What type of L/C's and Term on L/C's have to be Avoid?
Post 1 of 7
There are so many kind types of L/C and a lot of term of L/C include when we receive L/C. What kind of L/C's and Term of conditions on L/C that have to be avoid when we receive L/C from Issuing Bank/applicant?Because sometimes L/C and term of L/C will give unbeneficial for seller ,
22 Oct 2007 00:42
Post 2 of 7
Replying to [davindo]:
I wish I could answer your question in this space. But, I used a whole chapter in my book to explain and and answer exactly the question that you have asked. This space is too little to do justice to your question.
Very briefly, you should avoid (1) LCs that have terms that YOU as beneficiary cannot fulfil, (2) if the LC is "available" at a place not near your home/office, but at the opener's place, (3) LCs which have a condition that only the buyer can fulfil - for example, "buyer's certificate that the goods have been found acceptable to him" or "the buyer has fulfilled his re-export obligations" etc.
I wish I could answer your question in this space. But, I used a whole chapter in my book to explain and and answer exactly the question that you have asked. This space is too little to do justice to your question.
Very briefly, you should avoid (1) LCs that have terms that YOU as beneficiary cannot fulfil, (2) if the LC is "available" at a place not near your home/office, but at the opener's place, (3) LCs which have a condition that only the buyer can fulfil - for example, "buyer's certificate that the goods have been found acceptable to him" or "the buyer has fulfilled his re-export obligations" etc.
24 Oct 2007 01:55
Post 3 of 7
Replying to [Catalyst]:thank you for your kind advices, actually I need this info even you just give it step by step.
I ussually used IRREVOCABLE at Sight L/C by Payment, but my friend said sometimes it will dangerous for seller because have to wait the buyer to instruct the bank to pay to the seller. So it will good to use by Payment. What about another L/C? Like usance L/c, red clause L/C? Thanks in advance
I ussually used IRREVOCABLE at Sight L/C by Payment, but my friend said sometimes it will dangerous for seller because have to wait the buyer to instruct the bank to pay to the seller. So it will good to use by Payment. What about another L/C? Like usance L/c, red clause L/C? Thanks in advance
28 Oct 2007 20:17
Post 4 of 7
Replying to [davindo]:
You said "I usually used IRREVOCABLE at Sight L/C by Payment, but my friend said sometimes it will dangerous for seller because have to wait the buyer to instruct the bank to pay to the seller. So it will good to use by Payment. What about another L/C? Like usance L/c, red clause L/C?"
I could give you a specific reply if you could have explained a specific problem with regard to your plans or business.
The important thing is to get an LC from a first class bank, a bank of international repute. The point is, strictly speaking, the buyer has NO role to play in honouring of LCs by the issuing bank. The issuing bank must decide, based on documents alone, to pay or not to pay. (Article 14.a of UCP).
Shady banks do sometimes collude with the importers to find improbable discrepancies and delay payment. Hence, small and unknown or little known banks with no integrity are better avoided.
What type of LC to choose, also depends on your buyer. He must agree to your proposal. Better if reimbursement is by a third bank. (Sorry, will take a lot of space to explain this! So I won't explain here the reason for this statement.)
If you want to be absolutely sure (during the initial phases) then go for LCs confirmed by a bank that you trust at your city. Make sure that it does not find excuses to avoid payment when you tender biils to it for negotiation (by finding vague/imaginary discrepancies!). Some banks do that....too!
You said "I usually used IRREVOCABLE at Sight L/C by Payment, but my friend said sometimes it will dangerous for seller because have to wait the buyer to instruct the bank to pay to the seller. So it will good to use by Payment. What about another L/C? Like usance L/c, red clause L/C?"
I could give you a specific reply if you could have explained a specific problem with regard to your plans or business.
The important thing is to get an LC from a first class bank, a bank of international repute. The point is, strictly speaking, the buyer has NO role to play in honouring of LCs by the issuing bank. The issuing bank must decide, based on documents alone, to pay or not to pay. (Article 14.a of UCP).
Shady banks do sometimes collude with the importers to find improbable discrepancies and delay payment. Hence, small and unknown or little known banks with no integrity are better avoided.
What type of LC to choose, also depends on your buyer. He must agree to your proposal. Better if reimbursement is by a third bank. (Sorry, will take a lot of space to explain this! So I won't explain here the reason for this statement.)
If you want to be absolutely sure (during the initial phases) then go for LCs confirmed by a bank that you trust at your city. Make sure that it does not find excuses to avoid payment when you tender biils to it for negotiation (by finding vague/imaginary discrepancies!). Some banks do that....too!
29 Oct 2007 20:13
Post 5 of 7
Replying to [Catalyst]:Thank you Catalist...for your kind informations,...sorry I made mistakes noted the info, I ussually used Irrevocable at sight L/C by Payment but my friend recommend to use Irrevocable at Sight L/C by NEGOTIATION because we don't have to wait payment from issuing bank so it will help seller's cash flow, and if by payment the issuing bank will wait instruct from buyer to pay...and sometime it will take a long time to make a payment
31 Oct 2007 00:44
Post 6 of 7
Replying to [davindo]:
Agreed.An LC *should* be available by negotiation at the place of the beneficiary. Otherwise, what is an LC for !
Pl do see my response to your another question on similar lines.
Agreed.An LC *should* be available by negotiation at the place of the beneficiary. Otherwise, what is an LC for !
Pl do see my response to your another question on similar lines.
01 Nov 2007 03:25
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