Chapter six Letter of credit. 6.1 An Overview of Letter of Credit 6.2 Parties to Letter of Credit 6.3 Procedures of documentary credit operation 6.4 Types of Letter of Credit 6.5 Inspection and Amendment of letter of credit 6.6 Amendment of Letter of Credit. Definition
6.1 An Overview of Letter of Credit
6.2 Parties to Letter of Credit
6.3 Procedures of documentary credit operation
6.4 Types of Letter of Credit
6.5 Inspection and Amendment of letter of credit
6.6 Amendment of Letter of Credit
Characteristics of a L/C
Contents of a L/C
Uniform customs and
L/C is a letter from a bank promising to pay on certain specific condition
A. Primary Liability of the Issuing Bank to Make Payment
B. Separated from the sales
C. Dealing with Documents Only
D. High level of protection and security to both buyers and sellers
Items on the credit itself
Items on draft
Items on goods, shipping documents , transport and insurance
L/C amount and currency
Reimbursement of the paying, accepting and negotiating bank
The notation of the credit subject to UCP600
6.1.4 Uniform Customs and Practice for Documentary Credits
Issuing bank/the buyer’s bank 开证行
Advising bank 通知行
Confirming bank 保兑行
议付行 negotiating bank
Liable for payment to the issuing bank provided
no discrepancy between documents and the credit; (承担单证一致时的付款责任）
right to examine the documents and refuse payment;（有权检查单据和拒付）
any requirement of the applicant should be satisfied by certain documents and clearly indicated when making credit application（任何要求都必须在开证申请书中注明）
Issuing application form（递交开证申请书）
Require the applicant to hand over certain percentage of credit amount as a margin when it opens a credit.（收取开证保证金）
After effecting the payment, the issuing bank may handle goods under the credit and make claim on the importer if the importer is unable to pay the issuing bank.（付款后处理货物并追索进口商）
If there are any discrepancies in the documents, the issuing bank may reject the payment.(如单证不符有权拒付）
The issuing bank may be exempted from its obligation for delay or loss of transmission.(对邮递过程中延误的单据，享有不负任何责任的权利）
whether be paid or not solely depends on the fulfillment of terms and conditions of the credit.受益人 Beneficiary
According to 《UCP600》article 2, advising bank means the bank that advises the credit at the request of the issuing bank.
Advising bank is usually the correspondent bank of the issuing bank in the exporter’s country, which verifies the authenticity of the letter of credit and any amendment and forwards them to the beneficiary.
议付行 negotiating bank
According to 《UCP600》article 2, confirming bank means the bank that adds its confirmation to a credit upon the issuing bank’s authorization or request.
the confirming bank undertakes the same independent responsibility for payment as that of the issuing bank
Application of Issuing L/C by applicant
Issue of L/C by issuing banks
L/C delivered by advising bank
Shipment of goods and presentation of documents
A buyer and a seller enter into a sales contract providing payment by a documentary credit (签订合同）
The issuing bank opens a documentary credit according to the instructions of the applicant (开证）
The issuing bank asks another bank, usually in the country of the seller, to advise and perhaps also to add its confirmation to the documentary credit
The negotiating bank forwards documents to the issuing bank, claiming reimbursement as agreed between the two banks. The issuing bank examines the documents and make reimbursement.
10)pick up goods
9)examine documents and ask the buyer to redeem
5)examine and require an amendment
2)application and cash deposits
3)opens a L/C
8)Forwardsdocuments and claiming reimbursement
Sight payment L/C
Deferred payment L/C
Banker’s acceptance credit
In a banker’s acceptance credit, a time draft drawn on the issuing bank or any other nominated drawee bank by the beneficiary is essential, and the drawee of the draft should be bank only.
1. 远期汇票按即期议付，由本银行（开证银行）贴现，贴现及承兑费由进口商承担。Usance Drafts to be negotiated at sight basis and discounted by us （Issuing Bank）, discount charges and acceptancecommission are for Importer's account.
2. 远期汇票按即期议付，利息由买方承担。Usance draft to be negotiated at sight basis, interest is for buyer's account.
4. 本信用证项下开立的远期汇票可按即期议付。Usance drafts drawn under this credit are to be negotiated at sight basis.
5， UCP600 信用证中条款 42C DRAFTS AT：AT XXX DAYS AFTER SIGHT 即为假远期信用证
C公司开出信用证给B公司，B公司将该证转让给A公司。原证中有两个条款1.full set of clean B/L made out to order with blank endorsed and notify applicant. 2.the name of applicant must be appeared in inspection certificate of the health as the consignee
1.full set of clean B/L made out to order with blank endorsed and notify C company.
2.the name of C company must be appeared in inspection certificate of the health as the consignee
“This is a monthly revolving credit which is available for up to the amount of USD15000 per month, and the full credit amount will be automatically renewed on the 1st day of each succeeding calendar month. Our maximum liability under this revolving credit does not exceed USD90000 being aggregate value of six months. ”
“This credit is revolving for three shipments only. Each shipment should be effected at one month interval. The amount of each shipment is not exceeding USD50000. The total value of this revolving credit does not exceed USD150000.”
cumulative revolving 积累循环
periodic revolving (semi-automatic revolving)半自动恢复循环
notice revolving (non-automatic revolving)非自动恢复循环
.①The credit clause stated that the credit become effective unless the issuing bank give another instruction or notice.
②The credit clause stated that the beneficiary must submit an inspection certificate signed by the buyer after the cargo arrived the destination.
③The credit clause stated that the beneficiary must submit a certain document signed by a nominated person.