Letter_of_credit概要1.pptVIP

Letter of Credit Background We have seen that exporting on open account terms is not satisfactory . Cash payment is ideal for the exporter, but seldom used or illegal in some countries. However, the most widely-used and well - accepted method is by documentary credit. As we know, a buyer and a seller live far apart, international business is carried out beyond each others control and mutual trust is hard to establish. The seller is unwilling to ship the goods without receiving payment,- while the buyer is reluctant to part with his money without actually controlling the goods. In case the credit worthiness becomes the major bottleneck, the problems of the buyer and the seller are solved by the intervention of a third party- -the bank. Documentary credit is the product of international business and the creation of merchants and bankers and they have gone a long way, hand in hand, with the development and settlement of credit and money. Development of world business has always been an immense impetus to the evolution of documentary credits. Technological advances in banking, transportation and telecommunications have made it possible for the worldwide acceptance of credit operations. The objective of documentary credit is to facilitate international payment by making use of the financial expertise and credit reputation of the banks. It differs from other methods of payment in the credit and offers both buyer and seller a means of security. This bilateral security is the unique and characteristic feature of the documentary credit. A L/c is a written undertaking(保证） by the issuing bank to the beneficiary, under which the bank will pay a certain sum in money to the beneficiary if the beneficiary of the L/C provides the bank with specified documents within a prescribed time period, which all comply with the terms and conditions of the credit. 1 Definition of a L/C Primary Liability of the Issuing Bank to Make Payment Separated from the Underlying Contracts Dea