The Stages of Documentary Credit Transaction
The stages in an irrevocable documentary credit transaction are as follows:
1. The importer (buyer) asks their bank to issue a letter of credit in favour of the exporter (seller). The importer applies for a letter of credit by filling out a form. This gives the following details:
-type of credit (i.e. revocable or irrevocable)
-beneficiary (the person receiving the money)
-amount
-how long the credit will be available for (i.e. valid until a certain date)
-documents involved in the transaction (e.g. bill of lading, commercial invoice, insurance certificate)
- description of goods.
2. The importer’s bank (called the issuing bank as it issues the letter of credit) asks a bank in the seller’s country to advise the seller that a letter of credit has been issued in their favour. The issuing bank may also ask the bank in the seller’s country to confirm the letter of credit (i.e. promise to see that the conditions of payment are fulfilled). For these reasons the bank in the seller’s country is called the confirming or advising bank.
3. The exporters dispatch the consignment to the importers and present the shipping documents: bill of lading, commercial invoice, insurance certificate, etc.) to the confirming bank.
4. The exporters draw a bill of exchange on the confirming bank. The bank pays exporters against the bill and then sends the shipping documents to the issuing bank.
5. The issuing bank checks the documents and pays the confirming bank.
6. The issuing bank releases the shipping documents to the importers and debits their account.
7. The importers collect the consignment by presenting the shipping documents to the shipper.
Дата добавления: 2016-01-04; просмотров: 21; Мы поможем в написании вашей работы! |
Мы поможем в написании ваших работ!