International Trade And Finance - Documentary Credit

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Assalamualaikum and hi everyone...today i want to share about 'Red Clause' and 'Green Clause' letter of credit.Red Claus...
05/05/2019

Assalamualaikum and hi everyone...
today i want to share about 'Red Clause' and 'Green Clause' letter of credit.

Red Clause Letter of Credit
- The clause authorises the advising or Confirming
Bank to make advances to the beneficiary before
presentation of document and is basically a pre-
shipment loan.

- The instruction typed in red ink to draw attention to the
unique nature of credit.

Green Clause Letter of Credit
- Similar to a Red Clause Credit but in addition to pre-
shipment finance the exporter also receives storage
facilities at the part of shipment at the expense of the
buyer.

REVOLVING LETTER OF CREDIT 🚢⚓️- Normally used where shipments of the same goods are made to the same importer.- In v...
04/26/2019

REVOLVING LETTER OF CREDIT 🚢⚓️

- Normally used where shipments of the same goods are
made to the same importer.

- In view of it is revolving nature, the exporter should be of
established high integrity and trustworthiness before the
importer should consider agreeing to this request.

Back-to-back Latter of Credit.- Normally used in situation when a middleman purchases materials under an LC for resale t...
04/26/2019

Back-to-back Latter of Credit.

- Normally used in situation when a middleman purchases materials under an LC for resale to a final purchaser,

-The middleman does not wants to disclose it is source to the buyer foe fear that the buyer will go directly to the source for future purchases.

- There are two separate documentary credits involved in this type of transaction:

1) One prepare by the middleman bank in favour of the
original source
2) The second prepared by the buyers in favour of the
middleman

For more information about back-to-back documentary you can follow this link 🛂
https://youtu.be/4GuZKpWRO5s

REVOCABLE LATTER OF CREDIT..- It is can revoked without the consent of the exporter, meaning that it may be canceled o...
04/26/2019

REVOCABLE LATTER OF CREDIT..
- It is can revoked without the consent of the exporter,
meaning that it may be canceled or changed up to the
time the documents are presented.

- The buyer may wish to arrange for partial shipments and
have option to cancel the order and the LC if not satisfied
with the initial consignment.

TRANSFERABLE LATTER OF CREDIT..
- It can transferred by original beneficiary to another
party(second beneficiary)

- The original transferable LC must allow partial shipment
and the second beneficiary is not allowed to transfer the
LC further.

- Without LC their suppliers will not sell them the goods
they require. As solution, they need to use the LC that
they receive from their buyers to support their purchases
from their suppliers.

The diagram below shows the flow chart for the transferable LC.📑

04/26/2019

🏦Hi everyone, today we introduce about special type of documentary credit. 📑📑

The objective of special type of documentary credit is identify the different type of documentary credits. Besides, to discuss the usage and function of the different type of documentary credits. Lastly, to discuss the main differences between the different type of documentary credits.

I hope you enjoy with the special type of documentary credit. 😊

This is about Transferring Bank and Correspondent Bank.🏦 ______ 🏦
04/22/2019

This is about Transferring Bank and Correspondent Bank.🏦 ______ 🏦

Assalamualaikum and hai.Today i will continue the last part parties to documentary credits. 📑 1) Paying BankThat bank ar...
04/22/2019

Assalamualaikum and hai.
Today i will continue the last part parties to documentary credits. 📑

1) Paying Bank

That bank are nominated by the issuing bank, specifically to make payment to the beneficiary against stipulated documents which may or may not included a draft. which is bill of exchange.

2) Accepting Bank

This is provide the documents tendered are in conformity with credit. The accepting bank becomes primarily responsible for payment of the draft on its maturity.

3) Negotiating Bank

Presented to it under a credit and pays the beneficiary.
The bank that remits the documents from the seller (exporter) to the issuing bank in the buyer (importer) country.

4) Reimbursing Bank

Nominated by the issuing bank from which a negotiating bank may claim reimbursement for payment made under a documentary credit. Reimbursing bank may be in a different country from that of the issuing bank and negotiating bank.

Here, i will continue about parties to documentary credit.Confirming Bank - The bank that puts its confirmation to the ...
04/13/2019

Here, i will continue about parties to documentary credit.

Confirming Bank
- The bank that puts its confirmation to the credit issued by the issuing bank. By putting its confirmation, this bank also undertakes to pay the seller (exporter) against stipulated documents.

Beneficiary
- The seller or the exporter in whose favour a documentary credit is issued.
- the person named in the documentary credit to received payment, after presented the stipulated documents and complied with all the terms and conditions of the credit.

Nominated Bank
- The seller's country, nominated by the issuing bank, to pay, to accept, or to negotiate drafts drawn by the beneficiary against presentation of stipulated documents.

The parties in Documentary Credit is i) Applicant - The buyer or importer who initiates a credit transaction by ...
04/13/2019

The parties in Documentary Credit is

i) Applicant
- The buyer or importer who initiates a credit transaction
by applying to his bank to issue a documentary credit
in favour of a named seller (exporter) .

- Under the sales contract which he has concluded with
trading partner that provides for payment by way of
documentary credit, the buyer is obliged to request his
bank to issue a credit on his account.

ii) Issuing Bank
- Issuing bank also know as the opening bank.
- The bank that issues the documentary credit at the
request of its customer.
- The bank makes payment only after the exporter
presenting the stipulated document and on complying
with the terms and conditions of the credit.

iii) Advising Bank
- Normally the correspondent bank of the issuing bank in
seller country.
- It is an accepted banking practice for an issuing bank
to advise the credit to the seller through the
intermediary of an advising bank.

For details information this link can help..
https://www.advancedontrade.com/2017/03/letter-of-credit-basics-parties-to-letter-of-credit.html

04/13/2019

Assalamualaikum and hai..
Today i would like to share about
"Parties to Documentary Credit"

There are several parties involved in a documentary credit operations. It is important to know who they are and the role they play in documentary credit. Some of these parties are also known by more that one name.

This is "How Does a Documentary Credit Work"Stage 1 : Opening of the Documentary Credit i) Sign S&P agreem...
04/10/2019

This is "How Does a Documentary Credit Work"

Stage 1 : Opening of the Documentary Credit
i) Sign S&P agreement
ii) Request for a letter of credit
iii) Request to advice & possibly confirm the letter
of credit
iv) Advice of letter of credit

Stage 2 : Flow of Documents & Payments
v) Shipment of goods
vi) Exporter sends a document to Advising Bank
vii) Advising Bank make a payment to Exporter
viii) Advising Bank sends documents to Issuing
Bank
ix) Issuing Bank reimbursement to Advising Bank
x) Issuing Bank transfer the document to Importer
xi) Importer debit to account Issuing Bank

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