An Introduction to Letters of Credit phần 4 pdf

When the Beneficiary exporter of a Letter of Credit agrees to Letter of Credit terms stating that payment will be available by acceptance of drafts drawn at “60 days sight,” the Benefici

List of National Export Credit Agencies and

International Development Banks Export Credit

Agencies

Following are some of the most frequently used

Gov-ernment Financing Sources

Australia

Export Finance and Insurance Corporation (EFIC)

Austria

Oesterreichische Kontrollbank Aktiengesellschaft

(OEKB)

Belgium

Office National Du Ducroire Creditexport

Brazil

Instituto De Ressequros Do Brasil (IRB)

Carterira Do Comerico Exterior-Banco Do Brazil S/A

(CACEX)

Canada

Export Development Corporation (EDC)

Denmark

Eksportkreditradet (EKR)

Dansk Eksportfinansieringsfond (EF)

France

Compagnie Francaise D’Assurance Pour Le Commerce

Exterieur (COFACE)

Germany

Hermes Kreditversicherungs A.G

Ausfuhrkredit-Gesellschaft mbh (AKA)

Kreditanstalt Fur Wiederaufbau (KFW)

India

Export-lmport Bank of India

Italy

Sezione Speciale Per L'Assicurazione Del Credito All

Esportazione (SACE)

Mediocredito Centrale

Japan

Ministry of International Trade and Industry (MITI)

Export-Import Bank of Japan (J-Eximbank)

Korea

Export-Import Bank of Korea

Mexico

Fondo Para El Fomento De Las Exportaciones De Productos Manufacturados (BANCOMEXT)

Netherlands

Nederlandsche Credietverzekering Maatschappij (NCM)

De Nederlandsche Bank (DNB)

New Zealand

Export Guarantee Office (EXGO)

Spain

Compania Espanola De Seguros de Credito a la Exportacion (CESCE)

Export Finance

Sweden

Exportkreditnamnden (EKN) A/B Svensk Exportkredit (SEK)

Switzerland

Export Risiko Garantie (ERG)

Taiwan

Export-lmport Bank of the Republic of China (Taiwan)

United Kingdom

Export Credits Guarantee Department (ECGD)

United States

Export-Import Bank of the United States (Eximbank) Private Export Funding Corporation (PEFCO) Overseas Private Investment Corporation (OPIC) U.S Agency for International Development (AID) U.S Department of Agriculture-Commodity Credit Corporation (CCC)

International Development Banks

African Development Bank (ADB) Inter-American Development Bank (IDB) International Bank for Reconstruction and Development (IBRD) (The World Bank) International Finance Corporation (IFC) Multilateral Investment Guarantee Agency (MIGA)

LETTERS OF CREDIT U.S Dollar Banker’s Acceptance Financing

U.S Dollar Banker’s Acceptances, normally used for short-term financing of goods in the Channels of Trade, are discussed in this chapter.

C H A P T E R

7

42 The Beneficiary’s ultimate objective in requesting a

Letter of Credit is to receive funds of and from a bank rather than the applicant The previous chapters dealt with transactions payable at “sight” where the bank makes payment against presentation of conforming

“sight” drafts and/or documents under a Letter of Credit

However, drafts may also be drawn payable in the future (normally anywhere from 30 to 180 days “sight” or

“date”) Such drafts are “accepted”, rather than paid, by the Drawee Bank upon determination that documents comply A bank “accepts” a draft drawn on it by placing the word “Accepted” on the face of the draft, dating and signing the notation This type of draft, payable in U.S dollars, drawn on and accepted by a bank, is a Banker’s Acceptance The accepted draft is the unconditional obligation of the Accepting Bank to pay

at maturity

When the Beneficiary (exporter) of a Letter of Credit agrees to Letter of Credit terms stating that payment will

be available by acceptance of drafts drawn at “60 days sight,” the Beneficiary is extending credit terms to the Applicant (buyer), by agreeing to wait 60 days for pay-ment Thus, when the Beneficiary presents conforming draft(s) and documents to the Paying-Accepting Bank,

it does not expect payment at “sight” but rather it expects the bank to “accept” the draft and to receive payment 60 days later

A Banker’s Acceptance is a time draft drawn on a bank which is accepted by the bank and is payable at a predetermined future date Once “accepted,” the draft becomes a marketable instrument which the Beneficiary may sell at a discount to any bank A Banker’s Accep-tance can provide an immediate source of funds for the Beneficiary and can simultaneously defer payment by the Applicant

Banker’s Acceptances are regulated in the U.S by the Board of Governors of the Federal Reserve System (the

“Board”) A time draft drawn on and accepted by any member bank of the Federal Reserve System (or any foreign bank subject to the International Banking Act reserve requirements) is a “Banker's Acceptance.” There are two types of Banker’s Acceptances—“Eligible Banker’s Acceptances” and “Ineligible Banker’s Accep-tances.” If a Banker’s Acceptance grows out of an eligible transaction, as defined by the Board, and involves a time draft with a tenor of six months or less, it

is an Eligible Banker’s Acceptance If it does not grow out of an eligible transaction or if it involves a draft with

a tenor of more than six months, it is an Ineligible Banker’s Acceptance

Eligible Banker’s Acceptances

Banker’s Acceptances of either type are permissible However, Eligible Banker’s Acceptances are favored by the Board Both types are freely negotiable The Board does not require the Accepting Bank to post reserves against Eligible Banker’s Acceptances This makes them more appealing to banks, increases the size of the Eligible Banker’s Acceptance market and lowers the overall cost to the Beneficiary The Banker’s Acceptance market is comprised of banks, brokers, other institutions and private investors who both buy and sell Banker’s Acceptances The cost of a Banker’s Acceptance is equal

to the discount rate determined by the market The dis-counting bank deducts the charge from the face amount

of the draft The balance of the draft is paid to the Ben-eficiary Alternatively, the charge may be paid by the Applicant if the Beneficiary and Applicant agree in ad-vance

Eligible Transactions

An Eligible Banker’s Acceptance must grow out of one of the following eligible transactions:

• The import or export of goods;

• The domestic shipment of goods; or

• The storage of readily marketable staples (A “readily marketable staple” is defined by the Board to mean manufactured goods or raw materials which are non-perishable, generally produced, well-established in commerce and have an easily ascertainable price.) The transaction underlying the Banker’s Acceptance must meet the following requirements of the Board: 1) The transaction must involve a draft (drawn on and accepted by any member bank of the Federal Reserve System or any foreign bank subject to the International Banking Act reserve requirements) with a tenor of six months or less

2) The transaction must be self-liquidating This means that the borrower is to apply the proceeds from the sale

or resale of the goods toward payment of the accepted

draft

3) The transaction must not involve dual financing

4) The goods covered by the transaction must be in the

“Channels of Trade.” Goods in the “Channels of Trade”

means goods which are being manufactured, packaged,

shipped, received, stored or resold

Eligible Banker’s Acceptance financing has been put

to a variety of uses Any individual, corporation or firm

involved in the shipment of goods payable in U.S

dollars should consider Banker’s Acceptance financing

as a short-term financing tool The following illustrates

how Banker’s Acceptance financing may be used

U.S Exports and Imports

Time Draft Export Letter of Credit:

Financing to the importer in connection with a

U.S export—In Illustration 12 on page 45 a Missouri

Beneficiary presents documents together with a 90 day

“sight” draft drawn on Citibank, New York, and requests

the draft be accepted Upon examination, Citibank

determines that the documents conform to the Letter of

Credit and also that the transaction meets the Board’s

requirements for Eligible Banker’s Acceptances It places

an “acceptance” stamp and also an “eligibility” stamp

on the face of the draft, thus creating an Eligible Banker’s

Acceptance (as illustrated on page 46, Illustration 13),

returns the accepted draft to the

payee-drawer-benefi-ciary, and forwards the documents to the Issuing Bank

Since the Beneficiary did not request that Citibank

discount the draft upon acceptance, the Beneficiary

holds the accepted draft and presents it at maturity to

Citibank for payment The draft matures and becomes

payable on November 3, which is 90 days from the date

on which the draft was accepted By agreeing to ship on

90-day terms the Beneficiary has granted credit terms to

the importer On an acceptance Letter of Credit, the

issuer’s and confirmer’s duty to honor is to accept and,

at maturity, to pay

Financing to the Beneficiary and the importer in

connection with a U.S export—Had the Beneficiary

requested that Citibank discount the draft upon

acceptance, Citibank would have purchased the accepted

draft from the Beneficiary at the time of acceptance and

would have paid the Beneficiary the net proceeds (face amount of the draft less the discount calculated at the then current market discount rate) The amount of the discount is calculated at Citibank’s discount rate for the discount period, i.e., the number of days from the date of purchase to the date of the draft’s maturity If the accepted draft had been discounted on August 5, for 90 days, at a rate of 8% per annum, the discount would be equal to two thousand dollars ($2,000.00) The calculation is the amount of the draft, times the discount rate, times the number of days until maturity, divided by

360 equals the discount ($100,000.00 x 8% x 90 ÷ 360 =

$2,000.00) The net amount paid to the Beneficiary would

be ninety eight thousand dollars ($98,000.00) Both the Beneficiary and the Applicant would receive financing:

the Applicant because it does not have to pay until the maturity date; the Beneficiary because it receives payment by discounting the draft immediately

Time Draft Import Letter of Credit:

Financing to the Beneficiary and the importer in connection with an overseas export—In Illustration 14

on page 47 an overseas Beneficiary extends credit to its U.S importer by using a Banker’s Acceptance (In the previous illustration, a U.S Beneficiary extends credit to its overseas importer by using a Banker’s Acceptance.) A Banker’s Acceptance in U.S dollars enables the overseas Beneficiary to sell the accepted draft and receive discounted funds immediately either from Citibank or from one of the dealers in the U.S

banker’s acceptance market

Illustrations 12 and 14 demonstrate that Banker’s Acceptance Financing in U.S dollars operates similarly for U.S exports and imports For exports to the U.S., the overseas Beneficiary draws a draft on a U.S bank The procedure for discounting drafts or paying at maturity

is the same for U.S exports and imports It is also the same for domestic shipments and for shipments between foreign countries in U.S dollars

Refinancing “Sight” Draft Letters of Credit

Financing to importers—Importers can use Banker’s

Acceptance financing in connection with “sight” draft Letters of Credit For example, a U.S importer can arrange for a Letter of Credit involving a draft payable at

44 “sight.” After payment under the Letter of Credit is made

to the Beneficiary and the Issuing Bank has debited the importer’s account, the importer may arrange for the bank to “refinance” the import for a specific period, for example 60 days, by using a Banker’s Acceptance

Under this arrangement, the importer draws a draft on its bank payable at 60 days “sight.” The bank accepts the draft, discounts it, and pays the face value of the draft, less the discount, to the importer At maturity, the importer is required to pay the full face value of the draft from the sale of the imported goods

Pre-Export Financing

A U.S exporter with a firm contract of sale may draw

a time draft on its bank The bank accepts the draft, discounts it, and pays the face value of the draft, less the discount, to the exporter The exporter uses the funds

to secure and prepare the goods for export The proceeds from the sale of the exported goods are used

to pay off the Banker’s Acceptance at maturity

Shipments within the United States

Shipments by land, rail, or other means of transporta-tion from one point to another within the U.S may be financed by Banker’s Acceptances in a manner similar

to international shipments

Storage within the United States or Overseas

Eligible Banker’s Acceptances created to finance the storage of goods must cover merchandise defined

as a “readily marketable staple” (i.e., coal, natural gas, petroleum, grain, precious metals, etc.) Title to any financed staple must be in the name of the accepting bank at the time the Banker’s Acceptance is created

Title to the goods is represented by a third party ware-house receipt or other document giving the accepting bank clear title at the time the Banker’s Acceptance is created

Collections

Import “sight” collections may be refinanced in the same manner as “sight” draft Letters of Credit, as discussed above Export collections may be financed as discussed in Pre-Export Financing

Ineligible Banker’s Acceptances

Although generally less attractive than Eligible Banker’s Acceptances, Ineligible Banker’s Acceptance financing may be an attractive alternative to direct borrowing during periods when bank funds are limited and customers’ borrowing needs are extraordinary

An “Ineligible Banker’s Acceptance” involves a draft(s) drawn on and accepted by any member bank of the Federal Reserve System or any foreign bank subject

to the International Banking Act reserve requirements and has the following characteristics:

• the transaction does not meet the Board’s requirements i.e., the draft has a tenor longer than six months or does not involve the import or export of goods, the domestic shipment of goods, or the storage of readily marketable staples;

• the drafts are typically discounted at a higher rate;

• the discounting bank may be required to post reserves; and

• the drafts are marked “Ineligible” on their face Importers and exporters needing to finance merchandise, internationally or within the U.S., should investigate Banker’s Acceptance financing At times, such financing may be more advantageous than direct borrowing During periods of “tight money” (when banks have limited funds to meet all customer borrowing needs), banks may be willing to provide Banker’s Acceptance financing despite a limited availability of funds for direct loans

Illustration 12 – Export Letter of Credit – ACCEPTANCE FINANCING

Citibank, N.A.

New York, New York

Confirmed Irrevocable Straight Letter of Credit May 11, 20_

Mail To: The Missouri Corporation

1000 Broadway Citibank Ref 30030029

St Louis, MO 91230 Issuer’s Ref 1500

Ladies and Gentlemen:

At the request and for the account of The Royale German Bank, Frankfurt, Germany we are

advising you that it has issued this Irrevocable Letter of Credit in your favor for the account of The

German Export Co., for a sum or sums not exceeding a total of U.S $100,000.00, available with

Citibank, N.A by acceptance of your draft(s) at 90 DAYS AFTER SIGHT on us subject to the

following:

Expiration Date: August 22, 20_ Latest Shipping Date: August 1, 20_

Transshipment not allowed Partial shipment not allowed

Shipment from: Port of New York, NY Shipment to: Port of Bremen, Germany

and accompanied by the following documents:

1) Full set original On Board Ocean Bills of Lading issued to order, blank endorsed, notify the

buyer, marked “Freight Prepaid.”

2) Full set Marine Insurance Policy or Certificates, including War Risks, losses payable to the

order of the assured and endorsed in blank.

3) Commercial invoice, original and two copies, stating that it covers: “5000 yds window

screening, C.I.F Bremen.”

4) Packing list in triplicate showing goods packed in plastic containers.

This Letter of Credit must accompany all draft(s) and documents When presenting your draft(s)

and documents or when communicating with us you must mention our reference number shown

above.

The issuer of this Letter of Credit engages with you that each draft drawn under and in compliance

with the terms of the Letter of Credit will be duly if presented on or before the expiration date.

We confirm this Letter of Credit and hereby undertake with you to honor each draft drawn and

presented with the above specified documents if presented to us at Citicorp North America, Inc.,

Servicer for Citibank, N.A., 3800 Citibank Center, Bldg F, 1st Floor, Sort 3000, Tampa, Florida

33610, or such other address as we may advise from time to time.

This Letter of Credit is subject to the Uniform Customs and Practice for Documentary Credits

(1993 Revision), International Chamber of Commerce Publication 500 (the “UCP”) Our

confirma-tion to you is subject to the UCP and, as to matters not addressed by the UCP, is subject to and

governed by New York State and applicable U.S federal law.

Sample Letter of Credit

Authorized Signature

Citibank, N.A.

New York, New York

Confirmed Irrevocable Straight Letter of Credit May 11, 20_

Mail To: The Missouri Corporation

1000 Broadway Citibank Ref 30030029

St Louis, MO 91230 Issuer’s Ref 1500

Ladies and Gentlemen:

At the request and for the account of The Royale German Bank, Frankfurt, Germany we are advising you that it has issued this Irrevocable Letter of Credit in your favor for the account of The German Export Co., for a sum or sums not exceeding a total of U.S $100,000.00, available with

Citibank, N.A by acceptance of your draft(s) at 90 DAYS AFTER SIGHT on us subject to the

following:

Expiration Date: August 22, 20_ Latest Shipping Date: August 1, 20_

Transshipment not allowed Partial shipment not allowed Shipment from: Port of New York, NY Shipment to: Port of Bremen, Germany

and accompanied by the following documents:

1) Full set original On Board Ocean Bills of Lading issued to order, blank endorsed, notify the buyer, marked “Freight Prepaid.”

2) Full set negotiable Marine Insurance Certificates, including War Risks.

3) Commercial invoice, original and two copies, stating that it covers: “5000 yds window screening, C.I.P Bremen.”

4) Packing list in triplicate showing goods packed in plastic containers.

This Letter of Credit must accompany all draft(s) and documents When presenting your draft(s) and documents or when communicating with us you must mention our reference number shown above.

The issuer of this Letter of Credit engages with you that each draft drawn under and in compliance with the terms of the Letter of Credit will be duly if presented on or before the expiration date.

We confirm this Letter of Credit and hereby undertake with you to honor each draft drawn and presented with the above specified documents if presented to us at Citicorp North America, Inc., Servicer for Citibank, N.A., 3800 Citibank Center, Bldg F, 1st Floor, Sort 3000, Tampa, Florida

33610, or such other address as we may advise from time to time.

This Letter of Credit is subject to the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication 500 (the “UCP”) Our confirma-tion to you is subject to the UCP and, as to matters not addressed by the UCP, is subject to and governed by New York State and applicable U.S federal law.

Sample Letter of Credit

Authorized Signature

46

Illustration 13 – Export Letter of Credit – BANKER'S ACCEPTANCE

Illustration 14 – Import Letter of Credit – ACCEPTANCE FINANCING

Citibank, N.A.

New York, New York

Irrevocable Negotiation Letter of Credit December 10, 20_

Mail To: Citibank, N.A.

Sao Paulo, Brazil Citibank Ref 10020000

Ladies and Gentlemen:

At the request and for the account of The City Coffee Servers, Inc., New York we hereby issue our

Irrevocable Letter of Credit in favor of The Brazilian Coffee Growers Inc., Sao Paulo, Brazil for a

sum or sums not exceeding a total of U.S $190,000.00, available with you by negotiation of the

beneficiary’s draft(s) drawn at 90 DAYS SIGHT on us subject to the following:

Expiration Date: June 22, 20_ Latest Shipping Date: June 1, 20_

Transshipment not allowed Partial shipment not allowed

Shipment from: Brazil Shipment to: New York, New York

and accompanied by the following documents:

1) Full set original On Board Ocean Bills of Lading issued to order, blank endorsed, notify the

buyer, marked “Freight Prepaid.”

2) Full set Marine Insurance Policy or Certificates, including War Risks, losses payable to the

order of the assured and endorsed in blank.

3) Commercial invoice, original and two copies, stating that it covers: “25,000 bags of coffee,

C.I.F New York.”

This Letter of Credit must accompany all draft(s) and documents and must be presented for

negotiation within 21 days after the date of shipment shown on the Bill of Lading but within the

expiration date The negotiating bank is to forward all drafts and documents listed herein by airmail

in a single lot to us at Citicorp North America, Inc., Servicer for Citibank, N.A., 3800 Citibank

Center, Bldg F, 1st Floor, Sort 3000, Tampa, Florida 33610, stating our reference number above.

We hereby undertake with you and the beneficiary that drawings presented in conformity with the

terms of this Letter of Credit will be honored if presented for negotiation on or before expiration and

accepted drafts will be paid at maturity.

This Letter of Credit is subject to the Uniform Customs and Practice for Documentary Credits

(1993 Revision), International Chamber of Commerce Publication 500 (the “UCP”) and, as to

matters not addressed by the UCP, is subject to and governed by New York State and applicable U.S.

federal law.

Sample Letter of Credit

Authorized Signature