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5.Lecture

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2 views

5.Lecture

Uploaded by

959flash959
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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V.

LECTURE
 Advance payment
 Cash aginst goods
 Collections
- Cash against documents
- Againsts acceptance
 Letter of Credits
- Sight without confirm
- Sight with confirm
- Deferred payment without confirm
- Deferred payment with confirm
Letter of Credit /
Documentary Credit
Letter of Credit
 A letter stating the undertaking of the
bank to pay upon presentation of
documents in accordance with the
conditions stipulated in the credit
terms.
 Called as Letter of Credit or
Documentary Credit.
 İt is non-cash loan opened on behalf
of the importer.
 Exporter is under the irrevocable
undertaking of the bank as the
beneficiary of the letter of credit.
 The bank is not interested in the
status of the goods. The undertaking
of the bank cover only presentation
of credit conform documents. (The
only exception is the injunction
decision)
 L/C issued under UCP600 is
irrevocable Documentary Credit.
 Revocable letters of credit are not
used in practice.
 The bank is an impartial guarantor .
 Ifthe seller fails to comply with the
terms of the letter of credit, the bank
will not pay at all. This is a great
confidence factor for the buyer. For
these reasons, the letter of credit is a
form of payment that provides the
highest level of security for both
parties.
Parties of the letter of credit
 Applicant: Buyer who has applied to the
bank to open a letter of credit.
 Issuing Bank: The bank that issues a letter
of credit.
 Advising or Confirming Bank: A bank that
is usually located in the country of the
exporter, advising or confirming of the
letter of credit.
 Beneficiary: The exporter who makes
presentation under letter of credit.
Workflow
 The applicant is requested to open
the letter of credit in favor of the
exporter.
 The issuing bank processes the order
by taking into account the non-cash
credit limits of the applicant.
The applicant sends the letter of
credit to the bank of exporter.
L/C includes the conditions stipulated
in applicant’s instruction (port of
loading, port of discharge, transport
vehicle etc.) and the documents
required according to these conditions.
 The bank of the exporter receives the
letter of credit and advises to the
exporter of the issuing of the L/C.
 and send a copy of the letter of credit
to the exporter.
 When the beneficiary receives the L/C,
it checks that the conditions are in
accordance with the terms of
agreement with the applicant and
informs the applicant of any objections.
 The beneficiary ships the goods
 The beneficiary presents the
documents stipulated in L/C.
 If L/C is confirmed, the bank of the
exporter examines the documents,
otherwise sends them to the issuing
bank.
 Inconfirmed L/C, confirming bank
makes the payment or undertake to
pay at maturity.
 Sends the docs to the issuing bank
and request the same thing to be
done against themselves.
 The issuing bank examine the
documents and effect payment upon
credit conform documents or
undertake to pay at maturity.
 The issuing bank examine the
documents and effect payment upon
credit conform documents or
undertake to pay at maturity.
 The issuing bank delivers the
documents to the applicant.
 Ek 5.1 : L/C sample
Reserve Notice
 Ifa discrepancy is found issuing bank
put reserve on documents.
 And inform the advising or
confirming bank with a tested
message.
 Maximum examination period is 5
business day.
 Plsbe advised that due to following
discrepancies we put reserve on docs
and we hold docs at your
disposal.
- Late shipment.
- Description of goods is different
on commercal invoice.
Rgds./Int.Div.
Confirmation

 Confirmation means a definite


undertaking of the confirming bank ,
in addition to that of the issuing
bank, to honour or negotiate a
complying presentation.
Times on L/C
 Expiry Date:
The last date for presentation of docs
under L/C.
 Latest Date of Shipment:

The last date for shipment of the


goods.
 Period for Presentation:

The period of time after the date of


shipment within which the documents
must be presented.

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