Why is it common to use letters of credit as a means of payment in the international sale of goods?

A documentary letter of credit is a conditional payment commitment from a bank to an exporter. For the exporter, it has obtained the bank's credit, as long as it is consistent with the provisions of the letter of credit, "the documents are consistent", the bank will guarantee the payment. For the importer, he can ensure that the export is only delivered on time and in quantity through the documentary requirements of the letter of credit.

Because of this, letters of credit are used as a common means of payment in the international **.

Generally speaking, the letter of credit is a relatively safe means of payment, which is beneficial to both parties, especially when doing it with new customers or companies with poor qualifications. Because the payment method of the letter of credit is bank credit, in addition to the parties to the transaction, there is also the bank to guarantee the interests of both parties. If there are many times, mutual understanding and trust can take the form of pre-t t t or post-t t t.

Because the letter of credit is the reputation of the bank and not the business reputation, you may not trust your partner, but the reputation of the bank can be trusted, of course, it also depends on the bank in what country. The bank bears the responsibility of the first payment, even if the issuer has a bad reputation or even bankruptcy, as long as the letter of credit is issued, it can guarantee the receipt of payment. Moreover, the letter of credit is a document business, with a very standardized operating process and relevant regulations, which is easy to be received by both parties.

Because the letter of credit is a bank credit, it is a conditional payment commitment of the issuing bank to the beneficiary, that is, as long as the beneficiary (seller) acts in accordance with the provisions of the letter of credit (including the submission of documents that meet the provisions of the letter of credit), the issuing bank will guarantee the payment to the beneficiary - the buyer and the seller can avoid certain risks through this way of bank intervention - such as the buyer does not pay after the seller delivers the goods, or the seller does not deliver the goods after the buyer pays.

Further information: L/C refers to a written certificate issued by the bank to the exporter (seller) at the request of the importer (buyer) to guarantee the responsibility of paying the purchase price. In the L/C, the bank authorizes the exporter to issue a bill of exchange not exceeding the prescribed amount under the conditions specified in the L/C, with the bank or its designated bank as the payer, and to attach the shipping documents as required, and to collect the goods at the designated place on time.

The general procedure for payment by letter of credit is:

1) The parties to the import and export shall clearly stipulate in the sales contract that payment shall be made by letter of credit.

2) The importer submits an application for issuance to the bank where it is located, fills in the application for issuance, and pays a certain deposit or provides other guarantees, and asks the bank (issuing bank) to issue a letter of credit to the exporter.

3) The issuing bank shall issue a letter of credit in favour of the exporter according to the content of the application, and notify the exporter of the L/C through its ** bank or correspondent bank (collectively referred to as the advising bank) in the exporter's location.

4) After the exporter ships the goods and obtains the shipping documents required by the L/C, he shall negotiate the payment to the bank where he is located (which can be the advising bank or other banks) according to the provisions of the L/C.

5) After the negotiating bank negotiates the payment, the negotiating amount shall be indicated on the back of the L/C.

1) A description of the letter of credit itself. Such as its type, nature, validity period and place of expiry.

2) Requirements for goods. Described according to the contract.

3) Requirements for transportation.

4) Requirements for documents, i.e., cargo documents, transport documents, insurance documents and other relevant documents.

5) Special requirements.

6) The issuing bank's responsibility to guarantee the payment to the beneficiary and the holder of the bill of exchange.

7) Most of the foreign certificates are annotated: "Unless otherwise specified, this certificate is handled in accordance with the ICC Uniform Customs and Practice for Documentary Credits, i.e. ICC Publication No. 600 (UCP600). ”

8) T t reimbursement clause for interbank wire transfers.

Three principles of letter of credit:

1. The independent abstract principle of L/C transactions;

Second, the letter of credit is strictly in line with the principle;

III. Exception to L/C Fraud.

You answer this discourse:

First of all, what is the letter of credit, the classification of the letter of credit, the pros and cons (there are many long talks in the book, copy it desperately).

Secondly, I will give some of my own opinions, as follows:

Before the advent of the letter of credit, the international ** relied on the business reputation, that is, the reputation of the buyer or the seller, such as the advance payment, then whether the seller delivered the goods depends on the seller's reputation - if the seller has a good reputation, then there is no problem, the seller delivers on time; If the seller has a bad reputation, it is possible that the goods will not be delivered, or even the money will be lost. If it is cash on delivery, or delivery payment, then whether the buyer pays depends on the buyer's credit - if the buyer has good credit, then cash on delivery, or single cash on delivery; If the buyer has a bad reputation, then the goods arrive or the order arrives, the buyer just does not pay, and the seller has no guarantee of payment.

Then, in order to solve the problem of ensuring that the buyer receives the goods and the seller receives the payment, the merchants invented the settlement method of "letter of credit", that is, the introduction of bank credit - the bank comes forward to guarantee the bank's own credit, that is, as long as the seller (beneficiary) delivers the goods on time and submits the documents that meet the provisions of the letter of credit, then the bank (issuing bank) will guarantee payment to the beneficiary. In this way, the buyer and the seller are solved the embarrassing situation of "the wolf is afraid of the two heads", the buyer and the seller can not worry about the worry of non-delivery and non-payment through the means of letter of credit settlement, so that they can use the credit of the bank, rest assured and bold transactions, even if it is a new customer transaction, do not have to guard against each other, in order to pay first or deliver the goods first and argue endlessly, can not be concluded.

Therefore, the letter of credit is known as the "genius invention" of the merchants, his actual nature is a payment guarantee issued by the buyer to the seller under the supervision of the guarantor (bank), and under the strong capital and execution guarantee of the bank, it has greatly promoted the development of the international economy and made outstanding contributions to the development of the entire world economy.

Answer] :d In this question, the nature of the letter of credit is assessed, and its nature belongs to unconditional commercial credit.

Answer]: C test center] Seller risk in international** payment methods.

Analysis: In the international ** payment, the seller's risk mainly lies in the fact that the seller has delivered the goods but cannot get the payment. Under the L/C, because of the addition of bank credit, as long as the seller submits the documents that meet the L/C, the payment can be obtained, so the risk is relatively small, and under the collection method, the collection method of the document at sight is less risky, because the seller obtains payment when the document is submitted. The risk of the document against acceptance is greater than that of the forward payment beam, because the document against acceptance is submitted immediately after acceptance, and the document against acceptance is the document after acceptance, and the control of the goods is still in the hands of the seller, so C is chosen.

The payment method of Guohan and Chenji** that belongs to the credit of Tanchan Bank is ()aRemittance. b.Collection.

c.Letter of credit.

d.Bills. The answer is c

1. Letter of credit l c. This is currently the most important and commonly used payment method in the world. The L/C is a conditional payment commitment of the bank, which is a written guarantee document issued by the issuing bank to the beneficiary at the request and instruction of the issuing applicant, and the issuing bank will definitely pay within a certain period of time and the specified amount, as long as the documents submitted by the beneficiary are consistent with the terms of the L/C.

2. Telegraphic transfer t t refers to a remittance method in which the remitting bank sends a shielded telex or SWIFT to a branch or ** bank (i.e., the remitting bank) in another country to instruct the remittance to pay a certain amount to the payee at the request of the remitter. It is settled in foreign exchange cash, and the customer remits the money to the foreign exchange bank designated by the company, and can request the remittance within a certain period of time after the arrival of the goods. 3. Bill of payment dp means that the buyer's document must be subject to the payment of the importer, that is, when the exporter hands over the bill of exchange together with the freight documents to the bank for collection, the bank is instructed to hand over the freight documents only when the importer pays the bill.