经贸学院国贸系
王学惠 ?
Learning Objectives
1.1 Background
1.2 Definition
1.3 Main Parties
1.4 Procedure
1.5 Contents
1.6 Characteristics of L/C
1.7 Types
1.8 accomodation
1.9 limitations
经贸学院国贸系
王学惠 ?
1.1 Background
Roles that banks may play in international trade
Banks can act as a channel of communication,
keeping participants informed of the progress of a
transaction and taking appropriate steps in case of
problems,(Clean and documentary collections)
经贸学院国贸系
王学惠 ?
? Net works of correspondent banking
relationships simplify payment between
traders.
? Banks can maintain control over goods
(Documentary collections).
? Banks can give their financial backing to
transactions (Letter of credit).
? Banks can apply international codes of
practice (UCP500,URC522),
经贸学院国贸系
王学惠 ?
1.2 What is L/C?
lA bank’s written payment undertaking
lOn behalf of a buyer
lTo pay a seller
lA given sum of money
Upon presentation of documents representing the
supply of specified goods
LThese documents meeting the terms of the L/C
LAnd being presented within a specified time
And at a specified place
经贸学院国贸系
王学惠 ?
Briefly speaking,a documentary credit is
a conditional bank written undertaking
of payment.
经贸学院国贸系
王学惠 ?
1.3 Main Parties involved
l Applicant (Buyer/importer),Applies to
the Issuing Bank for a letter of credit in
favor of the beneficiary (seller),Also as
known as accountee or accreditor.
As for the importer,he is only requested
to pay a certain proportion of deposit
instead of the total amount of the Credit
at the time of application.
经贸学院国贸系
王学惠 ?
Issuing Bank
l Opening Bank,The bank who issues
the letter of credit,Gives the primary
payment undertaking of the letter of
credit.
Question,What factors should the issuing
bank consider before granting DC
facilities to his customer?
经贸学院国贸系
王学惠 ?
Answer:
? Credit standing of customer
? Cash cover as security
? Exchange risk
? Nature and control of goods
? Type of credit
经贸学院国贸系
王学惠 ?
Advising bank(notifying bank)
Communicates with the seller about the
letter of credit,Verifies that the L/C is
genuine,but gives no payment
undertaking of its own,It can also be
confirming bank.
经贸学院国贸系
王学惠 ?
Beneficiary (Exporter/Seller)
l The party to whom payment will be
made,The letter of credit gives the
beneficiary the assurance of payment
by the issuing bank provided documents
are presented which comply with all the
terms of the L/C.
经贸学院国贸系
王学惠 ?
Negotiation Bank
The bank that (1) receives and examines
the beneficiary’s documents for
adherence to the terms and conditions
of the L/C,
经贸学院国贸系
王学惠 ?
(2) gives value to the beneficiary,so long
as the terms of the credit have been
met and (3) forwards them to the
issuing bank.
经贸学院国贸系
王学惠 ?
Reimbursing Bank
The bank from which the paying,
accepting or negotiating bank may
request cover after receipt of the
documents in compliance with the
documentary credit.
经贸学院国贸系
王学惠 ?
Confirming bank
Is the bank which adds its confirmation
(an undertaking to pay which is
independent of the opening bank’s
obligation to do so) to the L/C,It will be
generally the advising bank but not
necessarily so.
经贸学院国贸系
王学惠 ?
1.4 Principles and theory
经贸学院国贸系
王学惠 ?
Step 1
The buyer agrees to purchase goods from the
seller,This agreement may be a purchase
order,an accepted pro-forma invoice,a
formal contract,or an informal exchange of
messages,but agreement is made as to
goods being purchased,how and when
they are to be shipped or insured,and how
and when payment is to be effected,In this
case,the agreement is to use an L/C as the
mechanism of payment,
经贸学院国贸系
王学惠 ?
Step 2
The buyer applies to his bank for an L/C,
signing the bank’s L/C
application/agreement form.
1st principle of L/C,Letters of credit are documentary.
经贸学院国贸系
王学惠 ?
Step 3
After approving the application,the issuing
bank issues the actual L/C instrument and
sends it to the beneficiary (the seller).
Note,There are 3 separate contracts in an L/C:
1,The contract of sale
2,The L/C application/agreement
3,The L/C itself
经贸学院国贸系
王学惠 ?
Step 4
Having received the issuing bank’s
assurance of payment,the seller ships
the goods to the buyer.
经贸学院国贸系
王学惠 ?
Step 5
The seller prepares the documents called
for in the L/C and presents them to the
issuing bank.
经贸学院国贸系
王学惠 ?
Step 6
The issuing bank examines the
documents,If it determines that the
documents comply with the L/C,the
issuing bank pays the beneficairy,
2nd principle of L/C,Letters of credit are independent of
any other contract or obiligation
经贸学院国贸系
王学惠 ?
Step 7 & 8
The issuing bank obtains payment from
the applicant in accordance with the
terms of the applicant’s L/C agreement
and forwards the documents to the
applicant,
经贸学院国贸系
王学惠 ?
Step 9
The applicant uses the documents to pick
up the merchandise from the carrier,
completing the letter of credit cycle.
经贸学院国贸系
王学惠 ?
L/C reality
经贸学院国贸系
王学惠 ?
Step 1
The buyer agrees to purchase goods from
the seller using an L/C as the
mechanism of payment.
经贸学院国贸系
王学惠 ?
Step 2
The buyer applies to his bank for an L/C,
signing the bank’s letter of credit
application/agreement form.
经贸学院国贸系
王学惠 ?
Step 3a
After approving the application,the
issuing bank issues the actual L/C
instrument and forwards it to their
chosen advising bank.
经贸学院国贸系
王学惠 ?
Step 3b
At the time the L/C is sent,the issuing
bank also sends a reimbursement
authorization to their chosen
reimbursing bank,This bank is the
clearing bank the issuing bank uses
when making payments in the currency
of the L/C and will play a role when the
time comes to pay the L/C.
经贸学院国贸系
王学惠 ?
Step 4
The advising bank authenticates the L/C
and delivers it to the beneficiary,If the
issuing bank has requested them to do
so,the advising bank may add their
confirmation to the L/C,
经贸学院国贸系
王学惠 ?
1.5 Characteristics of L/C
?Primary liabilities for payment
(opening/confirming Bank)
?Self-sufficient instrument (Is separate from
the contract to which it relates)
?Pure documentary transaction (Requires
that all parties deal only in documents )
经贸学院国贸系
王学惠 ?
But:
,Is not a contract between buyer and
seller
,Is not a guarantee that the seller will
definitely receive payment
,Is not a guarantee that the buyer will
receive the goods he ordered
经贸学院国贸系
王学惠 ?
1.6 contents
经贸学院国贸系
王学惠 ?
1.7 Types of credit
Sight,deferred,acceptance & negotiating
credit
ARTICLE 10
A,All Credits must clearly indicate
whether they are available by sight
payment,by deferred payment,by
acceptance or by negotiation.
经贸学院国贸系
王学惠 ?
SIGHT CREDIT(SETTLEMENT BY
PAYMENT)
In a sight credit the value of the credit is
available to the beneficiary
as soon as the terms and conditions of
the credit have been met.
经贸学院国贸系
王学惠 ?
deferred payment credit
the buyer accepts the documents and
agrees to pay the bank after a set
period of time,Essentially,this gives the
buyer time (a grace period) between
delivery of the goods and payment,
经贸学院国贸系
王学惠 ?
The issuing bank makes the payment at
the specified time,
when the terms and conditions of the
credit have been met.
Deferred payment credits are often used
in transactions involving food or drugs
that require inspection prior to import
and approval by a government agency,
经贸学院国贸系
王学惠 ?
Acceptance Credit
requires the beneficiary to draw a
usance bill for subsequent acceptance
by the issuing bank or the advising bank
or any other bank as the credit
stipulates.
经贸学院国贸系
王学惠 ?
negotiating credit
Negotiation means the giving of value for
Draft(s) and/or document(s) by the bank
authorized to negotiate.
Mere examination of the documents
without giving of value does not
constitute a negotiation.
经贸学院国贸系
王学惠 ?
comparison种类条件 即期付款L/C 延期付款 L/C 承兑 L/C 议付 L/C 自由议付 L/C
汇票 需要或不要 不要 需要 即期需要 /不需要，
远期需要
即期需要 /不需
要，远期需要
汇票期限 即期 远期 即期或远期 即期或远期
受票人 指定付款行 指定承兑行 开证行 开证行
限制使用或自由
使用
限制 限制 限制 限制 自由
付款给受益人的
时间
即期付款 延期付款 远期付款 即期支付净款扣
减垫款利息
即期支付净款扣
减垫款利息
起算日 装运日、交
单日或其他
承兑日
非保兑行的指定
银行对受益人有
无追索权
无 无 无 有 有
使用信用证的银
行
开证行、通
知行或其他
行
开证行、通
知行或其他
行
开证行、通
知行或其他
行
通知行或其他行 被选择愿意议付
的任何银行
经贸学院国贸系
王学惠 ?
banking charges
国际贸易和非贸易银行结算费率表 （各银
行略有不同） 单位：人民币
业务种类 费率（额） 最低 最高 说明
信用证（出口部分） / / / /
1、通知、转递 200 / / 按笔计算
2、预通知（简电通知） 100 / / /
3、修改通知 100 / / /
4、保兑 0.2% 300 / 每三个月计算
5、议付（信用证） 0.125% 200 / /
经贸学院国贸系
王学惠 ?
6、付款（信用证） 0.15% 200 / /
7、承兑（信用证） 0.1% 200 / 按月计算，最
低按 2个月
8、迟期（信用证） 0.1% 200 / /
9、转让 / / / /
（ 1）、信用证条款不变 200,/,/ /
（ 2）、信用证条款改变 0.1% 200 1000 /
10、撤证 /注销 100 / / /
经贸学院国贸系
王学惠 ?
信用证（进口部分）
1、开证 0.15% 200 / 有效期 6个月以上按每
六个月增加 0.05%收取
2、修改 /注销 200 / / 修改增加金额按
0.15%收取
3、无兑换付款手续费 0.125% 200 / 按保
证金同币种收取
4、承兑 0.1% 200 / 按月计算
5、拒付 300 / / /
6、提货担保 1000 / / /
经贸学院国贸系
王学惠 ?
1.8 accommodation
Packing Credit
A loan given to the beneficiary by the bank
to enable him to purchase raw materials,The
beneficiary is usually requested to deposit the
DC with the bank as security.
经贸学院国贸系
王学惠 ?
Bill purchased
negotiation
经贸学院国贸系
王学惠 ?
1.9 Limitations
You might have a perfectly good letter of
credit and still not be paid,because,for
example,
? the letter of credit is opened by a bank in
your customer’s (or other overseas) country
and political events or shortage of hard
currency might prevent the bank paying you
经贸学院国贸系
王学惠 ?
? the opening or advising bank becomes
insolvent and cannot pay you
? the opening bank refers your
documents to your customer for
approval before paying you
经贸学院国贸系
王学惠 ?
? you present documents to the bank which do
not comply with those
required by the letter of credit
? you present documents to the bank which do
comply with those required by the letter of
credit but you are too late in presenting them
? you are unable to present documents to the
bank which comply with
those required by the letter of credit
经贸学院国贸系
王学惠 ?
王学惠 ?
Learning Objectives
1.1 Background
1.2 Definition
1.3 Main Parties
1.4 Procedure
1.5 Contents
1.6 Characteristics of L/C
1.7 Types
1.8 accomodation
1.9 limitations
经贸学院国贸系
王学惠 ?
1.1 Background
Roles that banks may play in international trade
Banks can act as a channel of communication,
keeping participants informed of the progress of a
transaction and taking appropriate steps in case of
problems,(Clean and documentary collections)
经贸学院国贸系
王学惠 ?
? Net works of correspondent banking
relationships simplify payment between
traders.
? Banks can maintain control over goods
(Documentary collections).
? Banks can give their financial backing to
transactions (Letter of credit).
? Banks can apply international codes of
practice (UCP500,URC522),
经贸学院国贸系
王学惠 ?
1.2 What is L/C?
lA bank’s written payment undertaking
lOn behalf of a buyer
lTo pay a seller
lA given sum of money
Upon presentation of documents representing the
supply of specified goods
LThese documents meeting the terms of the L/C
LAnd being presented within a specified time
And at a specified place
经贸学院国贸系
王学惠 ?
Briefly speaking,a documentary credit is
a conditional bank written undertaking
of payment.
经贸学院国贸系
王学惠 ?
1.3 Main Parties involved
l Applicant (Buyer/importer),Applies to
the Issuing Bank for a letter of credit in
favor of the beneficiary (seller),Also as
known as accountee or accreditor.
As for the importer,he is only requested
to pay a certain proportion of deposit
instead of the total amount of the Credit
at the time of application.
经贸学院国贸系
王学惠 ?
Issuing Bank
l Opening Bank,The bank who issues
the letter of credit,Gives the primary
payment undertaking of the letter of
credit.
Question,What factors should the issuing
bank consider before granting DC
facilities to his customer?
经贸学院国贸系
王学惠 ?
Answer:
? Credit standing of customer
? Cash cover as security
? Exchange risk
? Nature and control of goods
? Type of credit
经贸学院国贸系
王学惠 ?
Advising bank(notifying bank)
Communicates with the seller about the
letter of credit,Verifies that the L/C is
genuine,but gives no payment
undertaking of its own,It can also be
confirming bank.
经贸学院国贸系
王学惠 ?
Beneficiary (Exporter/Seller)
l The party to whom payment will be
made,The letter of credit gives the
beneficiary the assurance of payment
by the issuing bank provided documents
are presented which comply with all the
terms of the L/C.
经贸学院国贸系
王学惠 ?
Negotiation Bank
The bank that (1) receives and examines
the beneficiary’s documents for
adherence to the terms and conditions
of the L/C,
经贸学院国贸系
王学惠 ?
(2) gives value to the beneficiary,so long
as the terms of the credit have been
met and (3) forwards them to the
issuing bank.
经贸学院国贸系
王学惠 ?
Reimbursing Bank
The bank from which the paying,
accepting or negotiating bank may
request cover after receipt of the
documents in compliance with the
documentary credit.
经贸学院国贸系
王学惠 ?
Confirming bank
Is the bank which adds its confirmation
(an undertaking to pay which is
independent of the opening bank’s
obligation to do so) to the L/C,It will be
generally the advising bank but not
necessarily so.
经贸学院国贸系
王学惠 ?
1.4 Principles and theory
经贸学院国贸系
王学惠 ?
Step 1
The buyer agrees to purchase goods from the
seller,This agreement may be a purchase
order,an accepted pro-forma invoice,a
formal contract,or an informal exchange of
messages,but agreement is made as to
goods being purchased,how and when
they are to be shipped or insured,and how
and when payment is to be effected,In this
case,the agreement is to use an L/C as the
mechanism of payment,
经贸学院国贸系
王学惠 ?
Step 2
The buyer applies to his bank for an L/C,
signing the bank’s L/C
application/agreement form.
1st principle of L/C,Letters of credit are documentary.
经贸学院国贸系
王学惠 ?
Step 3
After approving the application,the issuing
bank issues the actual L/C instrument and
sends it to the beneficiary (the seller).
Note,There are 3 separate contracts in an L/C:
1,The contract of sale
2,The L/C application/agreement
3,The L/C itself
经贸学院国贸系
王学惠 ?
Step 4
Having received the issuing bank’s
assurance of payment,the seller ships
the goods to the buyer.
经贸学院国贸系
王学惠 ?
Step 5
The seller prepares the documents called
for in the L/C and presents them to the
issuing bank.
经贸学院国贸系
王学惠 ?
Step 6
The issuing bank examines the
documents,If it determines that the
documents comply with the L/C,the
issuing bank pays the beneficairy,
2nd principle of L/C,Letters of credit are independent of
any other contract or obiligation
经贸学院国贸系
王学惠 ?
Step 7 & 8
The issuing bank obtains payment from
the applicant in accordance with the
terms of the applicant’s L/C agreement
and forwards the documents to the
applicant,
经贸学院国贸系
王学惠 ?
Step 9
The applicant uses the documents to pick
up the merchandise from the carrier,
completing the letter of credit cycle.
经贸学院国贸系
王学惠 ?
L/C reality
经贸学院国贸系
王学惠 ?
Step 1
The buyer agrees to purchase goods from
the seller using an L/C as the
mechanism of payment.
经贸学院国贸系
王学惠 ?
Step 2
The buyer applies to his bank for an L/C,
signing the bank’s letter of credit
application/agreement form.
经贸学院国贸系
王学惠 ?
Step 3a
After approving the application,the
issuing bank issues the actual L/C
instrument and forwards it to their
chosen advising bank.
经贸学院国贸系
王学惠 ?
Step 3b
At the time the L/C is sent,the issuing
bank also sends a reimbursement
authorization to their chosen
reimbursing bank,This bank is the
clearing bank the issuing bank uses
when making payments in the currency
of the L/C and will play a role when the
time comes to pay the L/C.
经贸学院国贸系
王学惠 ?
Step 4
The advising bank authenticates the L/C
and delivers it to the beneficiary,If the
issuing bank has requested them to do
so,the advising bank may add their
confirmation to the L/C,
经贸学院国贸系
王学惠 ?
1.5 Characteristics of L/C
?Primary liabilities for payment
(opening/confirming Bank)
?Self-sufficient instrument (Is separate from
the contract to which it relates)
?Pure documentary transaction (Requires
that all parties deal only in documents )
经贸学院国贸系
王学惠 ?
But:
,Is not a contract between buyer and
seller
,Is not a guarantee that the seller will
definitely receive payment
,Is not a guarantee that the buyer will
receive the goods he ordered
经贸学院国贸系
王学惠 ?
1.6 contents
经贸学院国贸系
王学惠 ?
1.7 Types of credit
Sight,deferred,acceptance & negotiating
credit
ARTICLE 10
A,All Credits must clearly indicate
whether they are available by sight
payment,by deferred payment,by
acceptance or by negotiation.
经贸学院国贸系
王学惠 ?
SIGHT CREDIT(SETTLEMENT BY
PAYMENT)
In a sight credit the value of the credit is
available to the beneficiary
as soon as the terms and conditions of
the credit have been met.
经贸学院国贸系
王学惠 ?
deferred payment credit
the buyer accepts the documents and
agrees to pay the bank after a set
period of time,Essentially,this gives the
buyer time (a grace period) between
delivery of the goods and payment,
经贸学院国贸系
王学惠 ?
The issuing bank makes the payment at
the specified time,
when the terms and conditions of the
credit have been met.
Deferred payment credits are often used
in transactions involving food or drugs
that require inspection prior to import
and approval by a government agency,
经贸学院国贸系
王学惠 ?
Acceptance Credit
requires the beneficiary to draw a
usance bill for subsequent acceptance
by the issuing bank or the advising bank
or any other bank as the credit
stipulates.
经贸学院国贸系
王学惠 ?
negotiating credit
Negotiation means the giving of value for
Draft(s) and/or document(s) by the bank
authorized to negotiate.
Mere examination of the documents
without giving of value does not
constitute a negotiation.
经贸学院国贸系
王学惠 ?
comparison种类条件 即期付款L/C 延期付款 L/C 承兑 L/C 议付 L/C 自由议付 L/C
汇票 需要或不要 不要 需要 即期需要 /不需要，
远期需要
即期需要 /不需
要，远期需要
汇票期限 即期 远期 即期或远期 即期或远期
受票人 指定付款行 指定承兑行 开证行 开证行
限制使用或自由
使用
限制 限制 限制 限制 自由
付款给受益人的
时间
即期付款 延期付款 远期付款 即期支付净款扣
减垫款利息
即期支付净款扣
减垫款利息
起算日 装运日、交
单日或其他
承兑日
非保兑行的指定
银行对受益人有
无追索权
无 无 无 有 有
使用信用证的银
行
开证行、通
知行或其他
行
开证行、通
知行或其他
行
开证行、通
知行或其他
行
通知行或其他行 被选择愿意议付
的任何银行
经贸学院国贸系
王学惠 ?
banking charges
国际贸易和非贸易银行结算费率表 （各银
行略有不同） 单位：人民币
业务种类 费率（额） 最低 最高 说明
信用证（出口部分） / / / /
1、通知、转递 200 / / 按笔计算
2、预通知（简电通知） 100 / / /
3、修改通知 100 / / /
4、保兑 0.2% 300 / 每三个月计算
5、议付（信用证） 0.125% 200 / /
经贸学院国贸系
王学惠 ?
6、付款（信用证） 0.15% 200 / /
7、承兑（信用证） 0.1% 200 / 按月计算，最
低按 2个月
8、迟期（信用证） 0.1% 200 / /
9、转让 / / / /
（ 1）、信用证条款不变 200,/,/ /
（ 2）、信用证条款改变 0.1% 200 1000 /
10、撤证 /注销 100 / / /
经贸学院国贸系
王学惠 ?
信用证（进口部分）
1、开证 0.15% 200 / 有效期 6个月以上按每
六个月增加 0.05%收取
2、修改 /注销 200 / / 修改增加金额按
0.15%收取
3、无兑换付款手续费 0.125% 200 / 按保
证金同币种收取
4、承兑 0.1% 200 / 按月计算
5、拒付 300 / / /
6、提货担保 1000 / / /
经贸学院国贸系
王学惠 ?
1.8 accommodation
Packing Credit
A loan given to the beneficiary by the bank
to enable him to purchase raw materials,The
beneficiary is usually requested to deposit the
DC with the bank as security.
经贸学院国贸系
王学惠 ?
Bill purchased
negotiation
经贸学院国贸系
王学惠 ?
1.9 Limitations
You might have a perfectly good letter of
credit and still not be paid,because,for
example,
? the letter of credit is opened by a bank in
your customer’s (or other overseas) country
and political events or shortage of hard
currency might prevent the bank paying you
经贸学院国贸系
王学惠 ?
? the opening or advising bank becomes
insolvent and cannot pay you
? the opening bank refers your
documents to your customer for
approval before paying you
经贸学院国贸系
王学惠 ?
? you present documents to the bank which do
not comply with those
required by the letter of credit
? you present documents to the bank which do
comply with those required by the letter of
credit but you are too late in presenting them
? you are unable to present documents to the
bank which comply with
those required by the letter of credit
经贸学院国贸系
王学惠 ?
