LETTERS OF CREDIT信用证.pptVIP

14. LETTERS OF CREDIT:PROCEDURES * LETTERS OF CREDIT I. THE NEED FOR LETTERS OF CREDIT A. USES TO THE SELLER WITH A FIRST-TIME CUSTOMER WITH A CREDIT RISKY BUYER WITH A CUSTOMER FROM A COUNTRY WITH EXCHANGE CONTROLS WHO MAY FACE THE RISK BUYER DEFAULTS BECAUSE PRICES HAVE DROPPED * LETTERS OF CREDIT B. DEFINITION 1. a letter addressed to the seller, 2. written and signed by a bank, 3. who acts on the buyer’s behalf. -Bank promises to pay drafts, provided seller performs exactly. * LETTERS OF CREDIT C. USUAL CONDITIONS: 1. Seller submits draft with documents. a. Documents 1) negotiable bill of lading - can be assigned 2) insurance certificate 3) commercial invoice * LETTERS OF CREDITAdvantages to the Exporter Credit risk eliminated Reduces exchange rate and political risk No Need for Credit Check Requirements to pay are well-known Preshipment risk avoided Facilitates financing Immediate payment * L/Cs Facilitate Financing * Bankers Acceptances : require a time draft from the exporter to the importer’s bank Under Letters of credit, B/As are especially easy to create With sound credit backing, banks ready to provide needed financing an L/C is like a purchase order that allows additional financing LETTERS OF CREDIT Advantages to the Importer (less than the exporter) Expert Examination of Documents Sources of Supply expand Financing No cash tied up Payment only after compliance To ship by a certain date requires an on-board bill of lading * On-Board Bill of Lading Definition: ? shipping?waybill certifying presence of goods:?a document establishing that goods have been loaded onto a particular vessel and that the carrier is now responsible for their safe passage * LETTERS OF CREDIT II. PARTIES TO THE TRANSACTION A. THE BENEFICIARY B. ACCOUNT PARTY (usually importer) C. OPENING BANK D. ADVISING BANK usually a correspondent of opening bank * LETTERS OF CREDIT E. PAYING BANK ag