chapter4Letterofcredit讲解.pptVIP

chapter 5 Letter of credit Main contents 1. Definition; 2. Characteristics of a L/C; 3. Parties to Letter of Credit 4. Procedures of documentary credit operation 5. Types of Letter of Credit 6. Inspection and Amendment of letter of credit 7. Amendment of Letter of Credit 1. Definition In simple terms, a documentary credit is a conditional bank undertaking or guarantee of payment by bank.More fully, it is a written undertaking by a bank given to the seller at the request, and in accordance with the instructions, of the buyer to effect payment up to a stated sum of money, within a prescribed time limit and against stipulated documents. TOO MANY L/C’S 1. Too labour and expertise intensive. 2. Too expensive. 3. Too unpredictable. 4. Too difficult to process correctly. 5. Too many intermediaries. 6. Too far off the mark ... International Chamber of Commerce (ICC) has estimated that up to 70% of documents are rejected due to discrepancies on first presentation. So treat L/C like any important contract and negotiate its terms. 2. Characteristics of a L/C 1. D/C is the banker’s credit, it is a definite undertaking of the issuing bank. This is the major difference from documentary collection or remittance; 2. D/C by its nature is a separate transaction from the sales contract . Banks are in no way concerned with or bound by sale contract, even if any reference whatsoever to it is included in the credit. 3. D/C IS a documentary transaction. Banks deal with documents, not with goods or service or performance to which the documents may relate. 3. Parties to Letter of Credit Applicant(buyer): This is the party at whose request a bank is to issue a credit. It is usually the importer. Beneficiary(seller): This is the party in whose favor the credit is to be issued and who must comply with the terms and conditions of the credit in order to be entitled to receive its proceeds. This is normally the exporter. Issuing bank(buyer’s bank): This i