Letter of credit by Nagarajan V.
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The document discusses various payment methods in international trade: 1) Advance payment is when the buyer pays upfront before the seller ships goods. 2) A letter of credit (LC) is when a bank guarantees payment to the seller if documents meet terms, providing security for both buyer and seller. 3) Documentary collection involves the seller shipping goods first and then sending documents to the buyer's bank for payment, providing more security for the buyer. 4) Direct payment is when the seller ships goods and waits for payment from the buyer, providing more security for the buyer.
![Advance payment (most secure for seller)
Where the buyer parts with money first and waits for the seller to forward the goods
Documentary Credit LC (more secure for seller as
well as buyer)
where the bank gives an undertaking (on behalf of buyer and at the request of applicant) to pay
the shipper (beneficiary) the value of the goods shipped if certain documents are
submitted and if the stipulated terms and conditions are strictly complied with.
Documentary collection (more secure for buyer
and to a certain extent to seller)
Also called "Cash Against Documents" where shipment happens first, then the title documents
are sent to the [collecting bank] buyer's bank by seller's bank [remitting
bank], for delivering documents against collection of payment/acceptance
Direct payment (most secure for buyer)
Where the supplier ships the goods and waits for the buyer to remit the bill proceeds, on
open account terms.](https://image.slidesharecdn.com/letterofcreditxmba22nagarajanv-120501211225-phpapp02/85/Letter-of-credit-by-Nagarajan-V-2-320.jpg)
Letter of credit by Nagarajan V.
- 1. Nagarajan V. XMBA 22
- 2. Advance payment (most secure for seller) Where the buyer parts with money first and waits for the seller to forward the goods Documentary Credit LC (more secure for seller as well as buyer) where the bank gives an undertaking (on behalf of buyer and at the request of applicant) to pay the shipper (beneficiary) the value of the goods shipped if certain documents are submitted and if the stipulated terms and conditions are strictly complied with. Documentary collection (more secure for buyer and to a certain extent to seller) Also called "Cash Against Documents" where shipment happens first, then the title documents are sent to the [collecting bank] buyer's bank by seller's bank [remitting bank], for delivering documents against collection of payment/acceptance Direct payment (most secure for buyer) Where the supplier ships the goods and waits for the buyer to remit the bill proceeds, on open account terms.
- 3. A letter of credit is a Promissory Note. LC LC Revocable Irrevocable At Site Time & LC LC LC Date LC
- 5. Financial Documents Bill of exchange , Co-accepted Draft Commercial Documents Invoice , Packing list Shipping Documents Transport Documents, Insurance Certificate, Commercial, Official or Legal Documents Transport Documents Bill of Lading (ocean or multi-modal or Charter party), Airway bill, Lorry/truck receipt, railway receipt, CMC Other than Mate Receipt, Forwarder Cargo Receipt, Deliver Challan...etc Official Documents License, Embassy legalization, Origin Certificate, Inspection Certificate, Insurance documents Insurance policy, or Certificate but not a cover note.