Letter of Credit Forum

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Tue, 09/18/2007 - 04:48 — saakshi
HOW DO WE CALCULATE THE DATES?

Hi,

I always get confused with the different dates we have in the letter of credit and the use.

I wanna know how do we come to know when is the last day to get payments?

If L/C is for usance 60 days then 60 days from which date....60 days from B/L date or 60 days from the date of negotiation.......

 Also explain the various fundamentals i need to clear before gettin into these details.

Kindly advise.

Dear Sir

In case of L/c payable at 120 days available by Negotation or available by acceptance and avaialable by deffered payment the banks make payment to the exporter in advance against presentation of clean documents

I would like to know if the interset rate for each i.e. by negotiation by acceptance and by deffered payment is the same or different. and which will have the lowest interst rate form the view of the exporter. 

For me they are similar, the second does not need a draft, in some countries charged with an expensive stamp. I don't know if the bank market in your country will discount a deferred payment engagement of a bank i/o a draft. Here in Italy it is difficult. But a nominated bank may be authorized to prepay or purchase such deferred engagement as per art 12 b-ucp600

ciao

Pan

Dear Sir

 I would like to know If the letter of credit is opend Available by deffered payment 120 days from bill of lading date, the Exporter will receive the payment only after 120 days from bill of lading date or is there a way the exporter can get payment early as in the case of Available by Acceptance.

Regards,

Neville D'costa

Dear Neville Dcosta,

Regarding your queries on types of  letter of credit (LC), I wish to respond as follows:

1. Is it possible for the bank to open an LC available by negotiation in case of usance LC ?

It is possible but the question is whether the beneficiary or his negotiating bank accepts such a strange type of LC.

Normally a usance LC can be issued in the form of an acceptance LC or in the form of a deferred payment LC. Regarding the difference between these two types of LC, please refer to my responses to your query on LC availability posted on this forum.

To evidence the possibilty,  I ‘d like to quote hereunder some swift fields of  an LC which my bank as an advising/negotiating bank has received from  Bank A in Korea:

= quote =

 41D:    Available with …. By ……

            ANY BANK BY NEGOTIATION

42C:     Drafts at ….

            BENEFICIARY DRAFTS 90 DAYS AFTER B/L DATE

42A:     Drawee

            BANK B

53A:    Reimbursing bank                

            BANK B

……..

78:     Instructions to the   Paying/Accepting/Negotiating Bank

+ BENEFICIARY TIME DRAFT SHALL BE NEGOTIATED ON AT SIGHT BASIS AND SHOULD BE FORWARDED TO THE DRAWEE BANK (BANK B).

+ ALL DOCUMENTS MUST BE FORWARDED DIRECTLY TO US (BANK  A) IN ONE LOT BY COURIER SERVICES

= unquote =

By appearance, it looks like an acceptance LC as it requires time drafts (90 days after B/L date). However, it is in fact a sight LC as it allows the beneficiary to negotiate the time drafts on at sight basis.

According to Mr. Abdulkader Bazara’s explanation for  this type of LC, the request starts by the applicant who wants to buy on sight basis but wants the issuing bank to finance the import. But the issuing bank for some reason or other wants the financing to be executed by the nominated bank but under the protection of the issuing bank. 

 2. Is it possible to have LC available by negotiation restricted to a particular bank ?

Yes, it is. An  LC may be stipulated available by negotiation with any bank or  with a named nominated bank. An LC available with any bank is called a freely negotiable LC, whereas nn LC available by negotiation with a named nominated bank is called a restricted (negotiation) LC. Negotiation under a confirmed LC is normally restricted to the confirming bank. In reality, if not requested by the export financing bank, the exporter prefers  a freely negotiable LC  to a restricted LC as with a freely negotiable LC,  the exporter can shop around to find out  the best negotiating bank which can negotiate the documents at the best price.  Of course, there are still other reasons.  

3.      LC availability

Regarding the LC availability, you may refer to my responses to your query of the same name on www.letterofcreditforum.com . Here I ‘d like to tell you by whom the availability of an LC is decided.

Normally the applicant will indicate in his application for openning LC the type of LC, i.e the LC is available by negotiation of drafts at sight, by sight payment, by acceptance of time drafts or by deferred payment undertaking.  In the event the availabilty of LC is not indicated in the application, normally the issuing bank will refer to the applicant’s opinion to help him decide which type of LC is appropriate.

What’s more. If it is a sight LC, the exporter wishes to receive a negotiation LC rather than a sight payment LC  as this type of LC may help him obtain the payment in advance right after shipment by negotiation  of the drafts and/or documents with his bank.

Similarly, If it is a usance LC,  the exporter wishes to receive an acceptance LC rather than a deferred payment LC  as this type of LC may help him obtain the payment in advance  by discounting the accepted drafts at his bank or on forfaiting markets. 

The importer who is experienced in the market, for some reason or other,  wishes to open LC available by sight payment  rather than LC available by negotiation, and similarly LC available by deferred payment rather than LC available by acceptance..

Best regards,  

Nguyen Huu Duc