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International Settlement Lecturer : Ms. Nông Thị Như Mai WORK ASSIGNMENT NAME PRESENT NGUYỄN THỊ THANH NGA CHAPTER 1 NGUYỄN THANH VY CHAPTER 2 TÔ THÚY THÚY CHAPTER 3 NGUYỄN THỤC NHI CHAPTER 4 CLC_13DTM4 – GROUP 4 Page 1 International Settlement Lecturer : Ms. Nông Thị Như Mai Contents Chapter 1 1.1. THEORY BASES............................................................................................8 Documentary Credit..............................................................................................................8 1.1.1. Definition..........................................................................................................................8 1.1.2. Parties involved.............................................................................................................8 1.1.3. Legal bases....................................................................................................................9 1.1.4. Payment process with Documentary Credit................................................................10 1.1.5. Types of Letter of Credit............................................................................................12 1.1.6. Documents Involved....................................................................................................17 1.1.7. Advantage and Disadvantage of Documentary Credit to both of parties....................18 1.2. Definition of Risk and Risks in Letter of Credit.................................................................20 1.2.1. Definition:...................................................................................................................20 1.2.2. Types of the risk of the Documentary credit...............................................................21 1.2.2.1. Risk to the Beneficiary:...........................................................................................21 1.2.2.2. Risk of the importer.................................................................................................22 1.2.2.3. Risk to the advising banks:......................................................................................22 1.2.2.4. Risks for the confirming bank:................................................................................22 1.2.2.5. Risks to the issuing bank.........................................................................................23 1.2.2.6. Political risk.............................................................................................................23 1.2.2.7. Technical risk...........................................................................................................24 1.2.2.8. Fraud risk (Business Ethics risk).............................................................................24 CLC_13DTM4 – GROUP 4 Page 2 International Settlement Chapter 2 2.1. Lecturer : Ms. Nông Thị Như Mai INTRODUCTION TO VIETNAM PAIHO LIMITED.......................26 Overview Of Vietnam Paiho Limited.................................................................................26 2.1.1. Company History............................................................................................................26 2.1.2. Developing progress.......................................................................................................27 2.2. Management Profiles..........................................................................................................29 2.3. Main Products.....................................................................................................................31 2.4. Business activities of Vietnam Paiho Limited in 2012-2014.............................................32 2.4.1. Export - Import activities................................................................................................32 2.4.2. Import activities for processing......................................................................................34 2.4.3. Processing export activities.............................................................................................36 2.5. Result of business activities of Vietnam Paiho Limited.....................................................39 Chapter 3 THE RIGHTS OF UTILIZING INTERNATIONAL SETTLEMENT METHODS . THE DIFFICULTIES AND RISKS OF FIRM IN IMPORT, EXPORT ACTIVITIES BY USING DOCUMENTARY CREDIT METHOD............................42 3.1. The rights of using International Settlement methods by firm in Import and Export activities during 3 years ( 2012 -2014)..........................................................................................42 3.1.1. For import activity..........................................................................................................42 3.1.2. For export activity...........................................................................................................45 3.1.3. Evaluate about this actual using......................................................................................47 3.2. The rights of using Documentary Credit method in export activities in firm in 2014.......48 3.2.1. The practical amount of lots utilize Documentary Credit method in import and export activities in firm in 2014............................................................................................................49 3.2.1.1. The amount of import lots.......................................................................................49 3.2.1.2. The amount of export lots........................................................................................50 3.2.2. The actual document...................................................................................................50 CLC_13DTM4 – GROUP 4 Page 3 International Settlement Lecturer : Ms. Nông Thị Như Mai 3.2.2.1. Actual Documentary Credit process in Export activity in firm...............................50 3.2.2.2. Documents involved................................................................................................52 3.2.2.3. Reason for requiring these trade documents...........................................................54 3.2.2.3.1. Packing list...............................................................................................................54 3.2.2.3.2. Commercial invoice.................................................................................................55 3.2.2.3.3. Bill of lading............................................................................................................59 3.2.2.3.4. Certificate of Origin.................................................................................................61 3.3. The actual difficulties and risks facing by firm when using Documentary Credit method in export activity................................................................................................................................63 Chapter 4 THE PREVENTIVE MEASURES AND REDUCTION THE RISKS IN LETTER OF CREDIT METHOD IN FIRM .............................................................68 4.1. For Export activity in firm...............................................................................................68 4.1.1. The preventive measures and reduction the risks from wasting time for following and correcting a conditions regulated in L/C:.......................................................................68 4.1.2. The preventive measures and reduction the risks from a fake or incorrect L/C document:...............................................................................................................................69 4.1.3. L/C: The preventive measures and reduction the risks due to high cost for confirming 69 4.1.4. The preventive measures and reduction the risks from transporting good :............70 4.1.5. The preventive measures and reduction the risks due to the refusal using L/C of importer:.................................................................................................................................71 4.1.6. The preventive measures and reduction the risks due to document’s mistake and wrong importer:......................................................................................................................71 4.1.7. The preventive measures and reduction the risks for delivering the good late and don’t follow the regulation in L/C of exporter:......................................................................72 4.1.8. The preventive measures and reduction the risks due to mistake in the process of making documents:.................................................................................................................73 CLC_13DTM4 – GROUP 4 Page 4 International Settlement Lecturer : Ms. Nông Thị Như Mai 4.1.9. The preventive measures and reduction the risks due to the export present a documents which is inconsistent with the L / C:....................................................................73 4.1.10. The preventive measures and reduction the risks due to the Currency fluctuation: 74 A key factor in operating in export markets is the currency exchange rate movements. The nature of the worldwide currency markets means that predicting the future is almost impossible, you can't do much to influence currency exchange rates....................................74 4.1.11. The preventive measures and reduction the risks for breach of ‘strict compliance”: 75 4.1.12. The preventive measures and reduction the risks due to the conflict between clauses of L/C and credit:.......................................................................................................75 4.1.13. The preventive measures and reduction the risks due to the objective reasons:.....76 4.1.14. The preventive measures and reduction the risks from lack of the information about the issuing bank:.....................................................................................................................77 4.1.15. Get benefit through buying an exporter credit insurance:.......................................77 4.1.16. The preventive measures and reduction the risks due to deficiency of information and understanding about partners:..........................................................................................78 Content of figures Figure 1 : Payment process with Documentary Credit...................................................................8 Figure 2 : Management Structure.................................................................................................23 Figure 3 : Export department organization...................................................................................24 Figure 4 : The export - import value from 2012 - 2014...............................................................28 Figure 5 : Revenue from processing export activities from 2012 - 2014.....................................33 Figure 6 : The growth of revenue from 2012-2014......................................................................35 Figure 7 : Proportion of International Settlement methods in import activity in 2012................37 Figure 8 : Proportion of International Settlement methods in import activity in 2013................38 Figure 9 : Proportion of International Settlement methods in import activity in 2014................38 CLC_13DTM4 – GROUP 4 Page 5 International Settlement Lecturer : Ms. Nông Thị Như Mai Figure 10 : Proportion of International Settlement methods in export activity in 2012...............40 Figure 11 : Proportion of International Settlement methods in export activity in 2013...............41 Figure 12 : Proportion of International Settlement methods in export activity in 2014...............42 Figure 13 : Actual Documentary Credit process in Export activity.............................................45 Content of tables Table 1 : Board of Director...........................................................................................................25 Table 2 : Total export - import value from 2012 - 2014..............................................................28 Table 3 : The value of import by goods from 2012-2014............................................................30 Table 4 : The value of import by market from 2012-2014...........................................................31 Table 5 : The value of export by market from 2012-2014............................................................32 Table 6 : The value of export by goods from 2012-2014.............................................................33 Table 7 : Income statement from 2012 to 2014 ( in VND)...........................................................35 Table 8 : The growth of revenue from 2012-2014........................................................................36 Table 9 : Value of each settlement method using by firm in import activity 2012 -2014............37 Table 10 : Value of each settlement method using by firm in export activity 2012 -2014..........40 Table 11 : The amount of import lots..........................................................................................45 Table 12 : The amount of export lots............................................................................................46 CLC_13DTM4 – GROUP 4 Page 6 International Settlement Chapter 1 1.1. Lecturer : Ms. Nông Thị Như Mai THEORY BASES Documentary Credit 1.1.1. Definition A documentary Letter of Credit (LC) is a written undertaking given by a bank on behalf of an Importer to pay the Exporter a given sum of money within a specified time, providing that the Exporter presents documents which comply with the terms laid down in the Letter of Credit  Significance of a credit :  It is the legal basis for the Bank decided to pay, accept or discount bills of exchange  As a basis for the buyer pays for the Bank or not, a credit must be made by telegram, telex, SWIFT  Payment basis of a credit is documents  Natural of a credit  L/C is formed on the basis of the sales contract  It will be independent with sales contract once is it formed 1.1.2. Parties involved  Applicant: buyer, the import of goods, people for opening letters of credit  Opening bank/Issuing bank: service for importers , in the importing country, extend credit to the importer  It is selected after the agreement of 2 parties the importer and exporter and will be presented in commercial contract.  Without the previous regulations, importers have the right to choose any bank ( article 2, UCP 600)  Beneficiary: the seller, the exporter, means the party in whose favor a credit is issued (article 2, UCP600)  Advising bank: service for exporters, advises to the exporter the credit has been opened at the request of the issuing bank , in the beneficiary’s country and is often a correspondent bank of the issuing bank  Confirming bank: CLC_13DTM4 – GROUP 4 Page 7 International Settlement Lecturer : Ms. Nông Thị Như Mai  Confirming bank is issuing bank is unable to make payment.  Be able to be a advising bank or other banks by the exporter request.  Confirmation means a definite undertaking of the confirming bank, in addition to that of the issuing bank, to honor or negotiate a complying presentation. ( Article UCP 600)  Paying bank: be able to be the issuing bank, a correspondent bank of the issuing bank, or any bank by the issuing bank request that will payments or drafts for exporters  Negotiating bank : the bank that purchase draft and /or documents under a complying present either by making an advance or agreeing to advance funds to the beneficiary on or before the date on which reimbursement is due to the nominated bank.  Nominated bank: Nominated Bank means the bank with which the credit is available or any bank in the case of a credit available with any bank.  Transferring bank: performed transfer credit value mentioned in Transferable Letter of Credit  Reimbursing bank: payment for Claiming Bank in the case of L/C is indicated.  Claiming bank: Claiming the documents under the authorization of the beneficiary  Accepting bank: Accepts a bill of exchange by endorsing on maturity date 1.1.3. Legal bases  International law: no  International Practice:  Uniform Customs and Practice for Documentary Credits- UCP 600,2007 issued by (ICC)  The ICC has no legislative authority.  The UCP 600 are ICC (International Chamber of Commerce publication No. 600 effective July 1, 2007.  There are following items in this Rule  Application of UCP and definitions  Issuing and Confirming bank undertaking  Advising of Credits and amendments + Standard for Examination of Documents CLC_13DTM4 – GROUP 4 Page 8 International Settlement Lecturer : Ms. Nông Thị Như Mai  Documents  Other articles like: Quantity, Credit amount, Unit prices, Partial drawing or shipments, Installment drawings or shipments  …  ISBP 745,2013 –ICC- International Standard Banking Practice for the examination of documents under documentary credits  eUCP 1.1,2007- Supplement to UCP 600 for Electric Presentation  URR 725, 2008-ICC: The Uniform Rules for Bank-to-Bank Reimbursement under Documentary Credits, effective from the 1/10/2008 1.1.4. Payment process with Documentary Credit Figure 1 : Payment process with Documentary Credit CLC_13DTM4 – GROUP 4 Page 9 International Settlement Lecturer : Ms. Nông Thị Như Mai  Documentary credit process Step1 : Buyer and seller agree to conduct business. The seller wants a letter of credit to guarantee payment. Buyer applies to his bank for a letter of credit in favor of the seller. Each bank has its own application form, so the importer needs to write on the right form of his bank, at least 2 copies, and:  Must base on the conditions stated in the contract signed by two parties, but in some necessary cases, can change some contents in the contract  Must give consideration to conditions that the exporter can fulfill all and his benefits are guaranteed After signing and stamping on the applications for a credit, the bank will send back the importer 1 copy. Two copies have the same legal value in resolving disputes. Step 2 : After receipt of the application for a credit, the bank will check carefully all its conditions and related documents, then requires the importer to make a deposit. Buyer's bank approves the credit risk of the buyer, issues and forwards the credit to its correspondent bank (advising or confirming). The correspondent bank is usually located in the same location as the beneficiary. Step3 : Advising bank will authenticate the credit and forward the original credit to the beneficiary Step 4: The exporter delivers the goods to the delivery point if he agrees on the credit’s contents/ Or else, the exporter can request the issuing bank to amend the credit to make it suitable with the contract Step5 : After delivery of goods, the exporter presents the required documents to the advising or confirming bank to be processed for payment. Step 6 : Advising bank or confirming bank examines the documents’ face for compliance with the terms and conditions of the letter of credit.  The advising bank can request the export to amend or supplement the documents if they are not suitable. CLC_13DTM4 – GROUP 4 Page 10 International Settlement Lecturer : Ms. Nông Thị Như Mai  Forward the documents to the issuing bank if they are be in compliance with the credit. Step 7: The issuing bank examines a presentation to determine  If suitable issuing bank will make payment for the exports accounting through advising bank  If the documents do not conform with the conditions and terms stated in L/C, issuing bank can be refused payment or consult the applicant and notification illegal for advising bank  The period of validity issuing bank to check and make payment is 5 working days from the receipt of the documents. If after 5 days without any announcement means the importers accept to make payment. Step 8: The issuing bank forwards the documents to the importer. The importer, the, examines the documents to determine whether or not the documents are complying. If the documents are complying, the importer shall honor and vice versa Step 9: The advising bank credits the exporter’s account. Or forwards the accepted draft to the exporter or gives notice of refusal 1.1.5. Types of Letter of Credit  According natural of Credit :  Revocable of Letter of Credit : A letter of credit that the granting bank or the letter holder (who is the buyer of some good) may canceled any time without the approval of the seller. It is a promise to payment not a commitment.  Advantage : - For importer:  The import use revocable credit for the export to get an export license and to check the feasibility of the export contract implementation then the importer can change revocable the credit into the irrevocable the credit CLC_13DTM4 – GROUP 4 Page 11 International Settlement Lecturer : Ms. Nông Thị Như Mai + The importer will request the issuing bank to cancel the credit if the exporter is unable to get it  Disadvantage: - For exporter: risk because the credit can be modified or canceled on the way of delivery of the goods, or before presentation is made… - For importer: flexible because the credit can be modified or canceled without prior notice to related parties  It is rarely used. Some banks even refuse to issue such L/C because of the fear of getting involved in the possible litigation between the buyer and the seller.  Irrevocable credit: is one kind of letter of credit by issuing bank must be responsibility for payment to the exporter in its valid time. They cannot be changed or canceled without the permission of everybody involved: the buyer, seller, any bank involved Advantage: - For Exporter: guarantee the rights to the exporter, it removes the seller’s credit risk by assuring the seller that payment will be made by the buyer’s bank if the buyer’s refused payment. - For Importer: in irrevocable letter of credit is a financial instrument used by banks to guarantee a buyer’s obligations to a seller  Disadvantage : it is difficult to a letter of credit that is not irrevocable . Buyers may want things set in stone: they do not want to ship goods late or change order quantities without discussing. Ultimately, the greatest risk falls on sellers.  If no record is irrevocable L/C or non-cancellable it is irrevocable (Article 3 UCP 600). Amendments must be subject to Article 10 UCP 600. Kind of an irrevocable guarantee the rights to the exporter and is now being widely used  Confirmed credit: is an irrevocable of credit and it had been a bank other more warrants than payment under a letter of credit with the issuing bank.  Confirming bank responsible confirm payment to the exporter if the issuing bank is unable payment, guarantee the interest of the exporter  CLC_13DTM4 – GROUP 4 Page 12 International Settlement Lecturer : Ms. Nông Thị Như Mai  Responsibility of the confirming bank is the same as that of the issuing bank must be pay confirming charges and has to deposit 100% of credit value in the confirming credit.  Confirming bank can be another bank in a third country, or a bank in the beneficiary’s country or advising bank  Advising bank :can both a Confirming bank and advising bank Irrevocable without recourse credit: is a irrevocable of credit within which regulates issuing bank after payment to the exporter shall not entitled to claim money back in any cases. The beneficiary indicated “without recourse to drawer” on the Bill of Exchange as well as the credit.  Revolving credit: is an irrevocable of credit, which after finished using or have expired effective, it automatically has the same value and so it circulatory until reaching the total value of the contract. There are 3 types of revolving  Automatic revolving: while L/C before expiry is automatically be valid by L/C after without notice of the issuing bank to the seller  Limited revolving: only when the exporter receives the issuing bank’s advice will the credit be renewed.  Semi- automatically revolving: after few days of the expiration validity period or have used up value without notice from the issuing bank shall be automatically valid for L/C after.  L/C may be circulating on the amount or period, the circulation over time, L/C must specify the date of expiry of each circulation, and must specify L/C that is circulating cumulative or non-cumulative. - Cumulative revolving L/C: Letters of credit must clearly circulation expire last day and the number of times the circulatory and minimum value of each such time. If the circulation based on the validity period of each circulation must specify whether to allow numbers of L/C before accrue to the L/C successive or not, if permitted, calling it the Cumulative revolving L/C - Non-cumulative: do not allow numbers of L/C before accrue to the L/C successive CLC_13DTM4 – GROUP 4 Page 13 International Settlement Lecturer : Ms. Nông Thị Như Mai  Circulation type is applied in case the two parties export and import relations and objects frequently change payments and large value contracts. Applying L/C circulation, the importer may benefit from two major points, not stagnant capital and reduce costs by opening L/C  Back to back credit: Two letters of credit used together to help a seller finance the purchase of equipment or services from a subcontractor. With the original LC from the buyer's bank in place, the seller goes to his own bank and has a second LC issued, with the subcontractor as beneficiary. The subcontractor is thus ensured of payment upon fulfilling the terms of the contract. - It is used in many cases: +Master L/C not allowed indorse + Documents required by the original L/C does not coincide with the discrepancy from the 2nd L/C +While intermediaries want some information secret - Rules for: + Credit two back to back right through a direct banking service export organization + The original L/C must be greater or equal value L/C second. Intermediary organization export this arbitrage + Original L/C must be opened earlier than L/C second - The back to back credit is often used in intermediate purchases, temporary import for re-export  Reciprocal credit: often used in transaction processing of export goods in which both parties are acting as importers and exporters. Reciprocal L/C released or effective only when there is an L/C with its other counterpart was released. Unlike the L/C typically pay / accept payment upon presentation of appropriate documents, L/C counterpart is L/C payment terms under which Bank Issuer (Issuer) reciprocal L/C commitment to pay only after receiving the full amount under L/C others against L/C issued by the Issuer that. CLC_13DTM4 – GROUP 4 Page 14 International Settlement   Lecturer : Ms. Nông Thị Như Mai Advantage : - Guarantee benefits , responsibility for each other - Type L / C to help partners understand each other yet still be able to do business together. Defect: - Cumbersome procedures, structure L / C complex. - High bank fees  Stand- by credit: standby letter of credit is a document in which the bank is committed to payments to beneficiaries when the person presenting the request for payment document and documents evidencing the failure to implement the obligations of people request open letters of credit.  Used in the following cases - Guarantees for loans for construction - Securing the contract performance commoditized outsourcing - Ensure participants bid - Ensuring safety of the advance payment - Ensure solvency - Ensure the payment of rent for financial leasing contracts - ..ect…  According of the payment term of Letter of Credit  Deferred payment credit: is an irrevocable credit within which regulates by issuing bank or confirming bank commitments with beneficiaries to pay the entire amount of L/C at a specific time limit indicated presented on L/C after receiving the documents and drafts not required  Red clause credit: a specific type of credit: red clause credit supply advance payments to exporters before they actually ship the goods to the importers. CLC_13DTM4 – GROUP 4 Page 15 International Settlement Lecturer : Ms. Nông Thị Như Mai Exporters receive advance payments under red clause letters of credit mostly from the issuing banks.  Issuing banks make the advance payment under a red clause letter of credit against presentation of an advance payment guarantee issued by the bankers of the exporter, guaranteeing a refund 1.1.6. Documents Involved 1.1.6.5. Packing list - Definition: A document that lists and itemizes the merchandise contained in each package (box, crate, drum, carton, or container), and indicates the type, dimensions, and weight of the container. The packing list is used by customs and transportation companies. 1.1.6.6. Commercial Invoice - Definition: The commercial invoice is an invoice/bill for the goods from the seller to the buyer. It is a document that gives a complete description of the trade transaction, i.e. invoice number, full listing of the goods, quantities, shipping date, mode of transport, address of the shipper and buyer and the delivery and payment terms. The buyer requires the invoice to certify ownership and to initiate payment. Some governments use the commercial invoice to determine the true value of the goods when assessing customs duties. 1.1.6.7. Bill of Lading - Definition: B/Ls are contracts between the owner of the goods(shipper/contractor) and the transportation company. It is considered to be a receipt for the goods shipped (given to the seller by the carrier), a contract for delivery (i.e. a contract to deliver the goods as freight to the consignee), and, most importantly, a document of title to the goods. CLC_13DTM4 – GROUP 4 Page 16 International Settlement Lecturer : Ms. Nông Thị Như Mai 1.1.6.8. Certificate of Original - Definition: Some countries (particularly those subject to lower tariffs and free trade treaties) may require, for entry purposes, a signed statement certifying the origin of the goods being traded. If the buyer requires this document, he should so stipulate in his letter of credit. 1.1.7.Advantage and Disadvantage of Documentary Credit to both of parties 1.1.7.5. Advantage of Letter of Credit  To the importers:  While accepting a L/C, the supplier guarantees to meet the terms and conditions of letter of credit with documentary proof  To a buyer/importer is that the seller receives payment of exported goods only after shipment and meeting all of necessary requirements under L/C terms and conditions  A shipment under Letter of credit is treated with most care to meet delivery schedule and other required specifications by the exporter  The importers can plan the payment schedule properly by anticipating the requirements under letter of credit  Based on timely delivery schedule, buyer receives goods on time to plan the business smoothly and efficiently  To the exporters:  A supplier is minimizing of credit risk  Buyer can not deny payment by raising dispute on quality of goods, as letter of credit terms and conditions are based on documentation  L/C provides a security to exporter which is another advantage of a letter of credit, the exporter can preplan further business activities CLC_13DTM4 – GROUP 4 Page 17 International Settlement Lecturer : Ms. Nông Thị Như Mai  Another advantages of a Letter of credit is the exporters receives money on time  Do confirmed irrevocable a letter of credit transaction is that the exporter do not worry on cancelation of his export order or changes the order.  In a letter of credit, any dispute in transaction can be settled easily under the legal of uniform customs and practice of documentary credit.  Many banks extend financial assistance, an exporter can use to assist shipment finance from banks or other financial association 1.1.7.6. Disadvantage of letter of credit  To the importers:  The parties under letter of credit do not have any right to examine the contents of goods  Once opened a confirmed and irrevocable letter of credit, the import/buyer can not change the terms stated in between.  Due to various reasons, especially on spelling price , buyer need to stop his export order he can not to do  Cost of operating of credit procedures and formalities are more, which may be an additional expenses, cost of amendment, negotiation are paid by the importer  Currency fluctuation, the exchange rate may differ at the time of effecting payment. So, if any loss due to fluctuation in foreign currency contracted under letter of credit  In addition, currency fluctuations may also effect on goods price in local market, the customer may reduce spending on goods.  To the exporter: CLC_13DTM4 – GROUP 4 Page 18 International Settlement Lecturer : Ms. Nông Thị Như Mai  The liability of meeting all required specifications with suppliers. So, if the exporter does not follow with the term and conditions of L/C completely, the payment will not be effected by bank.  In case the exporter does not need to open a letter of credit to transact with importer, meeting of all terms and conditions is the responsibility of exporter and must be payment charges some additional expenses.  Policy of a country may effect to the business transaction between 2 countries( due to political reason, the trade agreement may become invalid, resulting to effect the uniform customs and practice of documentary credit  So the strength and stability of L/C issuing bank is affect to practice of document credit.  Compared to the modes of payment, the expenses for opening, negotiating and other procedures of letter of credit high.  The exporter receives payment after shipment, the exchange rate may differ at the time of shipping goods, from the time of opening L/C, it can make any loss of the exporter.  Currency fluctuations may also affect on price to procure raw materials for the buyers/ exporter, increase production cost within the exporters does not hike the selling price by accepting the terms and conditions of L/C. 1.2. Definition of Risk and Risks in Letter of Credit 1.2.1. Definition:  Risk is uncertainty exists objectively and does not depend on the will of people. In field of business activity, the risk is a necessity may occur, CLC_13DTM4 – GROUP 4 Page 19 International Settlement Lecturer : Ms. Nông Thị Như Mai affecting directly or indirectly the existence and development of enterprises.  There are 2 types of the risk: + Risk can be predicted is the predicted unfortunate result, businesses can make timely response strategies + Risk unpredictable: as things unfortunately are not predictive that may be cases of force majeure including natural disasters, war, terrorism, changes in policy and legislation… 1.2.2.Types of the risk of the Documentary credit 1.2.2.1. Risk to the Beneficiary:  When receiving L/C from advising bank, if the exporter check conditions in the documents carefully, accept all requests disadvantage that exporters can not meet in the process of making documents later. When these requirements are not met, the issuing bank refuses the documents and non-payment. At that time, importers will have the advantage to renegotiate the price is outside the terms of the L/C and exporters will be at a disadvantage.  During the payment process, the L/C stand out payment commitments for export when they produce the documents matching content of the L/C, banks will only work with the documents specified in L/C. Payment methods TDCT requires exact absolutely between the payment documents with contents specified in the L / C. Just a small mistake in the preparation of documents, exporters may be banks open L / C and the buyer find fault, to refuse payment. Consequently, the establishment of payment documents is an important step and very risky for exporters.  If the exporter present the documents not suitable with the L/C are all acceptable payment or may are denied, and exporters have to handle goods as unloading, storage until the problem is resolved or to find new buyers, auctions or cargo on return to the country. Also, exporters have to bear these costs as overdue detention, storage fees ... while not know the position of the importers will agree or refuse to take delivery because the documents contain errors. CLC_13DTM4 – GROUP 4 Page 20
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