Letter of Credit course – (Discussions on INCOTERMS 2020, UCP 600 and ISBP 745)
In international trade counter part y risk and country risk cannot be avoided. For more than a century, instruments like letters of credi t and bank guarantees are used by the companies for trade settlements and to mitigate their risks.
A market survey indicates that more than 70% of the documents presented under letter of credi t are rejected at the first presentation.
The survey also pointed out the reason as:
- Letters of credi t accepted by the exporters have certain tricky conditions
- Exporters are not fully aware about the UCP Rules and ISBP (International Standard Banking Practice) while executing documents under letters credi t which results in discrepancies
- Importers are not able to prescribe appropriate documents to safe guard their interest at the time of establishing letters of credi t
This program will exclusively address the operational issues in letters of credi t transactions with detailed discussions on importa nt UCP 600 articles relating to each filed in the standardised SWIFT LC format. This will enable the participants to interpret the implications of the terms and conditions in a letter of credi t. Live case studies will be circulated to the participants for effective understanding.
Detailed discussions on each document (Bill of Exchange, commercial invoice, bill of lading, airway bill, insuranc e, certificate of origin, packing list and weight certificate) with commonly observed discrepancies will be taken up with practical exercise. Interpretation of some of the provisions in ISBP 745 will be explained with the practical exercise.
In Import transactions, letter of credit is used for availing buyers credit. Issues relating to buyers credit will be discussed.
While finalising the commercial terms in international trade, terms of delivery plays an important role in pricing their product and risk transference. By using appropriate INCOTERMS 2020 both the parties are able to express clearly the responsibilities and obligations of each of them. This INCOTERMS is indicating the required documents for a particular transaction while structuring a letter of credit. Brief discussion on the implication of certain INCOTERMS 2020 will be addressed.
International market has a new product known as Bank Payment Obligation (BPO). ICC Paris has set the rules for this instrument. This instrument will be a mix of Letter of Credi t and Bank guarantees.
By participating in this workshop, participants will be able to enrich, with hands on experience in handling letters of credi t transactions from the initial stages of finalising the terms of delivery and terms of payment in a commercial transaction as well as update themselves with the latest developments which will result in reducing the transaction cost and better usage of these instruments.
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- Structure Import & Export transaction through letters of credit
- Significance of underlying contract in identifying terms of delivery
- Changes in Incoterms 2020 in comparison to 2010
- Terms of payment
- Responsibilities and of different parties in letter of credit transaction
- Types of letters of credit
- Difference between Standby letter of credit and letter of credit.
- Operational issues in a letter of credit transaction:
- Transaction under Letter of credit discussion in detail explaining the relevance of UCP Rules with the relevant field in SWIFT MT LC format.
- Transferring the contents of the commercial contract to Letter of credit application form
- Prescribing appropriate documents
- Discussion on important UCP 600 Articles with practical examples.
- Documents in a letter of credit transaction
- Possible discrepancies in draft (bill of exchange), invoice, transport documents, insurance, and certificate of origin and how to avoid such discrepancies
- Detailed discussion on the latest version ISBP 745- How it helps the exporters and importers in interpreting and resolving discrepancies with practical exercise
- Discussion on the proposed new instrument
- Amendments and Negotiation in LCs
- Bank guarantees Inland and foreign guarantees
- Case studies of some of the opinions, ruling and decisions of International Chamber of Commerce, Paris, on certain specific issues and certain court decisions will be discussed through case studies.