Payment ( Part 3.

)- Gap-filling
Letter of Credit: Notification
5. Notification from the Advising Bank
In practice, all letters of credit are ……irrevocable…...21.

- The advising bank always ……notifies…….22 the seller that the letter of

credit has been . opened.......23.

- The letter of advice always contains an indication of whether or not the advising
bank …confirms…… 24 the credit.
- If the letter of credit is confirmed, then the advising bank must pay the exporter
on exactly the same …amount…25 as the ... issuing........26 bank. That means

the exporter can, if the credit is suitably worded, …collect....... 27 ....

payment....28 immediately after delivery.

6. Letter of Credit: Associated Documentation
Documents required

- A letter of credit is a …“documentary…29 credit"-it can be paid only

against .... document.... 30.

- The parties should agree which documents are important to them - not
…leave….31 the decision to the bank.

Key documents
 …commercial invoice.32

 …transport docs…33.

 …insurance docs.34

Other common documents

 certificate of origin………..35

 …certificate of inspection…36

 .. special requirements......37

Specification
 The letter of credit should state exact/ywhat documents are required
including any special requirements as to:
- …signature……..38

- ..... sources........................ 39
- Notarization ……………...40
- …exact contents……..41

7. Common Discrepancies Reported by Banks

Problems with the Letter of Credit
 Documents required by the credit are ……missing…….41.

 Documents required to be signed are not …signed…….42.

 The credit amount is ……exceeded……44..

 The credit has expired or documents are presented within the required

time 45…...
 Shipment was ……short……45 or ……late……47.

Problems with the Bill of Lading

 The bill of lading is "……uncleaned……..' 48

 A marine bill of fading is required, but the bill does not state that the goods
were 'shipped on board" a ……named………49 vessel.

 The bill of lading shows shipment between ………ports……….50 other

 than those specified in the credit
 The bill of lading shows that the goods were shipped on ……deck.…….51.

 The bill of lading offers no evidence that ………freight……….52. was paid

by the
exporter (if this was required).
 There is no ………endorsement…………..53 (if endorsement is necessary).

Problems with Insurance

 The insurance document is not of the ........ type........54 specified in the).

 The insurance ……risks……………55 are not those specified in the credit.

 Insurance cover is expressed in a ………currency……. 56 other than that of

the credit.
 The sum …………………….57 is below the figure required.
 Insurance cover begin after or ends before ………date………58 of the

transport
document.
Inconsistencies among the Documents
 Description of the goods …on the invoice………59 and in the credit are
different.
 Weights differ between two ……documents.……60

 Marks and ...... numbers..........61 differ between two documents.

8. ISSUING A LETTER OF CREDIT

1. Exporter and buyer ……sign…. 1 a contract

2. The buyer asks a local bank to ……open…..2 a letter of credit

3. The issuing bank asks a band in the exporter's country to advise the exporter
that the letter of credit has been …opened…….3.

4. The advising bank ……advises……4 the exporter that the letter of credit has
been opened
9. PRESENTING LETTER OF CREDIT
1. Seller …ships……5 the goods and …gets…..6 shipping documents

2. The exporter ……presents…..6 the shipping documents to the advising bank

3. The advising bank ……checks…….7checks the docments and (if appropriate)

pays the exporter

4. The advising bank notifies the issuing bank that the credit has been presented
and …forwards…..8 the shipping documents

5. The issuing bank …transfers…9 necessary funds to the advising bank

10.METHOD OF PAYMENT
10.1 SETTLEMENT BY SIGHT PAYMENT
1. The seller …presents….1 the documents to the paying bank

2. The paying bank immediately …pays…2 the seller

10.2.SETTLEMENT BY DEFERRED PAYMENT

1.The seller…presents……2 the documents to the paying bank

2. The paying bank agrees to pay the seller the face value of the credit when it
…matures.…3..

3. If the seller needs money immediately, he can …exchange….4 the letter of

credit for cash (at a discount) with any agreeable bank.
10.3 SETTLEMENT BY ACCEPTANCE
1. The seller presents the accepting bank the documents and a bill of exchange
(time draft) ………………..5 drawn usually on the buyer.
2. The accepting bank ……agrees…….6 to pay the bill when it matures
3. If the seller needs money immediately, he can exchange the letter of credit for
cash (at a discount) with any …agreeable….7 bank.

10.4 SETTLEMENT BY NEGOTIATION

7. The seller presents to the …negotiating…….8 bank the documents and a bill

of exchange drawn usually on the buyer

8 The negotiating bank …the bill……..9 (at a discount)