BW -7 Letter of credit.pptVIP

Letter of Credit Background information Urging L/C Notifying the establishment of L/C Amending L/C Letter of Credit Among various ways of payment in international trade, letter of credit L/C is the most commonly used means of payment, because it is reliable and safe. Why? Letter of Credit Why? For exporter, he can get paid as soon as he has fulfilled his part of the sales contract and has shipped the goods even if the importer has not received the goods yet. For importer, he is assured of title to the goods before he pays for them 1 Letter of Credit L/C 1 Procedures of L/C operations 1. Letter of Credit L/C 1. Procedures of L/C operations 1. Letter of Credit L/C 1. Procedures of L/C operations Letter of Credit Letter of Credit Solve the issues of 1 seller’s unwillingness to deliver the goods without receiving payment 2 buyer’s reluctance to pay without actually controlling the goods 2. Urging a L/C When are the urging letters needed? 1 buyer fails to establish the L/C 2 a L/C fails to reach the seller on time First time urging letter: polite Second time urging letter: polite but disappointed or surprised Sample letters Urging the establishment of L/C p. 81-82 Sales Confirmation No. TE123 Order No. 234 2. Urging a L/C --- Analysis A letter urging for establishment of an L/C usually contains the following components: 1. A reference to a relevant contract or agreement 2. A request for the opening of the expected L/C 3. Expectation for a favorable reply or a friendly close. 2. Urging a L/C --- some points to remember 1st: Notify the importer what arrangements have been made on the exporter’s side so that the reader’s enthusiasm for opening an L/C may be aroused. a. goods will be delivered as soon as their L/C comes b. shipment date is approaching 2nd: Then ask for the opening of the covering L/C. some important points agreed upon in the related contract may be reiterated so that no important points may be neglected. a. price terms: