Chapter six Letter of credit

6.1 An Overview of Letter of Credit6.2 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

DefinitionDefinition

Characteristics of a L/CCharacteristics of a L/C

Contents of a L/CContents of a L/C

Uniform customs and Uniform customs and practicepractice

1.Definition of L/C1.Definition of L/C

•A L/C is a A L/C is a written undertakingwritten undertaking by the by the issuing bankissuing bank to to

the the beneficiarybeneficiary, under which the bank will , under which the bank will pay a sum pay a sum

certain in moneycertain in money to the beneficiary if the beneficiary of to the beneficiary if the beneficiary of

the L/C provides the bank with the L/C provides the bank with specified documentsspecified documents

withinwithin a prescribed time perioda prescribed time period, which all , which all comply with comply with

the terms and conditions of the credit.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。

Characteristics of a L/CCharacteristics of a L/C

A. Primary Liability of the Issuing Bank to Make PaymentA. Primary Liability of the Issuing Bank to Make Payment

B. Separated from the salesB. Separated from the sales

C. Dealing with Documents OnlyC. Dealing with Documents Only

D. High level of protection and security to both buyers and sellersD. High level of protection and security to both buyers and sellers

Assignment: translate the L/C on page 88

Contents of a L/CContents of a L/C

• Items on the credit itselfItems on the credit itself• Basic partiesBasic parties• Items on draftItems on draft• Settlement conditionsSettlement conditions 兑付的方式兑付的方式• Items on goods, shipping documents , Items on goods, shipping documents ,

transport and insurancetransport and insurance• L/C amount and currencyL/C amount and currency• Additional conditionsAdditional conditions• Reimbursement of the paying, accepting Reimbursement of the paying, accepting

and negotiating bankand negotiating bank• The notation of the credit subject to The notation of the credit subject to

UCP600UCP600

6.1.4 Uniform Customs and Practice for Documentary Credits Uniform Customs and PracticeUniform Customs and Practice

UCP UCP

500500UCP UCP

600600 ISBPISBP

6.2 Parties to letter of credit6.2 Parties to letter of credit

Applicant/buyer Applicant/buyer 申请人申请人

Issuing bank/the buyer’s bank Issuing bank/the buyer’s bank 开证开证行行

Beneficiary/seller 受益人

Advising bank 通知行

Confirming bank 保兑行

议付行 negotiating bank

申请人 APPLICANT

Liable for payment to the issuing bank provided Liable for payment to the issuing bank provided

no discrepancy between documents and the no discrepancy between documents and the

credit;credit; ( ( 承担单证一致时的付款责任）承担单证一致时的付款责任） right to examine the documents and refuse right to examine the documents and refuse

payment;payment; （有权检查单据和拒付）（有权检查单据和拒付） any requirement of the applicant should be any requirement of the applicant should be

satisfied by certain documents and clearly satisfied by certain documents and clearly

indicated when making credit applicationindicated when making credit application （任何要（任何要求都必须在开证申请书中注明） 求都必须在开证申请书中注明）

Issuing application formIssuing application form （递交开证申请书）（递交开证申请书）

开证行 Issuing bank Require the applicant to hand over certain Require the applicant to hand over certain

percentage of credit amount as a margin when it percentage of credit amount as a margin when it

opens a creditopens a credit.. （收取开证保证金）（收取开证保证金） After effecting the payment, the issuing bank may After effecting the payment, the issuing bank may

handle goods under the credit and make claim on handle goods under the credit and make claim on

the importer if the importer is unable to pay the the importer if the importer is unable to pay the

issuing bankissuing bank.. （（付款后处理货物并追索进口商）付款后处理货物并追索进口商） If there are any discrepancies in the documents, the If there are any discrepancies in the documents, the

issuing bank may reject the paymentissuing bank may reject the payment.(.( 如单证不符有如单证不符有权拒付）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）

• 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。

受益人 Beneficiary

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.

• 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

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

偿付行 Reimbursing bank

• The reimbursing bank is the bank that holds the local currency account of the issuing bank.

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

Procedures of L/CProcedures of L/C

Step 1Step 1

Step 2Step 2

A buyer and a seller enter into a sales A buyer and a seller enter into a sales contract providing payment by a contract providing payment by a documentary credit (documentary credit ( 签订合同）签订合同）

•The buyer instructs the issuing The buyer instructs the issuing bank to issue a documentary bank to issue a documentary credit in favor of the sellercredit in favor of the seller• （开证申请）（开证申请）

Step 4Step 4

The issuing bank opens a documentary The issuing bank opens a documentary credit according to the instructions of the credit according to the instructions of the applicant (applicant ( 开证）开证）

Step 3Step 3

Step 5Step 5

The issuing bank asks another bank, The issuing bank asks another bank, usually in the country of the seller, to usually in the country of the seller, to advise and perhaps also to add its advise and perhaps also to add its confirmation to the documentary creditconfirmation to the documentary credit

•The seller examines the documentary The seller examines the documentary credit, and requires credit, and requires an amendment of of the credit if necessary.the credit if necessary. （修改）

Step 7Step 7

•The seller presents his documents to the The seller presents his documents to the advising bank for settlementadvising bank for settlement

Step 6Step 6

Step 8Step 8

The negotiating bank forwards The negotiating bank forwards documents to the issuing bank, claiming documents to the issuing bank, claiming reimbursement as agreed between the reimbursement as agreed between the two banks. The issuing bank examines two banks. The issuing bank examines the documents and make reimbursementthe documents and make reimbursement..

•The buyer redeemsThe buyer redeems （赎回（赎回） ） the the documents and picks up the goods documents and picks up the goods against the documentsagainst the documents

Procedures of L/C

Seller/beneficiary

Buyer/applicant

Advising bankdesignated bank

Issuing bank

Shipping company

1)contract

2)application and cash deposits

3)opens a L/C

4)advise L/C

5)examine and require an amendment

6)

8)Forwards documents and claiming reimbursement

10)pick up goods

9)examine documents and ask the buyer to redeem

7)payment

4.Types of L/C

Revocable L/C

Irrevocable L/C

Confirmed L/C

Unconfirmed L/C

Documentary L/C

Clean credit

《 UCP600 》删去了“可撤销信用证”的概

念。

仅凭汇票，不要物权单据。

实务中基本不用。

《 UCP600 》保留了《 UCP500 》的四种类型信用证

• Sight payment L/C

Banker’s acceptance credit

Negotiable L/C

Deferred payment L/C

• 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。

即期付款 L/C sight 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。

延期付款 L/C deferred payment 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.

承兑信用证 acceptance credit

•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

•

• 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.

• 　

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

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.

Special Types of L/C

• Transferable L/C• Back to Back Credit• Reciprocal credit• Revolving L/C• Anticipatory credit

• Green clause L/C Red clause L/C

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”).

CASE

A 公司

出口商

B 公司

中间商

C 公司

进口商

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？

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

Answer

– 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.

•对背信用证 (Back to Back Credit)

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.

循环信用证 (revolving credit)

• The amount of the credit can be The amount of the credit can be renewed or reinstated without renewed or reinstated without specific amendments to the credit.specific amendments to the credit.

• Revolving around timeRevolving around time 按时间循环 ““This is a monthly revolving credit This is a monthly revolving credit

which is available for up to the which is available for up to the amount of USD15000 per month, and amount of USD15000 per month, and the full credit amount will be the full credit amount will be automatically renewed on the 1automatically renewed on the 1stst day day of each succeeding calendar month. of each succeeding calendar month. Our maximum liability under this Our maximum liability under this revolving credit does not exceed revolving credit does not exceed USD90000 being aggregate value of USD90000 being aggregate value of six months. ”six months. ”

Revolving around valueRevolving around value 按金额循环 ““This credit is revolving for three This credit is revolving for three

shipments only. Each shipment shipments only. Each shipment should be effected at one month should be effected at one month interval. The amount of each interval. The amount of each shipment is not exceeding shipment is not exceeding USD50000. The total value of this USD50000. The total value of this revolving credit does not exceed revolving credit does not exceed USD150000.”USD150000.”

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

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.

• 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。

Advising bank inspect the credit

Inspection of Letter of Credit

Issuing bank inspect the credit application and applicant’s credit

1.Advising bank inspect the credit

Beneficiary inspect the credit

it

Check the soft clause

. The credit clause stated that the credit become ①effective 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.

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

• 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”.

case

空运方式下信用证

“ 客检证”软条款