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APPLICATION FOR LETTER OF CREDIT ISSUEANCE 1.1.Fundamental theory on documentary credit1.1.1.Documentary credit Definition: A document credit is the written promise of a bank, undertake

INTRODUCTION 4

ABBREVIATION ……… 5

CHAPTER 1 APPLICATION FOR LETTER OF CREDIT ISSUEANCE 6

1.1.Fundamental theory on documentary credit 6

1.1.1.Documentary credit 6

1.1.2.Parties to a documentary credit 6

1.1.3.Documentary credit procedure 7

1.1.4.Letter of credit 8

1.2 PROCEDUE TO OPEN A LETTER CREDIT 14

1.2.1 Request to open L/C 14

1.2.2 Check L/C content 15

1.2.3 Amendment of L/C 15

1.2.4 Receive and check documents 15

1.2.5 Request to issue guarantee/authorization to receive goods under L/C 15

1.2.6 Payment 16

1.2.7 Revoke L/C 16

1.3.Filling in the application for letter of credit issueance 16

CHAPTER 2: PREPARATION THE DOCUMENT PACKAGE AS L/C IN DOCUMENTARY CREDIT 24

2.1 Introduction to documents used in documentary credit 24

2.1.1 Bill of Lading 24

2.1.2 Commercial invoice 28

2.1.3 Packing list 29

2.1.4 Quality/Quantity certificate ( C/Q) 29

2.1.5 Certificate of origin ( C/O) 29

2.1.6 Insuarance certificate 30

2.2 Standard for issuance and examination of documents under UCP 600 and ISBP 745 31

2.2.1.Complying presentation 31

2.2.2.Standard for issuance and examination of documents under UCP 600 and

ISBP 745 31

2.3.Preparing the documents package base on the given L/C 34

CONCLUSION 35

REFERENCES……… 36

APPENDIX………44

In the trend of internationalization strong economy, the most advanced economicfoundation of regional and world economy On 11 January 2007, the Government ofViet Nam became the 150th member of the World Trade Organization (WTO) This

is an important event that opens opportunities and challenges for the Vietnameseeconomy to deepen and broaden integration into the world's economies and furtheraccelerate industrialization and modernization Foreign economic relations ingeneral and trade and investment activities in particular, with countries in the worldhave been expanding and developing, affirming the fuller position and role ofVietnam in the world community The opening up of international trade andinvestment relations has become more and more widespread, necessitating thecontinuous development of international payment, monetary and banking relations.There are many payment methods in international trade such as money transfer,collection, debit book, letter credit However, the method of international paymentfor money transfer, collection has not yet guaranteed the interests of exportersbecause it has not tightly constrained payment obligations of importers So, unlessthere is mutual trust between the exporter and the importer, otherwise the creditdocument payment method Payment by this method will closely tie theresponsibility of the seller and the buyer Because of the above reasons, I would like

to present details, method of credit document in the dissertation of internationalpayment

10 ISBP International standard banking practive for the examination of

documents under documentary of credits

CHAPTER 1 APPLICATION FOR LETTER OF CREDIT ISSUEANCE 1.1.Fundamental theory on documentary credit

1.1.1.Documentary credit

Definition: A document credit is the written promise of a bank, undertaken on behalf of a buyer,to pay the seller the amount specificed in the credit provided the seller complies with the terms and conditions set forth in the credit

1.1.2.Parties to a documentary credit

There are four main parties to a basic documentary letter of credits transaction

a Applicant (buyer /Importer)

Applicant initiates the documentary credits process by applying to his bank to open a documentary credit naming the seller as the beneficiary The applicant, therefore may be called the buyer in commercial terms, the importer in economic terms, and the applicants in the banking terms They are all one and the same

b Issuing bank (Opening bank)

Upon instructions from the buyer, the issuing bank issues a documentary credit naming the seller as the beneficiary and sends it to the advising bank

c Advising bank (Correspondent bank)

Upon instructions from the issuing bank and the buyer, advising bank advises the seller of the credit Advising bank is typically the seller's regular business bank and is in the seller's country

d Beneficiary (exporter/ seller)

The beneficiary receives notification (advise) of the credit from the advising bank, complies with theterms and conditions of the credit and gets paid

Beneficiary therefore may

be called the seller in commercial terms, the exporter in economic terms and the beneficiary in banking terms They are all one and the same

e Other parties involved in a documentary credit:

Paying bank: The bank nominated by issuing bank to make payment to the beneficiary

Negotiating bank: This refers to the bank which negotiates a draft under a letter of credit

Confirming bank: the bank that guarantees payment to the beneficiary in the event of non-payment by the issuing bank provided that the documents comply with the terms and conditions of the letter of credit

Reimbursing bank: the bank appointed by the issuing bank to provide

repayment to the negotiating bank for negotiations effected under the LC It may

be the issuing bank itself, another bank in the beneficiary’s country

1.1.3.Documentary credit procedure

2 Issuing bank acting on the request and issues a letter credit in favour of the seller and sends it to the advising bank named in the credit

3 The advising bank informs (advises) the seller of the letter credit

4 The seller on receipt of LC, examines LC to make sure that he or she is satisfied that it meets the terms and conditions of the sales contract and the seller can meets the LC terms and conditions, then the seller ships the goods to the buyer

5 One shipment is made, the seller will present the relevant documents called for in the credit to his bank (advising bank) or to the bank where

(7)

(9)(8)

(2)(5)

(3)

Goods(4)

9 The buyer makes payment to the bank and bank releases the document

to the buyer to enable him to receive the goods

1.1.4.2.Functions of a letter of credit

There are three major functions a lettter of credit performs:

Under a L/C transaction, the bank may negotiate shipping documents presented

by the beneficiary, provided that the documents comply with terms and conditions

of the L/C, Besides, when usance L/C is used, it is the way that banks grant credit for the buyers

1.1.4.3.Contents of letter of credit

a) L/C number

L/C number must state on all L/C It is useful for banks to communicate with each other It also used to write on some financial documents as well as shipping documents such as bill of exchange, bill of lading or other documents

b) Date of issue

Date of issue is a day that issuing bank's payment engagement (undertaking)

to beneficiary comes into force L/C may be issued in full teletransmission (TELEX

or SWIFT) or airmail transmission L/C issued by teletransmitssion is faster than by airmail transmitssion and the credit can be authenticated by the test numbers found

on the transmission Electronic letter of credit transferred through a system of

Society for Worldwide Interbank Financial Telecommunication (SWIFT) from opening bank to advising bank is very common nowadays.

Date of issue has some meanings:

 Date of issue is a day to calculate the L/C’s validity L/C comes into effect from date of issue to date of expiry

 Bank undertaking to pay the beneficiary comes into effect from this day

 It helps the seller to check whether the buyer open L/C on the time stipulated in the the sales contract or not

c) Place of Issue

Place of issue is where the bank open a letter of credit This palce often relates

to which law is choosen when L/C related parties have disputes

d) Form of documentary credit

L/C must indicate which type L/C belong to

e) Name and addresses of related parties

The full name and address of related parties (applicant, beneficiary, issuing bank advising bank ) must be correctly stated in L/C

h) Validity of the credit, time of payment, period of presentation

 Validity of the credit: Validity of the credit is counted from date of issue to date of expiry Expiry date is the latest date for presentation of documents called for in the L/C, for payment, acceptance or negotiation

 Time of payment: depend on L/C at sight or usance L/C If L/C is at sight, time of payment is within the validity of the credit, if not time of payment may be after the expiry date

 Period of presentation: This period is stipulated in L/C The latest date for presentaion is expiry date If documents arc presented after this date, banks have right to refuse documents.

To ensure that the shipping documents are sent to the buyer without delay, a clause such as “Documents must be presented to negotiating bank not later than X days after the date of issuance of shipping documents but within the validity of the credit" may be included in the L/C If the time period is not stated in the credit, the deadline for presentation will be 21 days after the date of shipment accoding to UCPrules Article 14(c)

i) Description of Goods and/of Services

Description of the goods must be in brieft Excessive and detailed descriptions

of the goods are discouraged by the banks Sales contract can be referenced in L/C

as follows: "All other details are as per contract no 08-20xx dated 18th august

All charges and expenses of the credit will be born by the applicant unless it is stated in the credit that all such charges are for the account of the beneficiary If this

is not stated, it is up to the negotiation bank to claim such charge from the issuing bank in addition to the bill amount

m) Issuing bank’s undertaking

Letter of credit is an irrevocable commitment of issuing bank to honor a

complying presentation This commitment must be stated in L/C

n) Other terms and conditions

1.1.4.4.Type of letter of credit

a Revocable L/C

Revocable credits can be amended or cancelled at any time right up to the moment of intended payment without approval by, or notice to, the seller Because itoffers little security, this form is hardly ever used

b Irrvocable L/C

An irevocable letter of credit constitutes a firm contractual obligation on the part of the issuing bank to honor the terms of payment of the credit as issued The buyer and issuing bank can not amend or cancel the credit without the express aproval of the seller

In this type of letter of credit, the issuing bank (buyers bank) commits itself irrevocably to honor its obligation under the credit, provided that required

documents comply with terms and conditions of the Letter of Credit Thus the

beneficiary receive a firm undertaking of the issuing bank, giving him the security him desire

c Irrevocable, unconfirmed L/C

Irrevocable L/C always involve a commitment on the part of the issuing bank

to pay In this case, the advising bank does not make any payment commitment It merely acts on behalf of the issuing bank

d Irrevocable, confirmed L/C

Irrevocable confirmed letter of credit carry' the commitment to pay of both the issuing bank and the confirming bank The confirming bank undertakes to honor its commitments regardless of whether or not the issuing bank is in a postion to

reimburse

Irrevocable confirmed letter of credit give the seller the greatest protection, since the seller can rely on the commitment of two bank to make payment.

e Standby letter of credit

Standby L/C is a Document Credit or similar arrangement, which represents

an obligation to the Beneficiary on the part of the Issuing Bank to:

 Repay money borrowed, or advanced to or for the account of aplication,

 Make payment on A/C of any indebtedness undertaken by applicant,

 Make payment on A/C of any default by the applicant in the performance obligation

A standby letter of credit is similar to a guarantee The opening of standby credit by the buyer serves as a guarantee to seller that he will honor the contract and makes his payment to the seller when shipment is made Under a standby credit, the bank only pays the beneficiary of the credit upon the presentation of a declaration that the credit applicant (buyer) has failed to fulfill the contract and other supporting documents The beneficiary only draws under the credit in the event of a default situation committed by the applicant (buyer)

The Standby L/C thus served as a back up or secondary means of payment The difference in application between commercial L/C and Standby L/C is that the commercial L/C is generally utilized in the sale of goods transactions Its purpose is

to assure the seller that upon presentationof appropriate documents, the obligation ofthe buyer to pay will be performed The Stand by L/C ,s sometimes used in sale of goods transactions, but it is applied in an unlmuted variety of other situations It is Intended to assure a party to a contractor other party will perform its obligations That obligation may be manufacture or delivery of goods and services, payment of the price, compliance with quality or performance standards, or the fulfilment of other contractual obligation A stanby letter of credit, in this sense, is similar in function to a performance guarantee

f Revolving credit

Revolving credit is a commitment on the part of the issuing bank to restore the credit to the original amount after it has been used The number of uses and the period of time within which these must take place are specified in the credit

It is either cumulative (accepted) or non-cumulative:

 Cumulative means that used sums can be added to the next installment

 In the case of non-comulative credits, partial amounts arc not used after the time has expired

Revolving credit is often used in situations where a buyer and seller agree that goods will be shipped on a continuing basis and where the parties to credit wish to establish one credit to handle all the shipment rather than to establish individual letter of credit for each shipment

g Transferable L/C

The beneficiary specified in the transferable L/C has the option of instructing his

or her bank to transfer the credit fully or in part to one or more other parties, who become second beneficiaries

Under the transferable credit, the documents should be demanded in such a way that they can also be used for the original credit

Of course, the intermediate has the right to replace the invoice from the

transferred credit with his own

The insurance amount should be established for the transfer In such a way that it

at least covers the insurance amount prescribed in the original credit

Unit prices and credit amount can be reduced

Delivery period and validity period can be shortened

Transferable documentary credits are commonly used in the situations where the business deal is made between a buyer and a seller through a middleman

h Back to back credit

Back to back credit is a new credit opened on the basis of an already existing, nontransferable credit (original credit) In favor of another beneciary (hence the name, back to back)

As the name implies, a back-to back letter of credit Is actually two distinct letter

of credit The first L/C Is called master L/C and the second L/C (bases on the first L/C) is called back-to-back L/C

A back-to back L/C is used in situations where the master credit is not

transferable and in the situations where the business deal Is made between a buyer and a seller through a middleman

1.2 PROCEDUE TO OPEN A LETTER CREDIT.

1.2.1 Request to open L/C

a Sources of capital to ensure the payment by L/C

In case the contractual parties agreed to pay by L/C, the client need to consider the source of capital to pay for L/C that they will ask the bank to open.

- L/C issued by equity capital, customers must deposit 100%

- L/C issued by equity capital, the customer does not deposit 100% and/or request free, reduced deposits

- L/C issued by the Bank's loan

b Application for opening L/C

After considering the source of capital, the customer base on the content of the contract to apply the bank issues L/C For convenience, the bank has a preprinted form in accordance with the standard of ICC and International SWIFT

After completing the application for opening L/C, the customer need to present the following documents at the bank:

 Application for opening L/C (in form)

 A copy of the foreign trade contract or paper equivalent to the contract

 Business registration (for the first time)

 Commitment contract, payment of credit (loan case), dispatch approval for open l/c deferred of commercial banks of Vietnam (case open L/C deferred)

 Purchase of foreign currency (if applicable)

 The exposition open L/C's credit bureau established branch was Branch

Manager or the person authorized to approve Directors (under 100% escrow case value of L/C)

 A copy of Import and export registration code-if available (for first time)

 The import permit issued by the Ministry of Trade or the specialized

management ministry (for conditional import goods)

 After considering the source of capital to ensure the payment of L/C of

customers, the bank will decide the issuing of L / C

 Particularly for the import by the Government loans and ODA, apart from the above mentioned regulations, the customer should send documents to the bank such as approving the use of government loans and ODA of the MinistryFinance, the approval by the financing organization

1.2.2 Check L/C content

After the bank issues the L/C, customers will receive a copy of the L/C.Customer should compare the contents of the L/C with your request to ensure that

the L/C is fully in accordance with the contract and with the requirements of theirand at the same time notify the bank of any deviations immediately.

1.2.3 Amendment of L/C

If customers want to amend L/C, customent have to present L/C amendmentletter (in form) with written agreement between buyer and seller (if any)

1.2.4 Receive and check documents

Customers will receive documents under L/C at the bank After receiving thedocument, customers need to check the comparison between the L / C and thereceived documents, in case there are differences between L/C and documentswithin 05 working days Let the bank to complain to foreign banks

The bank will deliver documents when you accept the payment of documentsand related costs (if any)

1.2.5 Request to issue guarantee/authorization to receive goods under L/C

The bank will issue guarantee for receipt of goods when there is no originalbill of lading or the letter of authorization to receive goods or endorsement bill oflading so that you can receive goods under L/C

Conditions for banks to issue letter of guarantee - letter of authorization toreceive goods, endorsement of original bill of lading:

- You need to deposit 100% of the invoice value, or authorize the bank tofreeze the corresponding amount on the deposit account or debit the loan accountwhen payment and depending on the case you need to present the paper thefollowing:

Issue of letter of guarantee for receipt of goods: Customers must have letter ofrequest for issuance of guarantee (form) with 01 copy of bill of lading or airwaybill and 01 copy of invoice sent directly by the exporter

Issue letters of authorization for receipt of goods: Customers must have letters

of request for issuance of goods receipt certificates (made according to a setform), enclosed with 01 original of air waybills, inscribed with the goodsconsignees being banks enclosed with 01 copy of invoices

The endorsement of the bill of lading: the customer must have a letter ofrequest for endorsement of the bill of lading (one copy) attached with oneoriginal of the bill of lading and one copy of the invoice

1.2.6 Payment.

The bank will deduct money from the specified account of the customer topay to the foreign bank according to the L/C content when receiving the documentcompletely follow by the terms and conditions of L/C

1.2.7 Revoke L/C.

Customer doesn't cancel the L/C if:

- The customer has received the goods through the bank's guarantee

- Trade disputes have occurred Both parties agree to cancel L/C but the Bank

haven't approved

1.3.Filling in the application for letter of credit issueance

RHEEGEND VIETNAM Co.,Ltd

Address: Block 2-CN5, Small and medium industrial zone, Minh Khai Ward, North

Tu Liem district, Ha Noi, Vietnam

Tel: 84.4.3780.5378

Fax: 84.4.3780.5378

A/C (USD): 0774-001244-20-001 BIDV Hanoi Branch

A/C (VND): 0774-001244-20-002 BIDV Hanoi Branch

The Sellers:

RHEEGEND INDUSTRIAL CO.,LTD

Address: A-705,Jungang Circulation Complex,1258 Kuro-Bon

Dong,Kuro-Gu,Seoul,Korea

TEL:0082-2-2619-1625

FAX:0082-2-2619-1627

A/C: 802-068-03-100091 (USD) KDB BANK

Add: 16-3, Yeouido-dong, Yeongdeungpo-gu, SEOUL

ARTICLE 1: COMMODITY SPECIFICATONS, QUANTITY AND PRICE:

Good

Quantity (PCS)

Unit price (USD)

Amount (USD)

0

0The total contract value: US 33,660.000 Dollars

(In words: United States Dollars Thirty Three Thousand, Six hundred and Sixty only./.)

ARTICLE 2: QUALITY-PACKING- ORIGIN

 Quality : Brand new as agreement

 Packing : In export Standard

 Origin : CHINA

ARTICLE 3: SHIPMENT TERMS

 Shipped from : HONGKONG, CHINA

 Shipped to : HAIPHONG, VIETNAM

 Date of shipment: 30-Sep-17

 Trans-shipment : Allowed

 Partial shipment : Allowed

 Shipment terms : CIF

In case of the goods cannot sell in Vietnam's market or error materials (due tosupplier's faults), these will be returned to the seller or the others representing for it

ARTICLE 4: PAYMENT TERMS

 By Irrevocable Letter of Credit ai sight in favor of RHEEGENDINDUSTRIAL CO.,LTD

 Document for payment: Full cable covering 100% of value that should bepaid against the following documents which shall be presented within 30 daysafter Bill of Lading date but within L/C validity (unless otherwise stated):+ Ocean (Clean on Board) Bill of Lading made out “To order of issuing bank”,marked “Freight Prepaid” in 2/3 set

+ Commercial invoice in triplicate

+ Packing list in triplicate

+ Certificate of quality in triplicate issued by the Seller

+ Certificate of origin in triplicate issued by the Seller

+ The Seller’s confirmation in triplicate advising the Buyer the shippingparticulars

+ Insurance Certificate covering 110% of the contract value

+ Third party documents are acceptable

 Advising bank: Korea Development Bank KDB

Address : 16-3, Yeouido-dong, Yeongdeungpo-gu, SEOUL

Address : 47 Phan Dinh Phung street, Quan Thanh Ward, Ba Dinh District,

Ha Noi, Viet Nam

ARTICLE 5: DOCUMENTS REQUIRED

 3/3 original clean bill of lading

 Commercial Invoice in 1 original sell’s commercial and 2 copies

 Packing List in 1 original and 2 copies

 Sales Contract with both sign

 Insurance certificate

ARTICLE 6: ARBITRATION

Any disputes in connection with this contract to be not settled amicable shall bereferred to Vietnam international arbitration center, beside chamber of commerceand industry of Vietnam The arbitration fee and other charge shall be born by theloosing party, unless otherwise agreed

ARTICLE 7: GENERAL TERM

Both sides undertake to execute strictly all the articles of this contract, anyamendments or additions to this contract shall be made in writing and signed byauthoritative of both sides This contract is made in 02 set which confirm by fax oremail 01 of which retained by each party, and shall come in force from the signingdate

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KÝnh göi: Ng©n hµng BIDV

chi nh¸nh Tay Ho

Yªu cÇu quÝ Ng©n hµng më cho chóng t«i b»ng  Th,  §iÖniÖn

Irrevocable,  Confirmed,  Transferable documentary credit víi nh÷ng ®iÒu kho¶n vµ ®iÒu kiÖn sau ®©y:

For Bank Credit No: Date of issue:

Applicant

RHEEGEND VIETNAM Co.,Ltd

Address: Block 2-CN5, Small and medium

industrial zone, Minh Khai Ward, North Tu

Liem district, Ha Noi, Vietnam

Full name and Add

Beneficiary.

RHEEGEND INDUSTRIAL CO.,LTD Address: A-705,Jungang Circulation Complex,1258 Kuro-Bon Dong,Kuro-Gu,Seoul,Korea.

Available by Beneficiary's Draft for 100 % invoice value

At sight .Drawn on accountee

After days, calculated from date of Drawn on yourselves

.Drawn on your correspondents

At your option

Accompanied by the following documents as checked:

 Sight commercial invoice in triplicate

 Clean on board ocean Bill of Lading in complete set at least 2 original signed copies and notify the accountee

Detailed packing list in triplicate

 Insurance Policies (or Certificates) covering … by the seller … for 110 % invoice. by the seller … by the seller … for 110 % invoice. for 110 % invoice.

 Test/Inspection certificate issued by

 Copy of cable/telex advising shipment particulars to

 Receipt of shipmaster acknowledging due receipt of all document in non-negotiable copies of each documents for handling same over at destination port.

 Other documents: C/0 Triplicate , Certificate of quality triplicate

Term of shipment (FOB, C&F, CIF etc.) : CIF

Shipment from HongKong China to Hai Phong , Vietnam

Latest date of shipment: 170930

Transhipment

 Permitted  Not permitted

Partial shipment

 Permitted  Not permitted

Documents must be presented not later than 30 days after date of shipping document but within validity of the credit

Goods: YICAP – Electronic component

Brand new

Other terms and conditions as per Sale Contract/Proforma Invoice/Purchase Order

No VOD-ETC-170727-02 dated 170920

Special Instructions

In case of the goods can not sell in VietNam s market or error materials, these will be returned to the seller or the @

others representing for it