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
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International Settlement
Lecturer : Ms. Nông Thị Như Mai
Contents
Chapter 1
1.1.
THEORY BASES ............................................................................................ 7
Documentary Credit ............................................................................................................. 7
Definition ......................................................................................................................... 7
1.1.1.
1.1.2.
Parties involved ............................................................................................................ 7
1.1.3.
Legal bases ................................................................................................................... 8
1.1.4.
Payment process with Documentary Credit ................................................................. 9
1.1.5.
Types of Letter of Credit ........................................................................................... 11
1.1.6.
Documents Involved ................................................................................................... 16
1.1.7.
Advantage and Disadvantage of Documentary Credit to both of parties ................... 17
1.2.
Definition of Risk and Risks in Letter of Credit ................................................................ 19
1.2.1.
Definition: ................................................................................................................... 19
1.2.2.
Types of the risk of the Documentary credit .............................................................. 20
1.2.2.1.
Risk to the Beneficiary: .......................................................................................... 20
1.2.2.2.
Risk of the importer ................................................................................................ 21
1.2.2.3.
Risk to the advising banks: ..................................................................................... 21
1.2.2.4.
Risks for the confirming bank: ............................................................................... 21
1.2.2.5.
Risks to the issuing bank......................................................................................... 22
1.2.2.6.
Political risk ............................................................................................................ 22
1.2.2.7.
Technical risk .......................................................................................................... 23
1.2.2.8.
Fraud risk (Business Ethics risk) ............................................................................ 23
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Chapter 2
2.1.
Lecturer : Ms. Nông Thị Như Mai
INTRODUCTION TO VIETNAM PAIHO LIMITED ...................... 25
Overview Of Vietnam Paiho Limited ................................................................................ 25
2.1.1.
Company History ........................................................................................................... 25
2.1.2.
Developing progress ....................................................................................................... 26
2.2.
Management Profiles ......................................................................................................... 28
2.3.
Main Products .................................................................................................................... 30
2.4.
Business activities of Vietnam Paiho Limited in 2012-2014............................................. 31
2.4.1.
Export - Import activities ............................................................................................... 31
2.4.2.
Import activities for processing ..................................................................................... 33
2.4.3.
Processing export activities ............................................................................................ 35
2.5.
Result of business activities of Vietnam Paiho Limited .................................................... 38
Chapter 3
THE RIGHTS OF UTILIZING INTERNATIONAL SETTLEMENT
METHODS . THE DIFFICULTIES AND RISKS OF FIRM IN IMPORT, EXPORT
ACTIVITIES BY USING DOCUMENTARY CREDIT METHOD ........................... 41
3.1. The rights of using International Settlement methods by firm in Import and Export
activities during 3 years ( 2012 -2014) ......................................................................................... 41
3.1.1.
For import activity.......................................................................................................... 41
3.1.2.
For export activity .......................................................................................................... 44
3.1.3.
Evaluate about this actual using ..................................................................................... 46
3.2.
The rights of using Documentary Credit method in export activities in firm in 2014....... 47
3.2.1. The practical amount of lots utilize Documentary Credit method in import and export
activities in firm in 2014 ........................................................................................................... 48
3.2.1.1.
The amount of import lots....................................................................................... 48
3.2.1.2.
The amount of export lots ....................................................................................... 49
3.2.2.
The actual document ................................................................................................... 49
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3.2.2.1.
Actual Documentary Credit process in Export activity in firm .............................. 49
3.2.2.2.
Documents involved ............................................................................................... 53
3.2.2.3.
Reason for requiring these trade documents .......................................................... 55
3.2.2.3.1. Packing list .............................................................................................................. 55
3.2.2.3.2. Commercial invoice ................................................................................................ 56
3.2.2.3.3. Bill of lading ........................................................................................................... 60
3.2.2.3.4. Certificate of Origin ................................................................................................ 62
3.3. The actual difficulties and risks facing by firm when using Documentary Credit method in
export activity ............................................................................................................................... 64
Chapter 4
THE PREVENTIVE MEASURES AND REDUCTION THE RISKS
IN LETTER OF CREDIT METHOD IN FIRM ............................................................ 69
4.1.
For Export activity in firm .............................................................................................. 69
4.1.1. The preventive measures and reduction the risks from wasting time for following
and correcting a conditions regulated in L/C: ...................................................................... 69
4.1.2. The preventive measures and reduction the risks from a fake or incorrect L/C
document: .............................................................................................................................. 70
4.1.3.
L/C:
The preventive measures and reduction the risks due to high cost for confirming
70
4.1.4.
The preventive measures and reduction the risks from transporting good : ........... 71
4.1.5. The preventive measures and reduction the risks due to the refusal using L/C of
importer: ................................................................................................................................ 72
4.1.6. The preventive measures and reduction the risks due to document‟s mistake and
wrong importer: ..................................................................................................................... 72
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: ..................................................................... 73
4.1.8. The preventive measures and reduction the risks due to mistake in the process of
making documents: ................................................................................................................ 74
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4.1.9. The preventive measures and reduction the risks due to the export present a
documents which is inconsistent with the L / C: ................................................................... 74
4.1.10. The preventive measures and reduction the risks due to the Currency fluctuation: 75
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. .................................. 75
4.1.11. The preventive measures and reduction the risks for breach of „strict compliance”:
76
4.1.12. The preventive measures and reduction the risks due to the conflict between
clauses of L/C and credit: ...................................................................................................... 76
4.1.13. The preventive measures and reduction the risks due to the objective reasons: ..... 77
4.1.14. The preventive measures and reduction the risks from lack of the information about
the issuing bank: .................................................................................................................... 78
4.1.15. Get benefit through buying an exporter credit insurance: ...................................... 78
4.1.16. The preventive measures and reduction the risks due to deficiency of information
and understanding about partners: ......................................................................................... 79
Content of figures
Figure 1 : Payment process with Documentary Credit . Lỗi! Thẻ đánh dấu không được xác định.
Figure 2 : Management Structure ................................................................................................ 28
Figure 3 : Export department organization .................................................................................. 29
Figure 4 : The export - import value from 2012 - 2014 ............................................................... 33
Figure 5 : Revenue from processing export activities from 2012 - 2014 .................................... 38
Figure 6 : The growth of revenue from 2012-2014 ..................................................................... 40
Figure 7 : Proportion of International Settlement methods in import activity in 2012 ............... 42
Figure 8 : Proportion of International Settlement methods in import activity in 2013 ............... 42
Figure 9 : Proportion of International Settlement methods in import activity in 2014 ............... 43
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Figure 10 : Proportion of International Settlement methods in export activity in 2012 .............. 44
Figure 11 : Proportion of International Settlement methods in export activity in 2013 .............. 45
Figure 12 : Proportion of International Settlement methods in export activity in 2014 .............. 46
Figure 13 : Actual Documentary Credit process in Export activity ............................................ 49
Content of tables
Table 1 : Board of Director .......................................................................................................... 29
Table 2 : Total export - import value from 2012 - 2014 ............................................................. 32
Table 3 : The value of import by goods from 2012-2014 ........................................................... 34
Table 4 : The value of import by market from 2012-2014 .......................................................... 35
Table 5 : The value of export by market from 2012-2014 ........................................................... 36
Table 6 : The value of export by goods from 2012-2014 ............................................................ 37
Table 7 : Income statement from 2012 to 2014 ( in VND) .......................................................... 39
Table 8 : The growth of revenue from 2012-2014 ....................................................................... 40
Table 9 : Value of each settlement method using by firm in import activity 2012 -2014 ........... 41
Table 10 : Value of each settlement method using by firm in export activity 2012 -2014.......... 44
Table 11 : The amount of import lots ......................................................................................... 48
Table 12 : The amount of export lots ........................................................................................... 49
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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:
Confirming bank is issuing bank is unable to make payment.
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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
Documents
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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
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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.
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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
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+ 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
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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
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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.
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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.
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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.
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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
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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:
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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,
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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
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