IMPORTS PROVISIONS LETTERS OF CREDIT

Transcription

1 IMPORTS PROVISIONS LETTERS OF CREDIT

2 LETTERS OF CREDIT: A letter of credit is an undertaking given to the beneficiary of the letter of credit that on his submitting the stipulated documents such as drafts, invoices, insurance policy, bills of lading etc., the bank (which established the letter of credit) or its correspondents (nominated bank or confirming bank) would pay him the amount stated therein provided the documents are conforming to the terms of Letter of Credit. PARTIES TO A L/C: Applicant is the one at whose request L/C is issued by a bank. Opener of L/C is importer or buyer of goods / services. Beneficiary is the one in whose favour L/C is established. Beneficiary of the L/C is the exporter / seller. Issuing Bank Bank opening the LC. Advising bank - Usually Branch of the Bank opening the credit/ their correspondent who authenticate and advise the credit. Negotiating Bank - Bank who receives credit complied documents and pay against the LC. Reimbursing Bank The Bank authorised to reimburse the amount under the LC to the negotiating Bank. Confirming Bank - Bank adding confirmation to the LC. since 1st July 2007 all authorised dealers in India are required to adhere to the UCPDC-600 (2007 Revision). All documentary letters of credit issued by the bank should contain a clause "Except as otherwise stated, this letter of credit is subject to the Uniform Customs and Practice for Documentary Credits 600 (2007 Revision) ICC Brochure No. 600".

3 Types of Letters of Credit : 1. Irrevocable Letters of Credit - Such LCs can neither be modified nor cancelled without the agreement of all concerned parties. (In terms of Article 2 of UCP 600, all credits are to be irrevocable. ) 2. Revocable LC: - LC can be amended or cancelled by the issuing bank at any time without prior notice to beneficiary. 3. Revolving Letters of Credit : The amount available after negotiation of documents under letter of credit reverts to the original amount as soon as the negotiating bank receives advices from the opening bank that the documents have been paid by the drawee. The revolving letter of credit should always bear the following stipulation "This letter of credit being revolving, the amount of drawings there under would not be reinstated until receipt of our advice of payment of the bills by the drawees." 4. Transferable Letter of Credit : At the request of first beneficiary may be transferred to a new beneficiary in whole or in part by a nominated bank in the credit (Article 38 UCP 600).Credit can be transferred only if it is specifically stated as transferable in the credit. 5. Back-to-Back Letters of Credit : Under a Back-to-Back Credit concept, the Seller, as Beneficiary of the first Credit (Master Credit), offers it as "security" to his bank for the issuance of the second Credit (Slave Credit). As Applicant for the Slave Credit, the Seller is responsible for reimbursing the bank for payments made under it, regardless of whether or not he himself is paid under the Master Credit. 6. Red Clause Letters of Credit : A Red Clause Letter of Credit is an irrevocable Letter of Credit, incorporating a clause which permits the Advising Bank to assist the Seller to pay for the goods he is exporting by granting him an advance of the purchase, or some part thereof, before the goods are dispatched by him. If shipment is not effected any advance will be claimed from the Issuing Bank who guarantees the lending.

4 7. Green Clause Credit: It is an extended version of Red Clause Credit in the sense that it not only provides for advance towards purchase, processing and packing, but also for warehousing and insurance charges at port when the goods are stored pending availability of ship/ shipping space. 8. Confirmed LC. L/C to which another bank (other than the issuing bank) has added its confirmation. Thus, in case of confirmed L/C, beneficiary has undertaking from two banks i) issuing bank and ii) confirming bank. Confirmation is added at the request of the issuing bank. Only irrevocable L/Cs are eligible for adding of confirmation

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