国际金融英语教学课件Unit 13 ppt.pptVIP

L/C 　　A letter of credit (Credit) is a letter written by a bank to another party, the beneficiary, informing that beneficiary that the bank will pay a sum certain in money to the beneficiary if the beneficiary of the letter provides the bank with certain described pieces of paper within a prescribed time frame. Advantage of L/C for the beneficairy The payment commitment is made by a third party, a bank, which is not involved in the commercial transaction and is usually believed to adhere to ethical business practices and to exercise prudence in their commercial dealings. Why the beneficiary may ask for an L/C The exporter has no funds to manufacture to acquire the goods to be exported, and the letter of credit serves as collateral acceptable to the exporter’s bank in support of loans to acquire goods. The exporter cannot borrow unless it can demonstrate that there are sufficient sales to pay back the loan. The exporter has an export sales policy that requires all sales be made on a letter of credit or cash in advance. Parties to the letter of credit The issuing bank The buyer Beneficiary of the letter of credit The advising bank The confirming bank The nominated bank The negotiating bank The reimbursing bank Types of letter of credit Revocable and irrevocable Confirmed and unconfirmed credits Documentary and clean credit Revocable and irrevocable Credits Irrevocable Credit A definite undertaking of the issuing bank Provided that the stipulated documents are presented to the nominated bank The terms and conditions of the Credit are complied with Revocable Credit Can be canceled or amended by the issuing bank at any time and without prior notice to the beneficiary Payment absolutely uncertain and outside the sellers control Confirmed and unconfirmed Credits Unconfirmed letter of credit Binding obligation of the issuing bank to pay the beneficiary The usual type of letter of credit. Confirmed Credit A second bank makes an independent and preceding undertaking to