Export / Back to Back Lc

Export Lc :: Back to Back Lc
Basically Export letter of credit means a commercial letter of credit issued by a foreign bank in favor of a domestic exporter at the request of a foreign buyer. The benefits associated with export letter of credit include improvement in cash flow management, extended payment terms, hedge currency exposures, and prevents insurance costs. The purpose of an export letter of credit is two-fold: first, the export letter of credit virtually eliminates any credit risk assumed by nonpayment for the goods sold; and second, it ensures a line of credit to finance business with borrowed money.
Example of Lc:

Explanation	Contents	Particular, Description, Terms
Sender:	NBOBINBO
Message type:	700
Receiver:	RABONL2U
Sequence of total:	27:	1/1
Applicable rules:	40E:	UCP LATEST VERSION.
Documentary credit number:	20:	RN/543
Reference to pre-advice:	23:	RE PRE-ADVICE DATED 160105
Date of issue:	31C:	160110
Date and place of expiry:	31D:	160630 UTRECHT.
Applicant:	50:	INDIAN IMPORT CO.
		P.O.BOX 100
		MUMBAI, INDIA
Beneficiary:	59:	EXPORTBEDRIJF NEDERLAND B.V.
		P.O.BOX 333
		LEEUWARDEN, NETHERLANDS.
Currency code / amount:	32B:	EUR 38.475,00
Available with:	41A:	RABONL2U
By:		BY NEGOTIATION.
Partial shipments:	43P:	ALLOWED.
Transhipment:	43T:	ALLOWED.
Port of loading:	44E:	ANY EUROPEAN PORT, NOT LATER THAN 160630
Port of discharge:	44F:	ANY INDIAN PORT.
Shipment period:	44D:	SHIPMENT TO BE EFFECTED AS FOLLOWS:
		2250 CARTONS IN APRIL 2016.
		2250 CARTONS IN MAY 2016.
		2250 CARTONS IN JUNE 2016.
Description of goods:	45A:	67.500 KG DEEP FROZEN FRENCH FRIED DUTCH
		POTATOES, GRADE “A”, STRAIGHT CUT 7 X 7 MM ,
		5 CM UP, PACKED IN 4 X 2.5KG POLYBAGS PER
		CARTON, UNDER “RED POINT” BRAND ON STRONG
		SHRINK-WRAPPED PALLETS AT EUR 5,70 PER
		CARTON AS PER ORDER CONFIRMATION 96/807 CPT
		(INCOTERMS 2010) INDIAN PORT.
Documents required:	46A:	+ DRAFT DRAWN ON THE ISSUING BANK AT 90 DAYS
		AFTER BILL OF LADING DATE.
		+SIGNED COMMERCIAL INVOICE IN SEVEN COPIES  .
		+ CERTIFICATE OF EU ORIGIN ISSUED BY THE
		CHAMBER OF COMMERCE.
		+ BENEFICIARY’S DECLARATION INDICATING
		MANUFACTURERS NAME AND ADDRESS
		+ FULL SET CLEAN ON BOARD OCEAN BILLS
		OF LADING MADE OUT TO OUR ORDER, NOTIFY
		APPLICANT WITH FULL NAME AND ADDRESS, MARKED
		‘FREIGHT PREPAID’
		+ COPY OF BENEFICIARY’S FAX TO THE APPLICANT
		GIVING FULL SHIPMENT DETAILS WITHIN 48 HOURS
		AFTER SHIPMENT.
		+ RADIATION FREE CERTIFICATE ISSUED BY DUTCH
		HEALTH AUTHORITIES.
Additional conditions:	47A:	ALL DOCUMENTS SHOULD STATE THIS
		DOCUMENTARY CREDIT NUMBER AS WELL AS
		FOREIGN EXCHANGE NUMBER FBX/1L/738314-NL.
Charges:	71B:	CHARGES OUTSIDE THE NETHERLANDS FOR
		APPLICANTS ACCOUNT.
Period for presentation:	48:	WITHIN 15 DAYS AFTER DATE BILL OF LADING
Confirmation instructions:	49:	PLEASE ADD YOUR CONFIRMATION.
Instructions to paying/accepting/negotiating bank:	78:	+ TO US BY COURIER SERVICE.
		+ IN REIMBURSEMENT PLEASE CLAIM COVER
		FROM US.
Sender to receiver information:	72:	PLEASE ACKNOWLEDGE RECEIPT.

Explanation of SWIFT codes

Most of the L/C’s arrive by SWIFT (Society for Worldwide Interbank Financial Telecommunication).

Explanation codes SWIFT in example L/C:

M=mandatory field, always there O=optional, may occur but not necessarily

M 27    Sequence of Total

Indicates an individual item within the total number of items the L/C represents (for example 2/3 is second of the three items which together form the L/C).

M 40A  Form of documentary credit

In this field one of the following codes:

IRREVOCABLE

IRREVOCABLE TRANSFERABLE

IRREVOCABLE STANDBY

M 40E  Applicable rules

Indicates which rules apply.

M 20    Documentary credit number

The identification number of the L/C assigned by the opening bank.

O 23    Reference to pre-advice

A possible reference to an advice which was sent earlier.

O 31C Date of issue

If this field is empty, then refer to the date of the opening of the L/C.

M 31D Date and place of expiry

The final date by which the documents will have to be presented and the place where the documents have to be presented.

O 51A  Applicant bank

If present the bank of the applicant (the buyer). This is typi-cally not the bank which opens the L/C.

M 50    Applicant

The party who ordered the L/C to be opened.

M 59    Beneficiary

The beneficiary (the seller).

M 32B  Currency code/amount

The currency and the amount of the L/C.

O 39A  Percentage credit amount tolerance

The margin of the L/C indicated with a percentage plus and a percentage minus. For example 5/10 means 5% more and 10% less.

O 39B  Maximum amounts covered

Extra amounts which may be paid out under the L/C and which are not often to be expressed in an amount. For example “insurance is payable in excess against premium receipt”.

O 39C Additional amounts covered

Additional amounts payable under the L/C which may be paid out and which are often not to be expressed in an amount. For instance insurance is payable on excess against premium receipt.

M 41A  Available with.../Available by...

Available with the named bank or with all banks in the

named country/named place followed by one of the

following codes:

BY ACCEPTANCE

BY DEF PAYMENT

BY MIXED PAYMENT

BY NEGOTIATION

BY PAYMENT

O 42C Drafts at

Bill of Exchange at sight/long sight.

O 42A  Drawee

Drafts to be drawn on…

O 42M Mixed payment details

If field 41A contains the code BY MIXED PAYMENT it is explained here.

O 42P  Deferred payment details

If field 41A contains the code BY DEFERRED PAYMENT it is explained here.

O 43P  Partial shipment

Indication whether partial shipments are allowed or not.

O 43T Transshipment

Indication whether transshipment is allowed or not.

O 44A Place of taking in charge/dispatch from.../ place of receipt

Place of shipment.

O 44E Port of loading/Airport of departure

Seaport or airport of shipment.

O 44F  Port of discharge/Airport of destination

Port of unloading or airport of destination.

O 44B Place of final destination/for transportation to.../ place of delivery

Place of destination – place of delivery.

12      Fenedex Letters of Credit

O 45A  Description of goods and/or services

Description of the goods or services to be entered on the

invoice.

O 46A  Documents required

The documents asked for in the L/C.

O 47A  Additional conditions

Additional stipulations and conditions to be complied with.

O 71B  Charges

Description of who pays which costs.

O 48    Period for presentation documents

The period after shipment within which the documents are

to be presented. If the L/C does not indicate that please

take 21 days after shipment date into account, however,

within the expiry date of the L/C. (Art. 14c of the UCP600

applies)

M 49    Confirmation instructions

Instructions with regard to confirmation.

The following codes are used:

CONFIRM

the nominated bank is requested to confirm the L/C

MAY ADD

the nominated bank may confirm the L/C (if the beneficiary

prefers that)

WITHOUT

the nominated bank is requested not to confirm the L/C

O 53A  Reimbursing bank

Address of the bank where the nominated bank after

having accepted the documents can claim for payment.

O 78    Instructions to the paying/accepting/

negotiating bank

Instructions for the bank which is allowed to honour the

documents (the nominated bank).

O 57A  Advise through bank

The bank through which the receiver of the item is

requested to advise the beneficiary.

O 72    Sender to receiver information

Information of the sender to the receiver regarding the

settlement of the L/C.

How many Type of Export lc

There are five commonly used types of letter of credit. Each has different features and some are more secure than others. Sometimes a letter of credit may combine two types, such as 'confirmed' and 'irrevocable'.

>> Confirmed Lc

When an LC is issued, the Issuing Bank may request the Advising Bank to add its confirmation on the LC. By agreeing to add the confirmation, the Advising Bank will become the Confirming Bank and undertakes to pay the beneficiary (seller) if all the terms and conditions of the LC are complied with.

>> Irrevocable Lc

An irrevocable letter of credit is a financial instrument used by banks to guarantee a buyer's obligations to a seller. It is irrevocable because the letter of credit cannot be modified unless all parties agree to the modifications.

Back to Back Lc