27 27 Lc Presentation by Latter of Credit
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Transcript of 27 27 Lc Presentation by Latter of Credit
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7/30/2019 27 27 Lc Presentation by Latter of Credit
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I, WELCOME YOU TO THISPRESENTATION
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Sir, we will talk about
1. What is LETTER OF CREDIT (L.C.)OR
DOCUMENTARY CREDIT OR JUST CREDIT2. WHO ARE THE PARTIES TO A LETTER OFCREDIT
3. What are the different types of Letter of
Credit4. DOCUMENTATION5. INCO TERMS,2000
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1. What is LETTER OF CREDIT (L.C.)OR
DOCUMENTARY CREDIT
International Chamber of Commerce (ICC), Paris
defines it as
An arrangement (however named) whereby
a Bank (Issuing bank) acts at the request and onthe instructions of a customer (applicant) or onits behalf to
a) Make a payment to or to the order of a thirdparty (beneficiary) or is to accept bill ofexchange (draft) drawn by the beneficiary. OR
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What is LETTER OF CREDIT
An arrangement (however named) whereby
a Bank (Issuing bank) acts at the request and
on the instructions of a customer (applicant)or on its behalf to
b) Authorises another bank to effect suchpayments or to accept and pay such bills of
exchange (drafts) OR
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What is LETTER OF CREDIT
An arrangement ( however named) whereby
a Bank (Issuing bank) acts at the request andon the instructions of a customer (applicant)or on its behalf to
c) Authorises another Bank to negotiate againststipulated documents provided that the termsare complied with.
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PARTIES TO A LETTER OF CREDIT
1. Applicant (opener)
2. Issuing Bank (Opening bank)
3. Beneficiary 4. Advising Bank
5. Confirming Bank
6. Negotiating Bank 7. Reimbursing Bank
8. Second beneficiary
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Opening of documentary credit
IMPORTER EXPORTER
CONTRACT
OPENINGBANK ISSUE CREDIT
Opening of credit
Addresses concerns of both importer and exporter.
Exposure becomes real and fund based if applicant defaults.
Credit worthiness of the customer should be evaluated
SUPPLIES GOODS
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Advising bank
IMPORTER EXPORTER
CONTRACT
OPENING
BANKISSUE CREDIT
ADVISING
BANK
Advising bank guarantees genuineness of the credit. Does notvouch for competence or willingness of opening bank to pay.
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Confirming bank
IMPORTER EXPORTER
CONTRACT
OPENING
BANK
ISSUE CREDIT
CONFIRM
ING BANK
ADVISING
BANK
Confirming bank guarantees payment by opening bank
Means and creditworthiness of issuing bank to be assessed
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Negotiating Bank
IMPORTER EXPORTER
CONTRACT
OPENING
BANK
ISSUE CREDIT
NEGOTIATINGBANK
ADVISING
BANK
P
A
Y
DO
C
S
DOCUMENTS
PAYMENT
Negotiating bank pays beneficiary first and claims
reimbursement from the opening / confirming bank.
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Mechanics of Documentary Credit
IMPORTER EXPORTER
CONTRACT
OPENING
BANK
ADVISING/
NEGOTIATINGBANK
SHIPPING
COMPANY
GOODS
DOCS
DOCUMENTS
OPEN CREDIT
DOCUMENTS
PAYMENT PAYMENT
GOODS
DOCS
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TYPES OF LETTER OF
CREDIT 1. REVOCABLE
2. IRREVOCABLE
3. CONFIRMED 4. SIGHT CREDIT & USANCE CREDIT
5. BACK TO BACK
6. TRANSFERABLE
7. STANDBY
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DOCUMENTATION
1. AIRWAY BILL
2. BILL OF LADING
3. CERTIFICATE OF ORIGIN
4. COMBINED TRANSPORT DOCUMENTS
5. BILL OF EXCHANGE (draft)
6. INSURANCE POLICY 7. PACKING LIST
8. INSPECTION LIST
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INCO TERMS,2000
There are 4 groups of terms ---
(1) Group E Departure
(i) EXW
Ex works
(2) Group F Main Carriage unpaid (seller iscalled upon to deliver the goods to a carrier)
(i) FCA
Free Carrier (ii) FOB Free on Board
(iii) FAS Free alongside Ship
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INCO TERMS,2000
(3) Group C Seller has to contact forcarriage but without assuming the risk
of loss of or damage to the goods.(i) CFR Cost and freight
(ii) CIF - Cost, Insurance and freight
(iii) CPT - Carriage paid to(iv) CIP - Carriage & Insurance Paid to
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INCO TERMS,2000
(4) Group D Seller has to bear all cost andrisks needed to bring the goods to the
country of destination (i) DAF Delivered at Frontier
(ii) DDU Delivered duty unpaid
(iii) DDP Delivered duty paid
(iv) DEQ Delivered ex- quay
(v) DES Delivered ex ship