmail / by telecommunication (by cable, by telex, and by SWIFT) Documents Used in International Trade Financial documents: Bill of Exchange Commercial documents (case study) Commercial Invoice Bill of Lading Packing list Insurance Policy Certificate of Origin Certificate of Inspection Other Documents Drafts under L/C There is clear distinction between the draft under collection and that under L/C. –Drafts under collection is based on trader’s credit thus it is drawn on a trader, whereas drafts under L/C should be drawn on a bank from which the payment undertaking is given. –As both the collection and L/C are reverse remittance, drafts under both methods should be drawn by the exporter. The following comparison will make the matter clear. BILL OF EXCHANG NO. SD89741 GZ CHINA ,May 10,2013 EXCHANGE FOR USD 8,000.00 AT *** SIGHT OF THIS FIRST OF EXCHANGE (SECOND OF EXCHANGE BEING UNPAID) PAY TO THE ORDER OF OURSELVES THE SUM OF US DOLLARS EIGHT THOUSAND ONLY. DRAWN UN