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Chapter six Letter of credit

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  1. Chapter sixLetter 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

  2. Definition Characteristics of a L/C Contents of a L/C Uniform customs and practice

  3. 1.Definition of L/C • A L/C is a written undertaking by the issuing bank to the beneficiary, under which the bank will pay a sum certain in money to the beneficiary if the beneficiary of the L/C provides the bank with specified documentswithina prescribed time period, which all comply with the terms and conditions of the credit. L/C is a letter from a bank promising to pay on certain specific condition 信用证是银行出具的一种有条件的付款保证。

  4. Characteristics of a L/C 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

  5. Assignment: translate the L/C on page 88

  6. Contents of a L/C Items on the credit itself Basic parties Items on draft Settlement conditions兑付的方式 Items on goods, shipping documents , transport and insurance L/C amount and currency Additional conditions Reimbursement of the paying, accepting and negotiating bank The notation of the credit subject to UCP600

  7. Uniform Customs and Practice 6.1.4 Uniform Customs and Practice for Documentary Credits UCP 500 UCP 600 ISBP

  8. 6.2 Parties to letter of credit Applicant/buyer 申请人 Issuing bank/the buyer’s bank 开证行 Beneficiary/seller 受益人 Advising bank 通知行 Confirming bank 保兑行 议付行 negotiating bank

  9. 申请人 APPLICANT 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)

  10. 开证行 Issuing bank 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)

  11. The right to examine a credit upon receipt of it according to the sales contract; whether be paid or not solely depends on the fulfillment of terms and conditions of the credit. 受益人 Beneficiary 受益人有权要求修改信用证,条款不能接受时有权拒绝受证。 除单单一致外,还要单货一致,单同一致。 交单后如遇开证行拒付,有权对其提出质问并要求赔偿; 如交单不符,可以在交单截止日到来前及时更改单据。

  12. 通知行 Advising bank 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.

  13. According to the UCP600, Negotiation means the purchase by the nominated bank of drafts (drawn on a bank other than the nominated bank) and/or documents under a complying presentation by advancing or agreeing to advance funds to the beneficiary on or before the banking day on which reimbursement is due to the nominated bank. 议付行 negotiating bank

  14. 保兑行 Confirming 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

  15. 偿付行 Reimbursing bank • The reimbursing bank is the bank that holds the local currency account of the issuing bank.

  16. 6.3 The procedure of L/C 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

  17. Procedures of L/C A buyer and a seller enter into a sales contract providing payment by a documentary credit (签订合同) Step 1 • The buyer instructs the issuing bank to issue a documentary credit in favor of the seller • (开证申请) Step 2

  18. Step 3 The issuing bank opens a documentary credit according to the instructions of the applicant (开证) Step 4 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 Step 5 • The seller examines the documentary credit, and requires an amendment of the credit if necessary.(修改)

  19. Step 6 • The seller presents his documents to the advising bank for settlement Step 7 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. • The buyer redeems(赎回) the documents and picks up the goods against the documents Step 8

  20. Procedures of L/C 1)contract Buyer/ applicant Seller/ beneficiary Shipping company 10)pick up goods 6) 9)examine documents and ask the buyer to redeem 5)examine and require an amendment 7)payment 2)application and cash deposits 4)advise L/C 3)opens a L/C Advising bank designated bank Issuing bank 8)Forwardsdocuments and claiming reimbursement

  21. 4.Types of L/C 《UCP600》删去了“可撤销信用证”的概念。 Revocable L/C Irrevocable L/C ConfirmedL/C UnconfirmedL/C 仅凭汇票,不要物权单据。 实务中基本不用。 Documentary L/C Clean credit

  22. 《UCP600》保留了《UCP500》的四种类型信用证 Sight payment L/C Negotiable L/C Deferred payment L/C Banker’s acceptance credit

  23. 即期付款L/C sight payment credit • 1. “THIS CREDIT IS AVAILABLE WITH ISSUING • BANK(OR XX) BY PAYMENT AT SIGHT.” 2.特点: ①一般不需要汇票,只凭商业单据付款 ②信用证在付款所在地到期。 典型的即期付款信用证,开证行往往指定出口地银行(比如通知行)为付款人,收益人交单即可得到无追索权的付款。

  24. 延期付款L/C deferred payment credit • 付款期限为远期,但不开远期汇票或根本不须汇票 • 为合理避税创造的,多见于欧洲大陆银行。 • This credit is available with advising bank by deferred payment at 30 days after date of bill of lading against the documents detailed herein. • 这种信用证由于无需开立汇票,因此无法进行贴现业务。

  25. 承兑信用证 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.

  26. 假远期信用证 • Usance Letter of Credit Payable at sight • This usance drafts are payable on a sight-basis, • discount charges and acceptance commission • are for buyer’s account

  27. 信用证载明如下条款者,皆为假远期信用证: 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.

  28. 3. 授权议付银行议付远期汇票,依票额即期付款。The Negotiating Bank is authorized to negotiate the usance drafts at sight for the face amount. 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

  29. 议付信用证 negotiation credit • A negotiation credit refers to the • credit under which the issuing • bank authorizes other nominated • banks to purchase the documents • and /or drafts presented by the • beneficiary.

  30. Special Types of L/C • Transferable L/C • Back to Back Credit • Reciprocal credit • Revolving L/C • Anticipatory credit • Green clause L/CRed clause L/C

  31. Transferable L/C 可转让信用证 • According to UCP600 Article 38, a transferable credit means a credit that specifically states it is “transferable”. A transferable credit may be made available in whole or in part to another beneficiary (“second beneficiary”) or several other beneficiaries at the request of the beneficiary (“first beneficiary”).

  32. CASE C公司 进口商 A公司 出口商 B公司 中间商 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 . Question: 转开信用证中这两个条款要如何修改?

  33. Answer 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

  34. 对背信用证(Back to Back Credit) • Once the letter of credit is received by the middleman from the opening bank, that letter of credit is used as security to establish a second letter of credit drawn on the exporter in favor of his supplier. So a back-to-back documentary credit process actually involves two separate documentary credits: one opened by the buyer in favor of the middleman, and one opened for the account of the middleman naming the actual supplier of the goods as the beneficiary.

  35. 对开信用证(reciprocal credit) • A reciprocal credit is mostly used in a barter trade, a trade of processing of incoming materials, a counter trade, or a compensation trade. In the above types of trade, there are usually two transactions and letters of credit involved. The applicant of one credit(the original credit)may assume the position of the beneficiary of the other credit(the reciprocal credit), and the beneficiary of the first credit is the applicant of the second credit.

  36. 循环信用证(revolving credit) • The amount of the credit can be renewed or reinstated without specific amendments to the credit.

  37. Revolving around time按时间循环 “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. ”

  38. Revolving around value按金额循环 “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.”

  39. 上次未用完金额能否移到下期使用: cumulative revolving 积累循环 non-cumulative revolving非积累循环 金额恢复方式: automatic revolving自动恢复循环 periodic revolving (semi-automatic revolving)半自动恢复循环 notice revolving (non-automatic revolving)非自动恢复循环

  40. 预支信用证(anticipatory credit) • Anticipatory credit includes red clause letter of credit and green clause credit. Under this letter of credit variation, the beneficiary is able to obtain advances or funds against (from within) the letter of credit in order to purchase or process merchandise or carry out other activities. The beneficiary does not have to borrow money to get money.

  41. 红条款信用证,是部分预支信用证的一种,最早使用是在澳洲购买羊毛时需要预付部分货款,为了醒目,起初用红墨水书写,由此得名为红条款信用证。红条款信用证,是部分预支信用证的一种,最早使用是在澳洲购买羊毛时需要预付部分货款,为了醒目,起初用红墨水书写,由此得名为红条款信用证。 • 绿条款信用证,以绿色文字表示预支条款的信用证,与信用证红色条款相类似,但条款更严格。出口商有义务将预支后所采购的货物以开证行名义存入仓库,并把仓单交给银行。以后再办装船出口手续。因信用证中习惯将此条款打印成绿色文字因而得此名。渔业,矿业和伐木业。

  42. Advising bank inspect the credit Inspection of Letter of Credit Issuing bank inspect the credit application and applicant’s credit Advising bank inspect the credit • Beneficiary inspect the credit • it

  43. Check the soft clause 据不完全统计:我国企业每年因”软条款”信用证造成4000万元人民币的巨额损失 .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.

  44. ④The credit note that the issuing bank’s payment must be on the applicant’s acceptance on the draft drawn by beneficiary. • ⑤The credit may ask for documents impossible to get. For example, asking for the container B/L in cabin etc. which can not be got by shipper according to transportation regulation. • ⑥The credit terms seems easy but actually impossible to carry on. So that the issuing bank get the right to dishonor all the time. • ⑦The credit specify that “1/3 original B/L and one set of non-negotiable documents to be sent to applicant within 3 days after shipment by DHL”.

  45. “客检证”软条款 空运方式下信用证 case