What Should Import Enterprises Pay Attention To When Opening L/C?

　 　 Documentary credit Operational technological process The brief description is as follows:

1. The Buyer and the Seller stipulate in the trade contract that documentary credit shall be used for payment.

2. The Buyer shall notify the local bank (issuing bank) to open a letter of credit in favor of the Seller.

3. The issuing bank requests another bank to advise or confirm the credit.

4. The advising bank informs the seller that the letter of credit has been opened.

5. The seller shall ship the goods after receiving the letter of credit and ensuring that it can fulfill the conditions stipulated in the letter of credit.

6. The Seller shall submit the documents to the designated bank. The bank may be the issuing bank or the payment, acceptance or negotiation bank specified in the credit.

7. The bank reviews the documents according to the letter of credit. If the documents comply with the provisions of the letter of credit, the bank will pay, accept or negotiate according to the provisions of the letter of credit.

8. The bank other than the issuing bank sends the documents to the issuing bank.

9. The issuing bank shall repay the bank that has paid, accepted or negotiated in accordance with the letter of credit in the form agreed in advance after reviewing the documents.

10. The issuing bank shall present the documents after the buyer pays, and then the buyer shall take delivery against the documents.

　 　 letter of credit Opening of

1. Application for letter of credit

After the importer and exporter agree to pay by documentary letter of credit, the importer has the responsibility to open the letter of credit. The first thing is to fill in the L/C application form, which establishes the legal relationship between the applicant and the issuing bank. Therefore, the L/C application form is the most important document for L/C.

2. Requirements for issuing L/C

The requirements for letter of credit application are clearly stipulated in the Uniform Customs and Practice, and the importer must accurately inform the bank.

The instructions for opening the letter of credit must be complete and clear. The applicant must always remember that a documentary credit transaction is a document transaction, not a goods transaction. The banker is not a businessman, so the applicant cannot hope that the bank staff can fully understand the technical terms in each transaction. Even if he writes all the terms of the sales contract into the letter of credit, if the beneficiary really wants to cheat, he cannot be fully protected. This requires the bank and the applicant to work together and use common sense to avoid listing letters of credit that are burdensome to all parties. Banks should also discourage the use of letters of credit (sets of letters of credit) issued in the past when issuing letters of credit.

3. Security of L/C Issuance

After receiving the complete instructions from the applicant, the bank must immediately open the L/C according to the instructions. On the other hand, the bank has the right to require the applicant to hand over a certain amount of funds or use other forms of its property as a guarantee for the bank to implement its instructions.

According to the current regulations, the foreign exchange owned by Chinese localities, departments and enterprises must generally be deposited in Chinese banks. If some units need to import goods or technology under documentary credit, Chinese banks will freeze the funds in their accounts equal to the amount of the letter of credit as the deposit for opening the letter of credit.

If the applicant does not have an account number with the issuing bank, the issuing bank may require the applicant to deposit a sum of money equal to the total amount of the letter of credit in its bank before issuing the letter of credit. Such guarantee can be realized by mortgage or pledge (such as stock), but banks may also provide financing by using the goods used for transaction as guarantee. The issuing bank should first investigate the marketability of the goods. If the goods are easy to sell, the bank will provide a much higher amount of financing to the customer with the letter of credit than the unsalable goods.

4. Obligations and responsibilities of the applicant and the issuing bank

The applicant undertakes three main obligations to the issuing bank:

(1) The applicant must repay the loan paid to the beneficiary on behalf of the issuing bank who obtained the documents. Before his payment, the document as the document of title still belongs to the bank.

(2) If the document is consistent with the terms of the letter of credit and the applicant refuses to "redeem the document", the deposit or frozen funds in the account as security will belong to the bank.

(3) The applicant has the responsibility to provide the issuing bank with all the expenses required for issuing the letter of credit.

Responsibilities of the issuing bank to the applicant:

First of all, the issuing bank has the responsibility to issue the L/C as soon as it receives the detailed instructions for issuing the L/C.

Secondly, once the issuing bank accepts the application, it must act in strict accordance with the instructions of the applicant.

　 Notice of Letter of Credit

1. Responsibilities of the Advising Bank

In most cases, the letter of credit is not directly notified by the issuing bank to the beneficiary, but transmitted through its agent bank in the beneficiary's country or region, that is, the advising bank.

The biggest advantage of advising banks to notify beneficiaries is security. It is the duty of the advising bank to examine the apparent authenticity of the letter of credit it advises with reasonable care.

2. Delivery mode of letter of credit

A letter of credit may be sent by air mail, telegram or telex. SWIFT in Brussels uses leased lines to transmit information between banks in many countries. Most banks, including Chinese banks, have joined this organization.

3. Instructions for valid letters of credit

When the issuing bank instructs the advising bank to notify the credit or amendment of the credit by any effective means of telecommunication transmission, such telecommunication will be deemed as a valid credit document or amendment, and no mail confirmation is required. {page_break}

　　 Verification of beneficiary

After receiving the L/C, the beneficiary shall immediately conduct the following inspections:

1. Is the company name and address of both parties exactly the same as those printed on the invoice?

2. Does the payment guarantee mentioned in the letter of credit meet the requirements of the beneficiary?

3. Is the L/C payment correct? The total amount of the letter of credit shall be consistent with the contract and include all fees payable under the contract.

4. Whether the payment conditions meet the requirements? Unless for certain countries or certain importers, exporters usually require prompt payment. In the case of usance letter of credit, the time limit of the draft shall be the same as that specified in the contract. There is a kind of letter of credit that requires time draft but can be paid at sight. This kind of letter of credit is called "fake time letter of credit", which plays the same role on the beneficiary as sight letter of credit.

5. Whether the trade terms mentioned in the letter of credit comply with the original requirements of the beneficiary?

6. Whether the documents can be delivered to the bank within the validity period and shipping document deadline?

7. Can you provide the required shipping documents?

8. Are the provisions on insurance consistent with the terms of the sales contract?

-Risks to be insured. The beneficiary shall contact the People's Insurance Company of China to decide whether to accept the applicant's request. Any expenses exceeding the insurance coverage specified in the sales contract shall be borne by the applicant.

-Amount insured. Most letters of credit require insurance at 110% of the invoice value CIF.

9. Is the description of goods (including free items), quantity and other items written correctly?

If any omission or error is found during the inspection according to the above items, a decision shall be made immediately on the following points and necessary measures shall be taken:

-Can you change the plan or document content to cooperate accordingly?

-Should the buyer be required to amend the letter of credit? Which party should pay the amendment fee?

If you have any questions, you can consult our contact bank or advising bank. But please keep in mind that only when the applicant, the beneficiary and the relevant bank jointly agree, can they decide to make amendments.

　 L/C perform

1. Submission of documents

In documentary credit business, the submission of documents plays a very important role, because it is the key to the final settlement of letters of credit. Whether the beneficiary can get the payment after presenting the documents to the bank depends to a large extent on whether the L/C has been opened and whether the documents are ready.

2. Time limit for presentation

The time limit for submitting documents is determined by the following three factors:

(1) The expiry date of the letter of credit;

(2) The date of presentation specified after the date of shipment;

(3) The bank has no obligation to accept the presentation of documents outside its business hours.

The words "to", "to", "until", "since" and similar words in any date or period of credit relating to shipment can be understood to include the said date. The word "after" is understood to exclude the said date.

"The first half of the month" and "the second half of the month" are understood to mean from the first to the fifteenth day of the month and from the sixteenth to the last day of the month, including the first and last two days.

"The beginning of a month", "the middle of a month" or "the end of a month" are understood to mean the first to the tenth, the eleventh to the twentieth, and the twenty-first to the last day of the month, both of which are included.

3. Restrictions on the place of presentation

All credits must specify a place of presentation for payment and acceptance, or in the case of negotiation credits, a place of presentation and negotiation, except for free negotiation credits.

Like the time limit for presentation of documents, the place of expiry of a letter of credit will also affect the situation of the beneficiary. Sometimes it happens that the issuing bank places the expiry place of the letter of credit in its own country or its own business counter instead of the beneficiary's country, which is extremely unfavorable to the beneficiary, because he must ensure that documents are presented before the business counter of the issuing bank within the validity period of the letter of credit. {page_break}

　 Bank approval document

After the beneficiary presents the documents to the bank, the bank has the obligation to carefully examine the documents to ensure that they appear to meet the requirements of the letter of credit and are consistent with each other.

1. Document review criteria

A bank must examine all documents of a letter of credit with reasonable care to determine whether they are in apparent conformity with the terms of the letter of credit. The apparent conformity of documents with the terms of the letter of credit should be determined by the international standard banking practices reflected in these provisions. If the documents are not consistent with each other on the surface, it shall be deemed that they are not consistent with the terms of the certificate on the surface.

The meaning of the above word "its surface" is that the bank does not need to ask in person whether the document is false, whether the goods shipped are false, whether the goods shipped are actually shipped, and whether the document is invalid after issuance. Unless the bank knows that the fraud is committed, these actual situations have nothing to do with the bank. Thus, if the beneficiary makes the appearance of credit

Fake documents conforming to the stipulations of the certificate can also obtain payment for goods. However, if the beneficiary has shipped the specified goods in an appropriate manner and fails to meet some conditions specified in the letter of credit when preparing the documents, the bank will refuse to accept the documents and the recipient will never receive payment for the goods. The bank will not examine documents not specified in the letter of credit. If the bank receives such documents, it will return them to the presenter or hand them over and will not be responsible for them.

2. Disclaimer of document validity

The Bank shall not be responsible for the form, completeness, accuracy, authenticity or legal effect of any document, or the general and/or special conditions specified and attached in the document. The bank shall not be responsible for the description, quantity, weight, quality, condition, packaging, delivery, amount or existence of the goods represented by the documents, as well as the good faith, behavior and/or negligence, solvency, behavior or credit status of the consignor, carrier, freight forwarder, consignee, or cargo insurer and any other person.

3. Period of document review

How long does the bank need to review the documents submitted by the seller and notify the seller whether the documents are complete? Article 13 (b) of the Uniform Customs clearly stipulates that the issuing bank, the confirming bank (if confirmed) or the designated bank on their behalf shall each have a reasonable time, that is, not more than seven banking days after receipt of the documents, to examine the documents, decide whether to accept or reject the documents, and notify the party from whom the documents were received.

4. Inconsistent documents and notices

If the issuing bank authorizes another bank to make payment, bear deferred payment liability, accept bills of exchange or negotiate against documents that appear to conform to the terms of the letter of credit, the issuing bank and the confirming bank (if confirmed) are obliged to: (1) accept documents; (2) Repayment shall be made to the designated bank that has paid, assumed deferred payment liability, accepted bills of exchange or negotiated.