Unit 7 Letter of Credit

Unit7LetterofCredit7.1Questions1.What’sthedefinitionofanL/C?WhatisthemaindifferencebetweenpaymentbyL/Candpaymentbycollection?2.AreyouclearaboutthepartiesandcontentsofanL/C?3.CanyoutelltheprocedureofL/C?4.DoyouknowthereasonsforrushinganL/C?5.WhatshouldthesellerwriteinhisfirstlettertourgetheestablishmentofL/C?6.WhatshouldthesellerwriteinhissecondlettertourgetheestablishmentofL/Cifhisfirstletterbringsnoreply?7.Sincewedobusinesswithourbuyers,ifweneedtoaskforamendmentoftheL/C,canthebuyerandsellermakeadiscussionwithouttheissuingbankdirectly?Howcanwedo?8.UnderwhatconditionisanextensionofL/Cnecessary?contract4importerapplicantexporterbeneficiaryissuingbankadvisingbank1235678910Aletterofcreditisthewrittenpromiseofabankthatactsattherequestandontheinstructionsoftheapplicantandundertakestopaythebeneficiarytheamountspecifiedinthecredit,providedthatthetermsandconditionsofthecreditareobservedbythebeneficiary.4.DoyouknowthereasonsforrushinganL/C?∳Toremind,inadvance,theimportertoopenL/Cinaccordancewiththetimeprovidedinthecontract;∳TourgetheimportertorushestablishmentofL/C,ashehasexceededthetimelimit.5.WhatshouldthesellerwriteinhisfirstlettertourgetheestablishmentofL/C?∳InthefirstletterofurgingestablishmentofL/C,thesellershouldfirststatethefactthatthegoodsorderedarereadyforshipmentbuttherelevantL/Chasnotyetbeenreceivedandthenexpresshishopethat,uponreceiptofthisletter,thebuyerwillopentheL/Cimmediately.6.WhatshouldthesellerwriteinhissecondlettertourgetheestablishmentofL/Cifhisfirstletterbringsnoreply?∳Ifthefirstletterbringsnoreply,thesellershouldsendoutasecondonetourgethebuyertoopentheL/Cimmediately.Thesecondletter,thoughstillrestrained,manyexpressdisappointmentandsurprise.7.Sincewedobusinesswithourbuyers,ifweneedtoaskforamendmentoftheL/C,canthebuyerandsellermakeadiscussionwithouttheissuingbankdirectly?Howcanwedo?8.UnderwhatconditionisanextensionofL/Cnecessary?7.2usefulexpressionsDoctrineofstrictcomplianceInstructionObservedPackingloanDepositforsecurityIntegrityReimbursementCommissionchargesFinancialaccommodationAppearontheirfacetobeinconformitywithFraudDebtor—creditorBonafideholdersDraftatmaturityDiscrepancyApplicantIssuingbankAdvisingbankBeneficiaryNegotiatingbankNominatorConfirmingbankentrustmentRecourseDocumentarycredit–cleancreditRevocable—irrevocabledocumentarycreditConfirmed–unconfirmedSight—timeusancecredit7.3LettersconcerningL/CmainlyincludethefollowingSeller’surgingestablishmentofL/Candbuyer’sgivingreplySeller’saskingforamendmenttoL/Candbuyer’sgivingreply,orviceversaSeller’srequestingextensionofL/Candbuyer’sgivingreply,orviceversa7.3.1UrgingestablishofL/CDearSirWerefertoyourorderfor500dozenpairsofVivajeansandoursalesconfirmationNo.341.Wewouldliketoremindyouthatthedeliverydateisapproachingandwehavenotyetreceivedthecoveringletterofcredit.WewouldbegratefulifyouwouldexpediteestablishmentoftheL/Csothatwecanshiptheorderontime.Inordertoavoidanyfurtherdelay,pleasemakesurethattheL/Cinstructionsareinpreciseaccordancewiththetermsofthecontract.Welookforwardtoreceivingyourresponseatanearlydate.YoursSincerely.Dearsirs,withreferencetooursalesCntractNo123covering2000dozenofthermosflask,weregrettoinformyouthatwehavenotreceivedyourrelevantL/C,thoughyoupromisedtoestablishtheL/Cimmediatelyafterthesigningofthecontract.Accordingtothecontractstipulation,shipmentistobeeffectedbeforeNovember10,2003.pleasenotethatifyourLCcannotreachuswithinoneweek,weareafraidthatdeliverywillhavetobepostponed.PleasegivethismatteryourimmediateattentionandexpeditethecoveringL/Csothatwecaneffectshipmentwithoutanydelay.WehopetoreceiveyourL/Csoon.Yourssincerely,\LucyLeeDearMs.See,ThankyouforyourletterofOctober15,2003.WeareverysorrytolearnthatyouhavenotreceivedtheL/CunderyourSalesContractNo.123.Mr.SmithhasgonetoattendtheGuangzhouFairandI,AndrewTunik,hiscolleague,havecheckedthismatterupwithABCBank,Osaka,Japan,theissuingbank,toseewhetherthecoveringL/Chasbeenopened.IamverypleasedtotellyouthattheL/Cinquestionhasbeenopenedandwillbesenttotheadvisingbank,BankofChina,DalianBranchbyteletransmissiontoday,whoIbelievewilladviseyouoftheL/Ctomorrow.UponreceiptofourL/C,pleasedoyourutmosttogetallthegoodsreadywithinthetimelimit,booktheshippingspaceonthevessel“WhiteCloud”v.088andeffectdeliveryintime.UsefulsentencesforrushingL/C1.Itwouldbeadvisableforyoutoestablishthecoveringletterofcreditasearlyaspossiblesoastoenableustoarrangeshipmentinduetime.2.Weareunabletoeffectshipmentaccordingtothepriceandothertermsoriginallyagreeduponowingtothedelayofyourletterofcredit,andthereforetheresponsibilityforanylossarisingsubsequentlywillwhollyrestwithyou.3.Wewishtodrawyourattentiontothefactthatthegoodshavebeenreadyforshipmentforalongtimeandthecoveringletterofcredit,duetoarriveherebeforemarch15th,19…,hasnotbeenreceiveduptonow.Pleaseletusknowthereasonforthedelay.4.Asyouhavefailedtoestablishtheletterofcreditintime,weregretbeingunabletoeffectshipmentwithinthestipulatedtimelimit.5.Toourdisappointment,wehavenotyetreceivedtherequiredletterofcredituptothepresent.Pleasegiveth