Introduction
Traders and manufacturers engaged in international business of import and export must deal with Letter of Credit (referred to as L/C) as a means of securing payment. Various documents like Bill of Lading, Certificate of Origin and Insurance Policy are called for under L/C.
Unless the exporter submits the documents properly and strictly in conformity with the L/C, obtaining payment will become difficult.
As L/C is issued subject to a set of rules called UCPDC (Uniform Customs and Practices for Documentary Credit) comprehensive understanding of various Articles under UCPDC (UCP 600) becomes essential for importers and exporters who deal with L/C. Similarly, they must be aware of International standard Banking Practices (called ISBP). The bankers who deal with L/C need to have comprehensive knowledge of these Rules.
Understanding the impact of each INCOTERM and understanding the responsibility to be taken by the seller and buyer under each term of delivery like FOB or CIF is very important.
In order to enable the importers and exporters to understand the concept and mechanism of L/C and precautions to be taken by them while dealing with L/C this program “LETTER OF CREDIT, UCPDC and INCOTERMS” has been designed with simple and easy explanation of concepts and their practical application by bankers and customers.
- Concept of Letter of Credit (with examples)
- Bank’s Norms and Regulatory Guidelines of RBI
- Security / Margin/ Commission for opening L/C
- Obtaining Report on Supplier
3. How L/C Mechanism works and its process
- specimen copy of LC in SWIFT format
- Role of Issuing Bank / Advising Bank
- Liabilities of Confirming Bank / Negotiating Bank
4. Various Documents to be submitted under L/C
- Invoice / Bill of Lading
- Airway Bill
- Certificate of Origin / Insurance Policy
5. Negotiation of Bills (under L/C) with banks
- Scrutiny of Documents by Negotiating Bank
- Omissions / Discrepancies noticed by banks
6. Precautions to be taken by Importer and Exporter
- Perusal of L/C by exporter to rule out onerous/impractical clauses
- Important clauses/ documents to be included in L/C by importer
7. Understanding Important Articles under UCPDC (UCP 600)
- Clauses relating to Invoice / Bill of Lading / Airway Bill
- Clauses relating to Insurance Policy/ Certificate of Origin
- Clauses relating to time limit for submission and scrutiny of documents
8. Understanding Important Clauses under ISBP
9. Various Types of L/C:
- Irrevocable/ Transferable / Back-to-Back LC
- Revolving / Red clause / Stand-by LC
10. Understanding various Incoterms – 2020 (International Commercial terms):
(regarding rules of Costs / Risk Transfer under each of the following terms)
- EXW, FCA, FAS, FOB
- CFR, CIF, CPT, CIP
- DAP, DPU, DDP