信用证课堂练习

Chapter 5 Letter of Credit (English)一、Key words:开证行Issuing Bank, Issuer 受益人Beneficiary，Seller, Exporter, Drawer保兑行Confirming Bank 申请人Applicant, Buyer, Opener, Importer, Principal通知行Advising Bank 受票行Drawee Bank承兑行Accepting Bank 议付行Negotiating Bank偿付行Reimbursing Bank 索偿行Claiming Bank寄单行Remitting Bank 转让行Transferring Bank第一性的付款责任 Primary liability for payment of the Issuing Bank跟单信用证Documentary Credit 指定银行Nominated Bank保兑confirm 承诺 undertaking 议付negotiate延期付款deferred payment 非单据条件No-documentary condition软条款 soft clause不可撤销信用证Irrevocable Credit 可撤销信用证Revocable Credit修改的沉默接受Silent Acceptance of Amendment沉默保兑Silent Confirmation 直接付款信用证Straight credit延期付款信用证Deferred payment credit议付信用证 Negotiation credit 附加单据Additional Document融通汇票 Accommodation Draft 即期信用证sight credit远期信用证 Usance credit 信托收据 Trust Receipt信用证的再转让Retransfer of credit 部分转让 Partial Transfer全额转让 Total transfer 款项让渡 Assignment of Proceeds原始信用证 original credit 背对背信用证back to back credit对开信用证 Reciprocal credit 预支信用证 anticipatory credit红条款信用证 Red Clause Credit 绿条款信用证 Green Clause Credit循环信用证 Revolving credit 备用信用证 Stand-by credit信开信用证 credit opened by mail 电开信用证credit opened by the teletransmission全电开证 credit opened by full cable/telex环球银行间金融电讯协会 Society for Worldwide Interbank Financial Telecommunication二Please fill the following blanks according to your knowledge1Letter of credit can be defined as following:(1) In simple terms, a letter of credit is a conditional bank of payment. (ICC PublicationNo.415)(2)Fully meaning definition of letter of credit can be expressed as: A letter of credit is a writtenby a bank(Issuing bank) given to the seller (Beneficiary) at the request, and on the instruction, of the buyer(applicant) to pay at sight or at a determinable future date up to a stated sum of money, within a prescribed time limit and against stipulated documents which were with the terms and conditions of the credit. (ICC Publication No.415)(3) Definition of documentary credit is: Documentary credit or letter of credit is an issuedby a bank for the account of the buyer (the applicant) or for its own account to pay thebeneficiary the value of the draft and /or documents provided that terms and conditions of the documentary credit are with. (ICC Publication No.415)(4) Definition of irrevocable documentary credit is: An irrevocable documentary credit constitutesa definite undertaking of the , provided that the stipulated documents are presented to thenominated bank or to the issuing bank and thatthe of the credit are complied with, to pay, accept draft and/or documents presented under the documentary credit. (ICC Publication No.515)2 There exists a triangular contractual arrangement under a documentary credit operation:(1) Firstly, the sales contract between and(2) Secondly, the between applicant and issuing bank.(3) Thirdly, the between beneficiary and issuing bank.3 The documentary credit should be complied with the Independence or abstraction principle which means:(1) The separation between documents on the one hand and on the other hand, so that banks deal with documents and not with goods.(2) That credit is separate transaction from the sales and therefore banks are in no way concerned with or bound by sales contract.(3) When the terms and conditions of the credit have been complied with, the issuing bank or confirming bank (if any) should fulfill its independent without interference come from other parties.4 Parties that are usually involved in a documentary credit transaction are mainly the following ones, please match the suitable definition to each parties’ name.(1) whose obligation is to arrange for a credit to be opened or issued in favor of the exporter.(2) referred to somebody who can benefit from the credit by its assurance of payment to him and this payment term is usually incorporated in the sales contract at the request of the exporter(3) the bank that issued the documentary credit on behalf of the applicant(4) the bank that has the task of informing the beneficiary that credit has been issued in his favor so that the beneficiary may make necessary preparation for shipping the goods and drafting the documents stipulated in the credit.(5) the bank that is authorized to pay the beneficiary or accept or negotiate his bills of exchange (drafts), against his presentation of proper documents.(6) the bank that buys an exporter’s drafts submitted to it under a documentary credit.(7) the bank that is requested to add its own commitment (make payment to the beneficiary) to the documentary credit.(8) the bank that, at the request of the issuing bank, is to authorized to pay, or accept and pay time drafts under the credit .H applicant E beneficiary B issuing bank F advising bank A paying bank G negotiating bank D confirming bank C reimbursing bank(1) (2) (3) (4) (5) (6) (7) (8)三Read the following materials and answer the questions.1 General Concept of the Letter of CreditIn international trade it is almost impossible to match payment with physical delivery of the goods, which constitutes conflicting problems for trade, since the exporter prefers to get paid beforereleasing the foods before paying the money. It should be noted that under collection, the drawing of a bill of exchange on the importer does not guarantee payment, as is mentioned above. There is always the risk that by the time the foods arrive, the importer’s financial position may have deteriorated or the market is unfavorable to the importer and he may be unable or not prepared to meet the draft. The exporter might thus be left with a cargo at his disposal, at a distant port, possibly on a falling market, and the necessity of action against the importer. If a transaction is concluded under “D/A Payment”, the risk which confronts the exporter is doubtless greater because D/A calls for the delivery of shipping documents against acceptance of exporter’s draft. When the draft has been accepted by the importer, and the documents are released to him, the sole security of the exporter is the good faith of the acceptor.The letter of credit is an effective means to solve the problems. Its objective is to facilitate international payment by means of the creditworthiness of the bank. This method of payment offers security to both the seller and the buyer. The former has the security to get paid provided he presents impeccable documents while the latter has the security to get the goods required through the documents he stipulates in the credit. This bilateral security is the unique and characteristic feature of the letter of credit. However, it only assures payment to the beneficiary provided the terms and conditions of the credit are fulfilled. It does not guarantee that the goods purchased will be those invoiced or shipped. That is to say the banks are only concerned with the documents representing the goods instead of the underlying contracts. They have no legal obligation whether the goods comply with the contract. They will be considered as having fulfilled their responsibility so long as all the documents comply with the stipulations of the credit.“Letter of Credit”is often shortened as L/C, and is sometimes referred to as “banker’s commercial letter of credit”,“banker’s credit”, or simply“credit”. The commercial letter of credit is almost always a documentary credit in that it specifies the documents required such as a bill of lading, an invoice and an insurance document plus one or two supplementary documents. So a documentary credit is a letter issued by a bank at the request of an importer of goods in which the bank promises to pay a beneficiary (usually, though not always, the exporter of the goods) upon presentation of documents relating to the dispatch of the goods. If these documents are in order and shipment has been made as specified in the credit, the bank will pay the consignment in exchange for the documents or will accept a bill of exchange and, possibly, negotiate it.(1) Among following forms of international settlements, the risk which confronts the exporter is the most smallest:A D/A PaymentB collectionC international factoringD letter of credit(2) The unique and characteristic feature of the letter of credit is bilateral security as long as(3) In a documentary credit, the documents are referred as .2 Functions of Documentary CreditThe credit created for international settlement among banks not only provides a sense of security for the traders involved, but also a reliable source of finance for foreign trade where required. The credit created, in general, favors the exporter. In order to reduce the possible risk, the exporter usually insists on the buyer establishing a credit in his favor before shipment is unloaded.There are generally several types of credits. A “confirmed credit”guarantees payment to the beneficiary, provided that the credit terms and conditions are met and the standing of the advising bank in the beneficiary’s country is sound. A“revocable credit”may be cancelled at any time up tothe moment the advising bank pays. This type of credit is the least favorable to the exporter. There is a problem that the goods may be shipped and the credit revoked before documents are presented to the advising bank. An “irrevocable credit”may not be amended or even cancelled without the consent of all the parties involved. This type of credit guarantees that no single party will revoke the contract already sighed.With the credit arrangement, the issuing bank agrees to pay the advising bank, and the advising bank pays the exporter according to the terms of the documents which appear to fulfill the conditions of the credit. Banks, however, are not bound by, and therefore, not concerned with the underlying sales contract on which the credit requirements are based. As long as the documents are in good order and there are no apparent problems with the process, the buyer is still responsible for payment to the issuing bank although the goods received may be of inferior quality to those ordered.(1) Please reorder the following types of letter of credit from the least favorable to the exporter to the most favorable to the exporter: A confirmed credit B revocable credit C irrevocable credit(2) Please write the paying chain under the letter of credit among (advising bank, issuing bank, importer and exporter) : .(3) In a sense, the credit can be regarded as a kind of finance between and .3 The operation of the Documentary CreditSo let us sum up the operation of the documentary credit. The process of issuing a letter of credit starts with the importer. He instructs his bank to issue a L/C in favor of the seller for the amount of the purchase. The opening bank sends the credit to its correspondent bank in the exporter’s country, who will, after examination of all the contents of the credit advise the exporter of its receipt. The exporter or beneficiary will make a careful examination of all the contents of the credit and will request the opener to make amendments to any discrepancies in the credit so as to ensure safe and timely payment. Sometimes the exporter may require a confirmed letter of credit either because the credit amount is too large, or because he does not fully trust the opening bank. The confirmation is undertaken either by the advising bank or another prime bank. When everything with the credit is in order, the exporter will prepare the relevant documents based on the credit and dispatch the goods to the importer. Then he will present the draft and the accompanying documents to the advising bank that pays or accepts or negotiates the bill of exchange. The advising bank then also becomes the paying bank which acts as the agent of agent opening bank and gets reimbursed by the opening bank after paying the beneficiary. If a bank, either nominated by the opening bank or at its own choice, buys the exporter’s draft submitted to it under a credit, it is called a negotiating bank. The draft and the documents will then be sent to the opening bank for reimbursement.(1)A letter of credit starts from:A importerB issuing bankC exporterD advising bank(2)In the process of L/C, who will make a careful examination of all the contents of the credit (youcan choose two or more answers): A exporter B opening bank C advising bank(3)Who will first check whether the L/C is in line with the documentsA opening bankB advising bankC reimbursing bankD paying bank四Please fill the following blanks according to your knowledgeSection 1 Confirmed or unconfirmed credits1 Definition of an irrevocable confirmed documentary credit is as follows: A confirmation of an irrevocable documentary credit by a bank (the confirming bank) upon the authorization or request of the issuing bank constitutes a definite of the confirming bank, in addition to that of the issuing bank, provided that the stipulated documents are presented to the confirming bank or to any other nominated bank on or before the expiry date and the terms and conditions of the credit are with, to pay, to accept draft or to negotiate.2 A bank confirms a credit, it will usually write a clause as follows: We hereby add our confirmation to the credit and undertake to honor drafts and documents in conformity with the terms of the credit upon them to3 Definition of an irrevocable unconfirmed documentary credit is as follows: The issuing bank’s irrevocable documentary credit is advised through an advising bank. The advising bank acts as agent of the issuing bank and does not assume any responsibility to the beneficiary under the documentary credit except for taking reasonable care to check the apparent of the documentary credit which it advised.4 If the credit provides for negotiation, issuing bank pays draft recourse to the nominated bank or the beneficiary. If the credit provides for negotiation, confirming bank draft to the nominated bank or the beneficiary. If the credit provides for negotiation, nominated bank negotiates draft recourse to the beneficiary.Section 2 credit available by payment/acceptance/negotiation1 According to the settlement made to the beneficiary, all credits may be classified into four types: It is available by (1) (2) (3) (4)2 Definition of irrevocable straight documentary credit is as follows: Under the irrevocable straight documentary credit, the obligation of the issuing bank is extended only to the in honoring draft/document and usually expired at the country of issuing bank. This kind of documentary credit conveys no commitment or obligation the part of the issuing bank to persons other than the named .3 What is the meaning of the term “negotiation”? Negotiation means the giving of for draft and/or document by the bank authorized to negotiate.4 What does undertaking an obligation to make payment involve? Undertaking an obligation to make payment involve any undertaking other than giving a deferred payment undertaking or acceptinga .5 Put ×in relative check box of the following sentences or fill the blanks to issue an irrevocable confirmed documentary credit which is to expire on or before 30 june,200x and is available with the advising bank, Bank of China, Shanghai by payment at sight against draft and documents.(1)In irrevocable Documentary Credit Form (Advice for the advising bank) We request you to advise beneficiary: ①□without adding your confirmation ②□adding your confirmation.③□adding your confirmation if requested by the beneficiary.(2)In Notification of Irrevocable Documentary Credit Form ①□This notification and the enclosed advice are sent to you without any engagement on our part. ②□As requested by the issuing bank, we hereby add our confirmation to this credit in accordance with the stipulations under UCP600 Article 9.(3)In Irrevocable Documentary Credit Form (Advise for the beneficiary): Expiry date and place for presentation of documents expiry date: . Place for presentation: . credit available with .①□by payment at sight②□by deferred payment at③□by acceptance of draft at④□by negotiation against the documents detailed herein①□and beneficiary’s draft drawn on6 Put ×in relative check box of the following sentences on the advice of irrevocable confirmed documentary credit available by sight payment with the advising bank.⑴□This notification and the enclosed advice are sent to you without any engagement on our part.⑵□As requested by the issuing bank, we hereby add our confirmation to this creditAn irrevocable documentary credit will expire on 29 May, 200x.at: ⑶□(place of issuing bank)/⑷□(place of advising bank)/⑸□(place of other bank)Available with: name and place of ⑹□(issuing bank) /⑺□(advising bank)/⑻□(other bank) By: ⑼□(payment at sight) /⑽□(deferred payment at) /⑾□(acceptance of draft at)/ ⑿□(negotiation)Against the documents detailed herein: ⒀□and beneficiary’s draft drawn on name and place of /⒁□(issuing bank)/⒂□/ advising bank7An irrevocable negotiation (with the advising bank) documentary credit will expire on 29 May, 200x.at: ⑴□(place of issuing bank)/ ⑵□(place of advising bank)/⑶□(place of other bank)available with: name and place of /⑷□(issuing bank) /⑸□(advising bank)/⑹□(other bank) by: ⑺□(payment at sight )/⑻□(deferred payment at) /⑼□(acceptance of draft at)/ ⑽□(negotiation)Against the documents detailed herein: ⑾□and beneficiary’s draft drawn on name and place of /⑿□(issuing bank)/⒀□/ advising bankSection 3 sight credit and usance credit1 Usance credits include (1)acceptance (2) credit2All usance credits may be divided into three kinds: (1) Buyer’s usance credit or usance credit payable . (2) Seller’s usance credit including that contract has been concluded on a sight payment basis but credit was payable at the usance period, interest for the account.(3)Seller’s usance credit including that contract has been concludede on the usance payment basis and a usance credit was.3 A credit contains the terms as follows: (1) Immediate reimbursement will be provided by us on receipt of the documents. (2) Discount charges is for the buyer’s account. (3) Draft drawn under this credit should be negotiated at sight. The above credit belongs to Question 2 sub-question .4 A credit contains the terms as follows: (1) Payment made under this credit is to be effected 90 days from the date of shipment, interest at the rate of 11% per annum payable from the date of shipment till maturity date of draft. (2) Interest for applicant account. The above credit belongs to Question 2 Sub-question .5 Usance credit can be divided into 2 kinds, one is , the other is . Compare the first with sight credit, which one will be the same among following choices: A both credits will draw sight draft; B both credits have on seller; C both credits pay to seller at sight on the quantity of the draft; D both credits need the procedure of discountingbe further divided into 2 kind, one is , the other is .Section 4: back to back credit and reciprocal creditCompare the back to back credit with the transferable credit.Back to back L/C Transferable credit(1)The issuance of it is not the intention ofAnd issuing bank in the master credit. They have no concern with the back-to-back credit.(2)Aback to back credit is opened against the mastercredit. Two credits coexist.(3)The secondary beneficiary of back-to-back credit cannot obtain issuing bank’s undertaking of payment in the credit.(4)The bank that has issued a back-to-back credit is an bank of that credit. (1)At the request of the and with the consent of the issuing bank, they issue a transferable credit. Usually, the documentary credit is preceded by “transferable”.(2)The credit amount is transferred wither in whole or in part to the second beneficiary. Such amount no longer exists in the original transferable credit.(3)The secondary beneficiary always obtains the issuing bank’s undertaking of .(4)The bank, which has opened a new transferable credit, is a bank.。