Documentary Credit自考网52_z_k_w.c o m
When an exporter has an order for his goods, he also has a problem. He wants to be paid for his goods as soon as possible, but he doesn`t want to dispatch the goods to some distant land without any assurance that he will obtain the payment. In the domestic market this is not such a difficult problem. But great care must be taken when little known about a customer who lives thousands of miles away. If for example, the customer is unwilling or unable to pay the goods once they have been shipped, an exporter would spend a good deal of time and money trying to recoup his loss. By the same token, the customer does not want to pay any money until he has the goods or is sure that they are en route to him.http://www.hbkxw.com
Documentary credit is a method of payment, which can ensure that an exporter gets his money when he dispatches his goods not when they are received by the customer. It also ensures that the customer is assured of title to the goods before he pays for them. The problems of the exporter and his customer are solved by the intervention of a third party. The third party is a bank.自考网52_z_k_w.c o m
A documentary credit is merely a credit opened with a bank in the exporter`s favor. The word "documentary" indicates that the whole negotiation is linked with the shipping documents the invoices, bill of lading, insurance certificates etc.自考网52_z_k_w.c o m
The "Uniform Customs and Practice for Documentary Credits"(UCP) published by the International Chamber of Commerce contains detailed provisions dealing with the operation of documentary credit. It has been accepted and adopted by banks and banking associations throughout the world. It has brought the UCP into line with established and foreseeable practices regarding containerized transport and trade facilitation, the use of electronic data processing and the development of new types of credit like deferred payments and stand-by credits.武汉自考网52 z k w.c o m
As the documentary credit is operated through banks, therefore, it has certain advantages to both the seller and buyer: For the seller, it is a bank undertaking to which he can look for payment; for the buyer, it is a conditional undertaking where payment can been made on his behalf only against the documents which will transfer to him the title to the goods.http://www.hbkxw.com
For practical purpose, assume that a local buyer agrees to buy goods form an overseas seller and under the sales contract, and payment is to be made by banker`s letter of credit. To fulfill the contract, the buyer arranges with his bank to open a letter of credit for his account in favour of the overseas seller. The buyer is not required to pay for the goods until the arrival of the relevant shipping documents. The seller, on receipt of a letter of credit, will, of course after double check of the credit, have to prepare shipment of the contract goods within the delivery date. Once shipment of the goods is completed, the seller will be able to present all the documents to the negotiating bank for payment under the terms of the credit. The negotiating bank should ensure that the seller`s documents are drawn up in accordance with the credit terms before such documents are paid for and forwarded to the issuing bank for final reimbursement. When the issuing bank receives the negotiated documents it will make up a debit note showing the total cost due and request payment from the buyer. Once the buyer accepts that the documents are in compliance with the terms of the letter of credit he must settle the bill in order to obtain the shipping documents so that he able to take delivery of the goods from the carrier or his agent. On settlement of the bill, the whole
