LETTERS OF CREDIT

UNDER UCP 600

Methods of Payment

Advance Remittance
Open Account
Documentary Collections

D/P Bills
D/A Bills

Letters of Credit

Letters of credit

A method of payment, satisfying the

requirements of the exporter and importer
An CONDITIONAL undertaking to pay, by
the importers bank
Conditions relate to documents, not to
physical condition of the goods or the
marketing environment

(1)

IND EXPORTS
LTD
Ernakulam
(Beneficiary)

Sale contract

US IMP INC
New York

Ships goods
(5)

(Applicant)

Payment

L/C

Documents
(8)

(4)

(2)

(6)
Documents

Payment

Application

Payment

CSB
Ernakulam

(7)
Documents

(Advising Bank/
Negotiating Bank)

AMEX BANK
NewYork
(Issuing Bank)

Letter of Credit
(3)

What the LC specifies

Currency and Amount
Last date of shipment and Last date
for negotiation
Quantity and specification of goods
(to be evidenced by documents)
Documents to be submitted

What the LC specifies (contd)

Period of credit extended to importer
Where to obtain payment
(negotiation/restricted)
Mode of transport/from where to
where

UCP

Issued by International Chamber of

Commerce
To provide uniform interpretation of the
terms used in the credit amidst differences
in the usages and terminologies prevailing
in the different countries
First introduced in 1933
Current edition UCP 600 effective July
2007

Types of LC under UCP 600

Payment credit
Negotiation credit
Acceptance credit
Deferred payment credit
Irrevocable Credit
Confirmed Credit
Transferable Credit
Standby Credit

Commercial Invoice

Issued by beneficiary to the applicant

Same currency as credit
Need not be signed
May be drawn for excess, but negotiation
up to credit limit
Description of goods to correspond to
credit

Bill of lading

Full Set Clean on Board Freight paid

Ocean bill of lading made to Order and
blank endorsed.

Bill of Lading Under LC

Acceptable

Full Set
Clean
Shippers load and
count
Short Form
Third Party
Liner
House

Not Acceptable

Received for shipment

On Deck
Vessel propelled by
sail
Straight
Stale
Charter Party

Freight Paid/Payable
Through or Port-to-port

Marine Insurance (Article 28)

Insurance policy or insurance certificate or

declaration under open cover (no cover
note)
All originals
Same currency as invoice CIF + 10%
Place of taking in charge to place of
discharge
Exclusion, franchise or excess clauses
accepted