1、国际贸易实务Chapter 6 Letter of creditIn international trade practice, the seller and the buyer usually face such a dilemma. On the one hand, the seller worries about whether he can collect the payment successfully after he ships the goods. On the other hand, the buyer is reluctant to make the payment in
2、advance for fear that the goods he takes are not in accordance with the stipulation in the contract or never arrive.Definition Letter of Credit can also be called credit. Letter of credit has two meanings. In other words,it is a document itself and it is also a kind of payment method like remittance
3、 and collection.As defined in Uniform Customs and Practice for Documentary Credits 600 (UCP600),A letter of credit means any arrangement,however named or described,whereby a bank acting at the request and on the instructions of a customer or on its own behalf,is to make a payment to or to the order
4、of a third party. In other words,in an international trade context, a letter of credit is the written promise made by a bank to make settlement to a seller on behalf of a buyer on condition that the documents presented by the seller are in accordance with the terms and conditions stipulated in the c
5、redit.In nature,L/C is based on bank credit other than commercial credit since the opening bank provides guarantee to both the seller and the buyer. The seller can get his payment after he submits the required documents to prove that he has delivered,while the buyer will take delivery of the goods h
6、e ordered so long as he has paid for it. Thats the advantage of letter of credit.Parities involved in Letter of CreditApart from applicant(buyer) and beneficiary(seller), there are also some banks which play different roles in the performance of letter of credit.Beneficiary is usually the seller in
7、international trade.Applicant is the buyer in international trade.Opening bank (issuing bank) is a bank which opens or issues the credit at the request of the applicant.Advising bank is a bank which receives the letter of credit from the opening bank and then advises the beneficiary of it. The advis
8、ing bank is usually in the exporting country. Presenting bank is a bank which presents the documents to the opening bank on behalf of the beneficiary.Negotiating bank is a bank which makes negotiation upon the receipt of the documents presented by the beneficiary as long as the documents presented a
9、re in accordance with the terms and conditions set forth in the credit. The negotiating bank is usually in the exporting country.Paying bank is usually the opening bank.Confirming bank is a bank,other than the issuing bank,undertakes the liability to pay in case the opening bank fails to make the pa
10、yment.Main contents of L/CThe main contents of L/C include the major conditions in the sales contract,the required documents and banks instructions. It may be stated as the following provisions: The parties involved,including the beneficiary,the applicant,the opening bank,the advising bank,the negot
11、iating bank,the confirming bank if any and so on.Remarks about the L/C: the number of L/C,its form,the issuing date,the expiry date and place.The amount of L/C.The clauses of Bill of Exchange: the amount,the drawer and drawee.The clauses about documents requiredWhat kind of documents are requiredThe
12、 specific requirements for each kind of documents requiredThe required number of original and copy for each document.Special provisions such as the provisions about the transaction in accordance with the particular business or political situations in the importing countries.Instructions from the ope
13、ning bank to the banks involved such as paying bank,negotiating bank,confirming bank and others.Performance of L/CIssuing an L/CAmendment of L/CUtilization of L/CSight paymentSettlement by negotiationFeatures of L/CL/C is a kind of payment method based on bank credit. It means that the opening bank
14、undertakes the payment liability instead of the buyer so long as the seller complies with the terms and conditions stipulated in the credit.L/C is a self-sufficient document. Although the terms and conditions of credit is based on stipulations in the sales contract,once it is confirmed by the benefi
15、ciary,it is utilized independently. That means in the process of utilization,parties concerned examine the documents according to the credit instead of the sales contract.All parties concerned care about the documents instead of the actual situation of goods, so it is called pure document transactio
16、n. The banks involved are not held responsible for verifying the authenticity of the documents submitted at all. So long as the presented documents are in conformity with the terms and conditions stipulated on their surface,the banks will honor regardless of the actual situation of the goods.Part Ki
17、nds of Credit 1 Documentary L/C and Clean L/CDocumentary L/C is widely used in international trade. Under a Documentary L/C, the opening bank makes payment against the documentary draft or the required documents. The documentary draft is a draft attached by shipping documents which is a document of
18、title to the goods and evidence of delivery,commercial invoice,packing list, the insurance policy,inspection certificate and other required documents.Clean L/C refers to a letter of credit that requires the opening bank to make payment against the presentation of draft issued by the seller without t
19、he attachment of other documents.2 revocable L/C and Irrevocable L/CRevocable L/C is an L/C which can be amended or cancelled by the issuing bank without prior notice of the beneficiary. Irrevocable L/C means an L/C which cant be amended or cancelled without the agreement of the beneficiary and all
20、other parties concerned. Irrevocable L/C gives greater assurance of payment. According to UCP600, if the wording of revocable or irrevocable is not found on the credit, this credit shall be deemed as irrevocable.3 Confirmed L/C and Unconfirmed L/CConfirmed L/C is an L/C that another bank other than
21、the issuing bank,undertakes to make payment covering the credit by adding its confirmation.Confirming signs under the statement, “we hereby add our confirmation to this credit”. Confirming bank will be liable for payment in case of default by the issuing bank. It should be an irrevocable credit. Con
22、firmed credit provides double insurance of payment to the seller. Unconfirmed L/C is an L/C which doesnt indicate the undertaking to effect payment by another bank,except the issuing bank.4 Sight L/C and Usance L/CSight L/C is an L/C under which the opening bank will immediately effect payment upon
23、presentation of all documents as long as the documents are in accordance with the terms in credit. Usance L/C is an L/C which indicates that payment will not be made at the date of receipt of documents until the maturity date specified in the credit provided that all the documents presented are in a
24、ccordance with the credit.5 straight L/C and Open L/C6 Transferable L/C and Non-transferable L/CUnder transferable L/C, the beneficiary is entitled to transfer his rights,in whole or in part, to another party. Used especially when the exporter is not the direct manufacturer but a middle merchant. A
25、credit must state clearly that it is transferable. A transferable L/C can be transferred once only,namely from first beneficiary to second beneficiary. Where there are several second beneficiaries involved, the credit must allow partial shipments.7 revolving L/C Revolving L/C means that the issuing
26、bank can restore the credit to the original amount after it has been utilized or partially utilized and it can revolve by time or by amount. It is used to facilitate repeat sales transactions in international trade.8 Reciprocal L/C A reciprocal L/C is a counter credit under which the applicant of a
27、first credit becomes the beneficiary of the second reciprocal credit, while the beneficiary if the first credit becomes the applicant of the second reciprocal credit. It is often used in barter transactions,trade3 of processing incoming materials,counter trade or compensation trade.9 Back to Back L/
28、C Back to back L/C is a kind of payment arrangement in which a document credit is used as the backup for issuing a new credit. It is mainly used by middle-persons. The first credit must be irrevocable and non-transferable.Chapter 7 Commodity InspectionInspection is an essential procedure in internat
29、ional trade as well as an indispensable clause of a sales contract,and it protects the interests of both the buyer and the seller. Therefore,it is of great significance in international trade.Commodity inspectionIn international trade, the quality and quantity of the goods delivered by the seller sh
30、ould be consistent with the terms of the contract and should be packed in the way called for in the sales contract. Commodity inspection is the inspection conducted by an authorized third party to testify whether the quality,quantity,weight,package,etc, are in accordance with those stipulations in t
31、he contract. After inspection, the relevant authority will issue certain kinds of certificates which can serve as evidence in case of disputes.Time and Place of InspectionThere are generally three ways to stipulate the time and place and time of inspection in the sales contract: inspection at the fa
32、ctory or at the port of shipment;inspection at the port of destination,and inspection at the port of shipment and re-inspection at the port of destination.Inspection at the Factory or at the port of shipmentInspection at the factory or at the port of shipment refers to the inspection conducted by an authorized party agreed by both parties of the sales contract to testify the quality,quantity,weight,package,etc, of the goods at the factory or at the port of shipment before the delivery of the goods. It is also known as shipping quality and weight. The insp
