Unit 7 When Literature Meets Business

Letter of Credit (L/C)

A major part of international payment is made EITHER Bills of exchange OR documentary L/C OR a combination of the two

Characteristics of L/C It ’ s banker ’ s credit, which means the banker is responsible to pay money and tender documents on behalf of both parties. It ’ s a self-sufficient authorization, an agreement dependent from business contract. It deals with documents but not goods, service or other business related performance.

Parties of L/C Applicant 开证申请人 Issuing Bank 开证行 Advising Bank 通知行 Beneficiary 受益人 Negotiating Bank 议付行 Paying Banks 付款行 Confirming Banks 保兑行

Main Content of L/C About L/C itself: its type, nature,validity,duration About goods: its name, series, specification,quantity, quality,packing, price, sum,etc.. About shipping: delivery dates, departing place, destination, shipping instrument, partial shipment or not, transshipment or not, etc.. About documents: ---merchandise documents (of invoice: packing list, weight certificate, place of origin, quality certificate, etc shipping documents ( bill of lading) ---insurance policy or certificate Other special requirements

Types of L/C Documentary L/C 跟单信用证 跟单信用证 Clean L/C 光票信用证 Irrevocable L/C 不可撤消信用证 Revocable L/C 可撤消信用证 EXCEPT non-shipping documents such as invoice, prepayment list “ Irrevocable ” OR “ Revocable ”

Types of L/C Confirmed L/C 保兑信用证 Unconfirmed L/C 不保兑信用证 Sight Payment L/C 即期付款信用证 Deferred Payment L/C 延期付款信用证 By confirming bank (Principal 本人 ) Irrevocable ----paying responsibility by issuing bank Confirmed--- responsibility taken by the banks other than the issuing bank. “ Available by Payment ” Paying bank can be issuing bank as well as the informing bank or the third bank at seller ’ s place

Types of L/C Acceptance L/C 承兑信用证 / Banker ’ s Acceptance L/C 银行承兑信用证 Negotiation L/C 议付信用证 -Open Negotiation L/C 公开议付信用证 -Restricted Negotiation L/C 限制议付信用证 The issuing bank makes acceptance of the payment due on receipt of the usance draft and documents in the credit. Negotiated with any banks which can meet the credit ’ s need or with the banks appointed.

Types of L/C Sight L/C 即期信用证 Usance L/C 远期信用证 Usance L/C Payable at sight/Buyer ’ s Usance L/C 假远期信用证 T/T Reimbursement Clause Including Acceptance L/C and Deferred Payment L/C The buyer pays for the discount and acceptance Based on the contract with payment at sight

Types of L/C Transferable Credit 可转让信用证 Non-transferable Credit 不可转让信用证 A letter of credit part of whose value can be transferred to another party. “ transferable ”

Types of L/C Revolving Credit 循环信用证 Reciprocal Credit 对开信用证 The credit can be reused by resuming to the original amount after all or part of the credit is used out. It ’ s usually used for the settlement of long-term contract under which goods are split ot deliver for several times Letter of Credits are issued by both sides in the favor of each other for the reciprocal trade or processing business.

Types of L/C Back to Back Credit 对背信用证 Standby L/C 备用信用证 Anticipatory L/C / Red Provision L/C 预支信用证 / 红字条款信用证 A similar letter of credit is issued according to the original irrevocable one for middlepersons to make money or for those who has to trade through the third party. It ’ s designed to be used onlt when the applicant defaults on another agreed method of payment The letter of credit which allows exporter to withdraw all or part of the loan prior to loading and delivery.