International Payment

L/C (continued)

• L/C (continued)
• Shipping documents
• Bill of Lading:
• title document-
• contract between carrier and shipper
• shipper’s receipt of the goods
• document assigns control of goods
• Commerce Invoice:
• description of the product, price and others

Packing list:

• Packing list:
• outlines things to be filled
• Certificate of Insurance
• Certificate of Origin

• Documentary Credit Procedure

• Buyer
• (Importer)

• Seller
• (Exporter)

• Importer’s Bank
• (Issuing Bank)

• Correspondent
• Bank

• (1) Contract of Sale

• (5) Delivery of Goods

• (7) Documents Presented to
• issuing Bank

• (3) Credit Sent to Correspondent

• (6)
• Documents
• Presented

• (4)
• Letter of
• Credit
• Delivered

• (8)
• Documents
• & Claim for
• Payment

• (2)
• Request
• to Provide
• Credit

• (9) Payment

Irrevocable

• Documentary (Commercial)
• Letter of Credit (L/C)
• Advised or Confirmed

Documentary Letter of Credit

• Conditional, legal obligation of bank to pay
• beneficiary
• Bank places its internationally accepted
• credit rating before customer’s
• Eliminates commercial risk

Principal Parties to Letter of Credit

• Applicant
• (importer/buyer/account party)
• Beneficiary
• (exporter/seller)
• Issuing Bank
• (guarantor)
• Correspondent Bank

Use a Letter of Credit to Seller when:

• Credit standing of buyers is uncertain
• Your ability to absorb risk is low
• Merchandise is custom-made or high value
• Economic, political conditions unstable
• Use does not harm you competitive stand