SAMPLE LETTER OF CREDIT

 

 BELOW IS THE STANDARD FORMAT OF LETTER OF CREDIT

Swift Input  : FIN 700 Issue Of A Documentary Credit

Sender   :

Receiver :

---------------------------- Message Text --------------------------- 27: Sequence Of Total

1/1

40A: Form Of Documentary Credit IRREVOCABLE

 20: Documentary Credit Number

 

31C: Date Of Issue

40E: Applicable Rules

   UCP LATEST VERSION

31D: Date And Place Of Expiry

50: Applicant

 

59: Beneficiary

 

32B: Currency Code ,Amount

 

39A: Percentage Credit Amount Tolerance

41A: Available With...By...

 

43P: Partial Shipments

 

43T: Transhipment

 

44E: Port Of Loading/Airport Of

 

44F: Port Of Discharge/Airport Of Destination

 

44C: Latest Date Of Shipment

45A: Description of Goods and/or Services

 

46A: Documents Required

 

47A: Additional Conditions

+ L/C IS AVAILABLE BY PAYMENT AT SIGHT.

 

+ THIRD PARTY DOCUMENTS ARE ACCEPTABLE EXCEPT INVOICE AND PACKING LIST.

.

+ NEGOTIATION UNDER RESERVE(S) AND/OR BANK GUARANTEE PROHIBITED .

+ DOCUMENTS TO BE SENT BY SPECIAL COURIER SERVICES IN ONE LOT

(ON BENEF. ACCOUNT) TO OUR ADDRESS:

.

71D: Charges

ALL CHARGES AND COMMISSIONS

OUTSIDE FRANCE ARE ON

BENEFICIARIES' ACCOUNT

 48: Period for Presentation in Days

21FROM B/L DATE WITHIN L/C VALIDITY

49: Confirmation Instructions WITHOUT

78: Instructions to the Paying/Accepting/Negotiating Bank

WE UNDERTAKE TO COVER THE PRESENTING/NEGOTIATING BANK AS PER THEIR INSTRUCTIONS AFTER RECEIPT OF THE COMPLYING PRESENTATION.

.

NEGOTIATING BANK MUST CERTIFY ON THEIR SCHEDULE THAT ALL CHARGES OF ADVISING BANK HAVE BEEN SETTLED .

WE CONFIRM THAT L/C IS SUBJECT TO UCP 600

57A: 'Advise Through' Bank

72Z: Sender To Receiver Information

PLEASE ACKNOWLEDGE RECEIPT BY

RETURN SWIFT

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 Related Topics

What is letter of credit ?

 

Is RBI – International Trade Settlement in Indian Rupees beneficial?

Recent notification issued by Reserve Bank of India for settlement of International trade in Indian Rupees to promote growth in global trade with emphasis on exports from India and to support the increasing interest of global trading community in INR.

But we need to understand how much it will be helpful in making Indian currency stronger vis-à-vis other currencies mainly US Dollars. At this moment it is very difficult to predict its impact on currency and growth of international trade. There are certain issues related to ii like.

• Opening of Vostro account by Indian Authorized Dealer Bank in other country with their counterpart.

• Other countries willingness to trade in Indian Rupees.

• Would the big economies like US, Europe and China will accept our proposal for such arrangement?

• Will it be helpful in covering balance of payment of Indian government?

• Will this plan be limited to the under developed countries?

Understanding all these factors, it seems that development countries with big economy where our trade volume is very large, will not be interested in such arrangements. If we consider China, India has very big gap in Export and Import volume and value. Further US and European countries will not like such arrangements as they have to take care of their own currencies.

Now coming to under developed countries, they might be interested in such arrangements as they are dependent on more imports from India and instability of their own currencies.

So, in coming years we could be able to judge in better way the impact of such arrangement.

LETTER OF CREDIT IN EXPORT AND IMPORT

Letters of credit is often also called as Documentary Credits. So there is no difference in letter of credit and Documentary credit. Both are the same things.

Letter of Credit is issued by Buyer’s Bank (i.e. Importer’s Bank) on behalf of Buyer or Importer to the Seller’s Bank (i.e. Exporter’s Bank) and Buyer’s bank undertakes to pay for the goods/ services to the Exporter/ Beneficiary upon submission of clean documents as per terms and conditions of Letter of Credit.

Letter of Credit is widely used as payment instrument for Export and Import or International Trade. This helps us Exporter to enter in business with a new client. In this exporter gets a guarantee of payment from buyer’s bank as per terms and conditions laid down in the letter of credit.

PARTIES WHICH ARE INVOLVED TO A LETTER OF CREDIT

(i)     Applicant / Opener – Applicant is the buyer of goods or services i.e. Importer who request his bank of open a letter of credit in his behalf.

(ii)    Issuing Bank – The bank who opens the letter of credit on behalf of applicant and undertakes to execute payment as per terms and conditions of letter of credit.

(iii)    Beneficiary – Beneficiary is the seller of goods or services i.e. exporter in whose favor letter of credit is opened and he gets the payment on presentation of complying documents as terms and conditions of L/c

(iv)    Advising Bank – Advising bank is bank who advises the LC and confirms its authenticity of beneficiary. Generally this bank is located in the country of beneficiary.

(v)     Confirming Bank – Upon authorization of the L/c issuing bank an additional bank can add its guarantee to the Letter of Credit and undertakes responsibility for payment/ acceptance. Generally this bank operates in the country of beneficiary. For exporter point of view it is beneficial to have confirmation added in the letter of credit.

(vi)    Nominated Bank –  It is bank which is located in the country of beneficiary and authorized by Issuing bank to receive, negotiate the documents and make payment to the exporter/ beneficiary under the issued Letter of credit.

(vii)   Reimbursing Bank – Reimbursing bank normally have the Nostro Account of Letter of Credit Issuing Bank and from this account payment is made to the nominated bank for further payment transfer to exporter or beneficiary. They are authorized to honour the payment claim made under the letter of credit by paying, accepting by negotiating bank.