Fulfillment of letter of credit

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Performance under a Documentary Credit

Introduction

A documentary credit (DC) is an instrument which allows a buyer (the applicant) to issue an instruction to a bank (the issuing bank) to make payment to an exporter (the beneficiary) for goods and/or services, on the condition that the exporter presents specified documents to the issuing bank or an intermediary bank within a specified time period.

The documents must be in strict compliance with the documentary credit and must contain all the data and information that was required by the applicant when the credit was issued or confirmed. The function of the issuing bank is to inspect and assess the documents and to determine whether they fulfill the conditions and requirements of the documentary credit.

Operational Aspects

The documentary credit is a conditional and irrevocable contract between the applicant, the issuing bank and the beneficiary. In most jurisdictions, doctrine of independent guarantee applies in this type of contract, and the issuing bank’s obligation towards the beneficiary is thus independent of the seller-buyer relationship and creditworthiness of the party who ordered the credit.

The issuing bank must assess whether the documents presented by the beneficiary comply with the conditions of the letter of credit and only then can the issuing bank issue a form called “draft compliant declaration” to the applicant, informing him that the documents are compliant with the documentary credit and that the beneficiary may expect payment.

The issuing bank can also refuse to accept the documents presented by the beneficiary, in which case the beneficiary may be given a chance to cure the discrepancies. If the discrepancy cannot be cured within 5 days, the issuing bank must notify the beneficiary, the applicant and any other bank involved of this decision and decision must state the reasons why the documents were not accepted.

Conclusion

Performance under a documentary credit thus requires the issuing bank to assess the documents presented by the beneficiary to determine whether they are compliant with the conditions of the credit. Only then may the bank issue payment to the beneficiary and inform the applicant that the transaction is complete. In the case of non-compliance, the bank must inform the relevant parties and explain the reasons why the documents were not accepted. Ultimately, this multi-step process ensures that the buyer is protected while enabling exporter to receive prompt payment.

Letter of Credit (L/C) is a document issued by a commercial bank on behalf of the applicant (importer) in response to an application from the applicant. The bank promises to pay the beneficiary (exporter) on behalf of the applicant upon the presentation of certain proof that the applicant is required to fulfill their contractual obligations. The main purpose of a Letter of Credit is to reduce the risk of fraudulent or unethical behavior on the part of the exporter when selling goods to the importer.

When an importer applies for a Letter of Credit, the bank will examine the application for accuracy and authenticity. This is done to ensure that the importer will be able to fulfill the terms of the contract, such as payment terms and delivery location. Once the application is approved, the bank will issue the Letter of Credit. This document will contain the terms and conditions of the transaction, including terms of payment, delivery location, and other relevant details.

In order for the Letter of Credit to be successfully fulfilled, both the importer and the exporter must provide the necessary documentation. The documents must include a signed export/import contract, commercial invoice, bill of loading, and other related documents. Upon successful submission of these documents, the bank will issue payment to the exporter or release of funds to the importer.

It is important to note that the payment of funds through a Letter of Credit is legally binding. As a result, it is important to ensure that all documents required for the transaction are properly filled out and presented to the bank. Additionally, it is important that both parties uphold their contractual obligations to ensure smooth completion of the process. Failure to do so may result in late payment or full or partial non-payment of the contract.

关于信用证的履行

信用证(L/C)是商业银行代表申请人(进口商)根据申请人的申请发出的文件。银行承诺代表申请人在符合申请人有义务履行合同条款的一定条件下支付受益人(出口商)。信用证的主要目的是减少出口商在向进口商销售货物时存在欺诈或不道德行为的风险。

当进口商申请信用证时，银行会对申请进行准确性和真实性检查。这是为了确保进口商能够履行合同条款，如付款条件和交付地点。申请���理后，银行将开出信用证。这份文件将包括交易的条款和条件，包括付款条款，交付地点和其他相关细节。

为了成功完成信用证，进口商和出口商都必须提供必要的文件。文件必须包括署名的出口/进口合同、商业发票、提货单和其他相关文件。提交以上文件后，银行将向出口商付款或向进口商放款。

值得注意的是，通过信用证的付款是具有法律约束力的。因此，有必要确保所有必要的交易文件均填写完整并向银行提交。此外，双方必须履行合同义务，以确保顺利完成这个过程。否则可能导致付款迟延或完全或部分不当付款。