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Presented By:-
Rohit Kumar Sharma
MMM 4th sem.
Roll No. - 42
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A letter from a bank guaranteeing that a
buyer's payment to a seller will be received
on time and for the correct amount. In the
event that the buyer is unable to makepayment on the purchase, the bank will be
required to cover the full or remaining
amount of the purchase.
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The English name letter of credit derives
from the French word accreditation, a
power to do something, which in turn is
derivative of the Latin word accreditivus,meaning trust. This applies to any defense
relating to the underlying contract of sale.
This is as long as the seller performs their
duties to an extent that meets therequirements contained in the letter of
credit
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Financial Documents
Bill of exchange, Co-accepted draft
Commercial Documents
Invoice, Packing list
Shipping DocumentsTransport Document, Insurance Certificate, Commercial,
Official or Legal Documents
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Official Documents
License, Embassy legalization, Origin Certificate,Inspection Certificate, Phytosanitary certificate
Transport Documents
Bill of Lading (ocean or multi-modal or Charter party),Airway bill, Lorry/truck receipt, railway receipt, CMC
Other than Mate Receipt, Forwarder Cargo Receipt, Deliver
Challan...etc
Insurance documents
Insurance policy, or Certificate but not a cover note.
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All the charges for issuance of Letter of Credit,
negotiation of documents, reimbursements and
other charges like courier are to the account of
applicant or as per the terms and conditions ofthe Letter of credit. If the letter of credit is
silent on charges, then they are to the account
of the Applicant. The description of charges and
who would be bearing them would be indicated
in the field 71B in the Letter of Credit
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Advance payment (most secure for seller)
Documentary Credit (more secure for seller
as well as buyer)
Documentary collection (more secure forbuyer and to a certain extent to seller)
Direct payment (most secure for buyer)
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Revocable letter of credit
An irrevocable LC cannot be changed unless both the
buyer and seller agree.
Irrevocable letter of credit
a revocable LC changes to the LC can be made without the
consent of the beneficiary.
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Irrevocable unconfirmed letter of creditThe correspondent bank merely advisable the beneficiary
that the credit has been opened. It does not itself gives an
undertaking to pay, under no obligation to honour
documents presented to it by the beneficiary.
Irrevocable confirmed letter of credit
It gives the beneficiary a double assurance of payment,
since it represents both the undertaking of the Issuingbank and the undertaking of confirming bank.
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