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    Letter of Credit

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    adifaah
    A letter of credit is an undertaking by an issuing bank, on behalf of an importer, to pay an exporter upon presentation of documents that meet the terms of the letter of credit. Letters of credit are governed by the Uniform Customs and Practice for Documentary Credits. There are several types of letters of credit, including irrevocable letters of credit which cannot be amended without the beneficiary's consent, transferable letters of credit which can be transferred in full or part, and back-to-back letters of credit which involve two irrevocable credits, an inward and outward credit. Types of bills of lading include on board bills of lading, clean bills of lading which bear no notation of defects

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    Letter of Credit

    Uploaded by

    adifaah
    183 views2 pages
    A letter of credit is an undertaking by an issuing bank, on behalf of an importer, to pay an exporter upon presentation of documents that meet the terms of the letter of credit. Letters of credit are governed by the Uniform Customs and Practice for Documentary Credits. There are several types of letters of credit, including irrevocable letters of credit which cannot be amended without the beneficiary's consent, transferable letters of credit which can be transferred in full or part, and back-to-back letters of credit which involve two irrevocable credits, an inward and outward credit. Types of bills of lading include on board bills of lading, clean bills of lading which bear no notation of defects

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    Letter of Credit

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    A letter of credit is an undertaking by an issuing bank, on behalf of an importer, to pay an exporter upon presentation of documents that meet the terms of the letter of credit. Letters of credit are governed by the Uniform Customs and Practice for Documentary Credits. There are several types of letters of credit, including irrevocable letters of credit which cannot be amended without the beneficiary's consent, transferable letters of credit which can be transferred in full or part, and back-to-back letters of credit which involve two irrevocable credits, an inward and outward credit. Types of bills of lading include on board bills of lading, clean bills of lading which bear no notation of defects

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    183 views2 pages

    Letter of Credit

    Uploaded by

    adifaah
    A letter of credit is an undertaking by an issuing bank, on behalf of an importer, to pay an exporter upon presentation of documents that meet the terms of the letter of credit. Letters of credit are governed by the Uniform Customs and Practice for Documentary Credits. There are several types of letters of credit, including irrevocable letters of credit which cannot be amended without the beneficiary's consent, transferable letters of credit which can be transferred in full or part, and back-to-back letters of credit which involve two irrevocable credits, an inward and outward credit. Types of bills of lading include on board bills of lading, clean bills of lading which bear no notation of defects

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    Letter of credit:

    Letter of credit is an undertaking given by the issuing bank on behalf of importer in


    favour of the exporter, undertaking to make payment on presentation of documents as
    per the terms and conditions of LC. LCs are governed by Uniform Customs And
    Practices For Documentary Credit.

    Important types of letter of credits:

    a) Irrevocable LC: An LC in which issuing bank gives a definite, absolute and


    irrevocable undertaking to honor its obligations provided the beneficiary complies
    with all the terms and conditions of LC. Once irrevocable LC is issued, it can not
    be revoked/amended, without the consent of beneficiary.

    b) Transferable LC: An LC containing a specific clause that it is transferable. This


    gives the beneficiary the right to request the bank to make the credit available in
    whole or in parts to one or more beneficiaries. The transferable LC can be
    transferred in part or in full but it can be transferred only once.

    c) Red-clause LC: An LC in which a provision exists for allowing pre-shipment


    credit to the beneficiary for procurement/manufacturing of goods to be exported.

    d) Green clause LC: An LC in which apart from provision of allowing pre-shipment


    credit the issuing bank also has to arrange for storage/warehouse facility.

    e) Back to back LC: An LC involves two irrevocable credits. Firstly, the inward
    credit (Original LC) and the second called as outward credit (back-to-back),
    which is opened on the basis and security of the original LC.

    f) Stand-By LC: An LC similar to bank guarantee by issuing bank, guaranteeing


    payment and/or performance.

    g) Revolving LC: Under these LCs. The part amount, which has been utilized, is
    automatically restored and is available for further use. These are meant for more
    than one dealing. In such LC, roll-over of transactions take place.

    Type of bill of lading:

    a) On board bill of lading: It acknowledges that the goods have been put on
    board of the shipment. This is considered safe for negation purpose.
    b) Clean bill of lading: This bears no super imposed clause or notation that
    expressly declares the defective condition of goods or packaging. Best bill for
    negotiation purpose.
    c) Claused bill of lading: This bears super imposed clause or notation that
    expressly declares that defective condition of goods and packaging. Ship owner
    can disclaim his liability on loss of goods in case of such bill of lading. Hence it is
    not considered as safe.

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