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LETTERS OF CREDIT
B. DEFINITION 1. a letter addressed to the seller, 2. written and signed by a bank, 3. who acts on the buyers behalf. -Bank promises to pay drafts, provided seller performs exactly.
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LETTERS OF CREDIT
C. USUAL CONDITIONS: 1. Seller submits draft with documents. a. Documents 1) negotiable bill of lading - can be assigned 2) insurance certificate 3) commercial invoice
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LETTERS OF CREDIT
Advantages to the Importer (less than the exporter) Expert Examination of Documents Sources of Supply expand Financing No cash tied up Payment only after compliance
To ship by a certain date requires an on-board bill of lading
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LETTERS OF CREDIT
II. PARTIES TO THE TRANSACTION A. THE BENEFICIARY B. ACCOUNT PARTY (usually importer) C. OPENING BANK D. ADVISING BANK usually a correspondent of opening bank
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LETTERS OF CREDIT
E. F. PAYING BANK
agent for opening bank
NEGOTIATING BANK
any bank who submits documents to the opening bank
G.
CONFIRMING BANK
fee usually paid by opening bank
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OPENING AN L/C
The Route of a Letter of Credit
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LETTERS OF CREDIT
IMPOR TER
ACCOUNT PARTY
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LETTERS OF CREDIT
ADVISING BANK PAYING BANK
EXPORTER
BENEFICIARY
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2. Secured Credit requires security such as cash-commercial credit merchandise as collateral factors: export must be creditworthy are goods readily marketable adequacy of insurance coverage
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OPENING AN L/C
Cash Collateral Credit in between alternative
terms depend on the strength of the importer
B. REQUIREMENTS FOR THE ACCOUNT PARTY 1. Application importance of documents disadvantage of too much detail importance of insurance
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OPENING AN L/C
C. REQUIREMENTS FOR THE OPENING BANK 1. Receipt of Application 2. Advice to Beneficiary 3. Amendments
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DOCUMENTARY L/CS
VII. DOCUMENTARY L/C EXAMINATION PROCEDURES A. Schedule
B. L/C and the drawing C. Commercial invoice
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DOCUMENTARY L/CS
D. Marine bill of lading
E. Other documents F. Actions in Cases of Document Discrepancies
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