DOCUMENTARY Mode of Payment: CREDIT GROUP 6 OUTLINE Documentary Credit Denition 1 Procedure 2 Components 3 Main types 4 Advantages 5 Disadvantages 6 1. Denition Thoại Lam Letter of credit A letter issued by a bank upon request of the bank’s client, the importer, in which the banks promises to pay certain amount of money within a certain period of time to a beneciary on the condition that he presents a set of document in strict compliance with the terms and conditions set in that letter 1. Denition Participating parties: Participating parties: Thoại Lam Applicant Beneciary $ Issuing bank $ Advising bank who requests or instructs a bank to issue a L/C which issues a L/C upon the request of applicant in whose favour a L/C is issued Which advises/ authorized to advise a bene*ciary of the availibility of a credit & its terms $ Conrming bank $ Paying bank 2. Procedure Quang Huy Applicant Beneciary $ Issuing bank $ Advising bank (Buyer) (Buyer’s) (Seller) (Seller’s)  Apply for L/C  L/C is issued  L/C is advised to beneciary  Beneciary ships goods  Assemble documents against L/C  Forward documents  Pay  Ask for payment & release documents  Pay Huỳnh Như 3. Components of an L/C Huỳnh Như Name, address of relevant parties to L/C L/C amount Huỳnh Như Goods description Huỳnh Như Documents to be presented Huỳnh Như Documents to be presented [...]... L/C Transferable L/C permits the beneficiary of the letter to make some or all of the credit available to another party Applicant Beneficiary 1 Beneficiary 2 4 Main types of L/C Thanh Huyền Special L/C Standby L/C a bank issues on behalf of its customer to serve as a guarantee to the beneficiary of the letter of credit that the bank's customer will perform a specified contract with the beneficiary... types of L/C Thanh Huyền Special L/C Revolving L/C indicates the obligation of an issuing bank to restore a credit to the original amount after it has been used without amendment 4 Main types of L/C Thanh Huyền Special L/C Back to back L/C opened on the basis of an already existing, nontransferable credit, used by traders to make payment to the final supplier Applicant Beneficiary Trader Final supplier... the goods  Provides seller easier access to financing once the letter of credit has been issued 5 Advantages Phương Hằng To buyer/importer • • • • • Helps reduce the risk of non-performance of Exporter Avoids partial pre-payments or deposits to the seller  Control the shipping dates for the goods being purchased Purchasing Power Credit Worthiness 5 Advantages To banks  Increased balances  Commission... payment method to the beneficiaries  not frequently used in international trade 4 Main types of L/C Minh Nguyệt Basing on the nature of the L/C Irrevocable L/C The issuing bank undertakes not to revoke the credit before a specific time or event Every amendment at least requires beneficiary's acceptance in order to be effective 4 Main types of L/C Minh Nguyệt Basing on the nature of the L/C Confirmed Irrevocable . DOCUMENTARY Mode of Payment: CREDIT GROUP 6 OUTLINE Documentary Credit Denition 1 Procedure 2 Components 3 Main types 4 Advantages 5 Disadvantages 6 1. Denition Thoại Lam Letter of credit A. favour a L/C is issued Which advises/ authorized to advise a bene*ciary of the availibility of a credit & its terms $ Conrming bank $ Paying bank 2. Procedure Quang Huy Applicant Beneciary $ Issuing. international trade Minh Nguyệt 4. Main types of L/C The issuing bank undertakes not to revoke the credit before a speci*c time or event. Every amendment at least requires bene*ciary's acceptance