Information on letter of credit

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

01 June 2012
Dear Sir,

We are a trading firm in india and we are working on trading activities in third world country. One of the clause in their terms is

"we will issue a 100% Letter of Credit (LC) upfront for the total value of the shipment. UN DIVISIBLE/ UN IRDLC Irrevocable, Non Transferable Assignable,
The LC will be realized after the 2nd SGS at the unloading point"

Can you help us in understanding the above point.

RAMESH KUMAR VERMA

RAMESH KUMAR VERMA (Expert)
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01 June 2012 Letter of Credit L/c also known as Documentary Credit is a widely used term to make payment secure in domestic and international trade. The document is issued by a financial organization at the buyer request. Buyer also provide the necessary instructions in preparing the document.

The International Chamber of Commerce (ICC) in the Uniform Custom and Practice for Documentary Credit (UCPDC) defines L/C as:

"An arrangement, however named or described, whereby a bank (the Issuing bank) acting at the request and on the instructions of a customer (the Applicant) or on its own behalf :

Is to make a payment to or to the order third party ( the beneficiary ) or is to accept bills of exchange (drafts) drawn by the beneficiary.
Authorised another bank to effect such payments or to accept and pay such bills of exchange (draft).
Authorised another bank to negotiate against stipulated documents provided that the terms are complied with.

A key principle underlying letter of credit (L/C) is that banks deal only in documents and not in goods. The decision to pay under a letter of credit will be based entirely on whether the documents presented to the bank appear on their face to be in accordance with the terms and conditions of the letter of credit.

i am posting below mentioned link if u have any query please putup... eminent expert will assist you .

link is:

Letter of Credit L/c also known as Documentary Credit is a widely used term to make payment secure in domestic and international trade. The document is issued by a financial organization at the buyer request. Buyer also provide the necessary instructions in preparing the document.

The International Chamber of Commerce (ICC) in the Uniform Custom and Practice for Documentary Credit (UCPDC) defines L/C as:

"An arrangement, however named or described, whereby a bank (the Issuing bank) acting at the request and on the instructions of a customer (the Applicant) or on its own behalf :

Is to make a payment to or to the order third party ( the beneficiary ) or is to accept bills of exchange (drafts) drawn by the beneficiary.
Authorised another bank to effect such payments or to accept and pay such bills of exchange (draft).
Authorised another bank to negotiate against stipulated documents provided that the terms are complied with.

A key principle underlying letter of credit (L/C) is that banks deal only in documents and not in goods. The decision to pay under a letter of credit will be based entirely on whether the documents presented to the bank appear on their face to be in accordance with the terms and conditions of the letter of credit.
i m posting a link in this regards, if you have any query pls ask eminent expert will assist you.

Regards,

https://www.eximguru.com/exim/guides/export-finance/ch_3_letter_of_credit_lc.aspx

Querist : Anonymous

Querist : Anonymous (Querist)

06 June 2012 Mr. Ramesh Kumar Verma,

Thankyou very much for your detailed reply and thanks a million in providing me a link that will give substantial details about letter of credit.

However, i coudl not intrepret UN IRDLC IRREVOCABLE, NON TRANSFERABLE ASSIGNABLE. I could understand the terms irrecovable, non transferable and assignable. But can you please help me in understand UN IRDLC. End buy is raising UN IRDLC on my company. Does it safeguard the interest of my trading company... Could you please clarify