INTERNATIONALSETTLEMENTChapterDocumentaryCredits

INTERNATIONAL SETTLEMENT Chapter 4 Documentary CreditsChapter 4Documentary Credits1Inthischapter,youwilllearn:?Characteristics of a letter of credit;?Basic documentary credit procedure;?Different types of credits;?The content of letter of credit;?Risk protection and financing under credit methods.2Section 1 Outlineof Letter of Credit一、The definition of Letter of Credit 二、The contractual arrangement under a D.C operation1、Thesalescontractbetweenbeneficiaryandapplicant.2、Theapplicationbetweenissuingbankandapplicant.3、Thedocumentarycreditbetweenbeneficiaryandissuingbank.3三、Parties to Letter of Credit and their rights and obligations （一）Applicant （二）Issuing Bank1、Issue the Letter of Credit according to application signed by applicant.2、Issuing banks are the primarily liability for payment.3、Once payment is made by the Issuing Bank,that is ultimate payment.4、Issuing banks examine all documents, and pay it against documents .4(三)AdvisingBank1、Checktheapparentauthenticityofthecredit.2、Findthecreditinstructionsincompleteorunclear.Iftheadvisingbankfoundthecreditincompleteorunclear,itwouldinformtheissuingbankoftheactionandrequestittoprovidethenecessaryinformationwithoutdelay.5（四）Beneficiary1、incontract:Thegoodsmustconformwiththecontract;Thedocumentsmustconformwiththegoods2、inD.CThedocumentsareinconformity;ThedocumentsareinlinewiththeD.C3、Thebeneficiarycanclaimfromtheapplicantforthepaymentincaseofissuingbanknotbeingabletopay.6(五)NegotiatingBank(六)ConfirmingBank(七)ReimbursingBankDocumentary BillNegotiating BankIssuing BankReimbursing Bank7AuthorizationReimbursementReimbursementClaimsSection 2 The Procedure of Documentary Credit一、TheProcedureofDocumentaryCredit8BeneficiaryShApplicantipmentDocumentary CreditAdvising BankIssuing BankNegotiating BankSending Documents &Claiming to money9ApplicationRedeem Documents AdviceExamining and payingCredit adviceDocumentary BillChecking and Negotiating二、ThemaincharacteristicsofL/C1、Aletterofcreditisabankerscreditratherthanatraderscredit.2、Aletterofcreditisaseparatetransactionfromthesalescontract.3、Underletterofcredit,banksinvolveddealonlywithdocumentsratherthangoods.10三、AdvantagesandDisadvantagesofL/C(一)Advantage1、Onceconformingdocumentsarepresentedtothenegotiatingbank,beneficiarywillbesuretosecurenegotiation,andthereforespeedsuphisfundsturnover.2、Theburdenofbankrollismorebalanceablethancollection.11(二)Disadvantages1、TherearesomefraudulentcasesoccurredunderD.C.2、Thecostsoftransactionarehigher.12Section 3 Forms and Contents ofLetter of CreditSee the attachment13Section 4 Classification of Letter of Credit一、According to the revocability of credit(一) Revocable Credit It gives the buyer and /or issuing bank ability to amend or cancel the credit at any time right up to the moment of intended payment without approval by,or notice to, the seller.(二) Irrevocable CreditIt can neither be amended without the agreement of the issuing bank, the confirming bank, if any, and the beneficiary.14二、According to the adding of confirmation(一) Confirmed Credit Eg.(二) Unconfirmed CreditEg. This notification and enclosed advice are sent to you without any engagement on our part. 15三、Accordingtotheavailabilityofpayment(一)SightpaymentCredit1、Payingbankistheissuingbankitself.UndertakingClauseinD.C:Weherebyengagethatpaymentwillbedulymadeagainstsightdraftanddocuments/documentspresentedinconformitywiththetermsofthisCredit.162、Payingbankisthenominatedbank.UndertakingClauseinD.C:?4Creditavailablebypaymentwiththenominatedbank?4Foryourpaymentyouareauthorizedtochargeouraccountwith-Bank?4口Bypaymentatsightagainstthedocumentsdetailedherein口andBeneficiarysdraft(s)drawnonBankofChina,Tianjin17（二）DeferredpaymentCreditL/Cindicatingabanktopayonaspecifiedfuturedate,isadefferredcredt.UndertakingClauseinD.C:?4Weherebyengagethatpaymentwillbedulymadeatmaturityi.e.XX days after presentation of documentsXX days after the date of shipmentA fixed future dateagainst the documents presented in conformity with the terms of this Credit.18?4口Bydeferredpaymentat30daysafterthedateofshipmentagainstthedocumentsdetailedherein（三）AcceptanceCreditL/Cindicatingabanktoacceptandpaythefacevalueoftimedraftdrawnonthisbankatmaturity,isanacceptancecredit.UndertakingClauseinD.C:?4口Byacceptanceofdraftsat30daysaftersightagainstthedocumentsdetailedherein口andBeneficiarysdraft(s)drawnonBankofChina,Tianjin19?4WeherebyengagethatdraftsdrawninconformitywiththetermsofthisCreditwillbedulyacceptedonpresentationtodraweebankandhonouredonmaturity.Usance Credit payable at sightIt is stipulated in D.C:Draft at 150 days sight on Issuing Bank ,discount at current rate and charges are for buyers account . Reimbursing: We authorise the Nominated Bank to debit our Sydney Office account with their Beijing Head Office at sight with the amount of drawing in terms of the L/C20(四)NegotiationCredit1、RestrictednegotiationUndertakingClauseinD.C:?4Creditavailablebynegotiationwiththenominatedbank?4NegotiationsundertheCreditarerestrictedto-Bank,(place)?4Weherebyauthorise-Banktonegotiatethedraft2、FreelyNegotiableCredit21四、AccordingtothetransferabilityoftheCredit1、TransferableCreditAnewTransferableCreditmaybeopenedattherequestofthefirstbeneficiarybythetransferingbankinaccordancewithalltermsandconditionsoforiginalCreditexceptthatTheapplicantmaybechangedbyfirst beneficiaryThecreditamountandunitpricemaybereducedTheshipmentandexpirydatesandlatestdateforpresentationofdocumentsmaybeshortened22Thepercentageofinsurancecovermaybeincreased2、Non-transferable Credit五、Back-to back L/C1、Undertaking Clause in back-to back L/C?4Payment under this Credit is to be made upon receipt of the cover or the notice of acceptance from the Issuing Bank of the master Credit.?4This Credit shall become operative only upon our receipt from * of the relative documents as requested by the master Credit No. * dated * and made out in compliance with the terms thereof.23Section 5 Amendment of Letter of CreditAmendment Clause of Letter of Credit1、Shipment and validity extended to 31 March 2004 and 15 April 2004 respectively.2、L/C increased (decreased) by USD10000.00 to USD60000.00 and quantity of commodities increased (decreased) by 100 metric tons to 600 metric tons .3、Insurance covering All Risks instead of F.P.A.4、B/L made out to order of-instead of -245、Shipmentfrom-to-insteadofpreviouslystipulated.6、Partialshipmentpermitted.7、Transhipmentpermitted.8、Unitpricenowchangedtoread-insteadof-.9、TradetermsamendedtobeonCIFNewYorkinsteadofFOBShanghai.10、Allbankingchargesareforapplicantaccount11、Deletetheclause:“-”，andinsertanewclause“-”.25Section 6 Choice or Combination of Methods of Payment一、Comparison of Methods of Payment 二、Considerable Factors for choosing the methods of settlement1、Clients Credit2、Market of Goods3、Trade Terms4、Transport Documents三、Combination of Methods of Payment1、Combination of Remittance and Bank Guarantee2、Combination of Collection and L/C282930