"Corporate practice"
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| Corporate practice bd |
Ans:-
LC stands for Letter of credit /documentary credit which issued by a bank in favor of importer to the exporter or his bank against delivery of goods/services in respect to the presentation of valid documents as per terms & conditions which are already specified in the Letter of credit(LC). It is the worldwide most popular payment method for international trade business.
Who can issue letter of credit (LC) documents?
under the international chamber of commerce (ICC) & member of Uniform Customs and Practice (UCP) countries banks by following the rules & regulations may issue letter of credit (LC) documents.
Kinds of letter of credit(LC)
01. Import/Export LC
02. Recoverable LC
03. Back to Back LC etc.
04. Irrecoverable LC
05. Confirm LC
06. Unconfirmed LC
07. Transferable LC
08. Un transferable LC
09. Deferred LC
10. AT sight LC
11. Standby LC :-
But Nowadays there are two types of letters of credit (LC), most commonly used in Bangladesh. Let's starts to know these type of LC........
01. Deferred LC:-
This type of Letter of credit (LC) states the payment will not be given immediately. The seller will receive a payment after a certain period of time mentioned in the letter of credit. The issuing bank may review the documents early but the payment is made only after the agreed-upon time.
02. AT sight LC:-
This type of Letter of credit (LC) states that the payment will be given immediately to the beneficiary /exporter/seller upon the presentation of correct documents to the bank. The bank after taking necessary action and recommended discounting the bill 100% of LC value after charging the bank charge.
Now we are going to discuss some types of letters of credit (LC):-
03. Back to Back LC (BTB LC):-
This is a special type of Letter of credit (LC) which is originally issued on behalf of of a customer against the Export Letter of credit (LC) for procurement of raw materials. The importer's export LC is usually used as a security for opening Back to Back LC (BTB) LC.
This LC is commonly used for special procurement of raw materials like,(Raw cotton, Dyeing chemicals), etc. It is noted that 100% export-oriented garment industry that has already bonded warehouses are allowed to import their raw materials free of duty.
04. Revocable LC:-
This is an uncommon type of letter of credit being their lack of existence capability that means this LC can be changed or canceled by the bank that issued it at any time and or any reason.
05. Irrevocable LC:-
On the other hand ,
Irrevocable Letter of credit (LC) most popular being they're of existence capability that means this LC can not be changed or canceled or any modification by the bank that issued it without concern the all parties agree.
06. Confirmed LC:-
When issuing bank may request the advising bank to add its confirmation on the Letter of Credit (LC), The advising bank by agreeing to add confirmation and will undertake to pay the beneficiary(Seller) if all terms & conditions of LC are complied with.
07. Unconfirmed LC:-
Under this type of Letter of credit (LC), the advising bank is unable to take any confirmation or guarantee but merely inform to the seller or beneficiary about the LC terms & conditions .
08. Revolving LC:-
It is a type of Letter of credit which structured in a way so that it revolves either in value or in time covering several shipments under a single letter of credit.
09.Transferable LC:-
This type of letter of credit(LC) the first beneficiary which is usually a middleman may request the nominated bank to transfer credit in whole or in part to the Second beneficiary party.
10. Standby LC :-
Under this type of Letter of credit (LC) a bank guaranteed to payment on behalf of the client if he/she fail to fulfill the contractual commitment with a third party.
The end ....(Series class-01)........