I wanted to use this presentation as an opportunity to talk about

Comparison between Letter of credit and bill of lading. I thought that by

examining what the group’s ideas were about the play and comparing them
with some of natures such as introduction, Functions, types, risks, parties
involved and sample. To some extent I think that I succeeded in this, but
there’s no denying that my presentation could have been even better if I
had been more concise.

I think that my first slide gave the presentation a clear focus. It outlined all
of the different objectives that I was seeking to achieve and imposed a
clear structure on my talk.

Letter of credit
 Letter of Credit is a payment instrument used majorly in international
trade in which a bank provides a monetary guarantee to enterprises
that deal in the import and export of goods.
 Letter of credit can be used for both import and export purposes.
 Enterprises doing businesses overseas have to deal with unknown
suppliers and they require assurance of payment before performing
any transaction. Therefore, a letter of credit is important to provide
payment assurance to the suppliers or exporters.

Functions of Letter of Credit

A letter of Credit has the following characteristics:

1. Issued by Buyer’s Bank: An LC is released by the buyer’s bank to

the seller and is a formal document that comprises all the conditions
of a dealing.
2. Transferability: The LC can be assigned or transferred to a third
party by the beneficiary as a mode of payment, and this third party
can get it encashed on the due date. Further, it can be transferred
several times and remains valid.
3. Revocability: Some letters of credit are revocable, and therefore
these can be canceled at any time; however, most credit letters are
irrevocable. 
 4. Maturity: The LC is a time draft which means it has a due date on
which the beneficiaries can encash the amount from the issuing
bank. 
5. Negotiability: It is a negotiable instrument whereby the parties can
discuss and amend the terms and conditions of the LC. Similar to
other negotiable instruments, the letters of credit bear an
unconditional promise to pay a certain sum on the due date or
demand of the beneficiary.

Types of Letter of Credit in India

• Commercial Letter of Credit

• Export/Import LC
• Transferable Bank Credit Letter
• Non-transferable Bank Credit Letter
• Revocable Payment Guarantee Letters
• Standby Letter Of Credit

Parties to a Letter of Credit

• Applicant
• Benificiary
• Issuing bank
• Advising bank
• Confirming bank

Documentation Requirements

 Bills of exchange
 Invoices
 Government documents, such as licenses, certificates of origin,
inspection certificates, embassy legalizations, and phytosanitary
certificates
 Shipping and transport documents, such as bills of lading and airway
bills
 Insurance policies or certificates, except cover notes
Risks in Letter of Credit Transactions

Letter of credit transactions are not without risks. The risks inherent in
these types of transactions include:

 Fraud risk, in which the payment is obtained through the use of

falsified or forged documents for worthless or nonexistent
merchandise
 Regulatory risk, in which government action may prevent completion
of the transaction
 Legal risk, in which legal action prevents completion of the
transaction
 Force majeure risk, in which completion of the transaction is
prevented by an external force, such as war or a natural disaster
 Failure of the issuing or collecting bank

Bill of lading
Definition: Bill of lading (BOL) is one of the most important documents in
the shipping process. To ship any goods, a bill of lading is required and
acts as a receipt and a contract. A completed BOL legally shows that the
carrier has received the freight as described and is obligated to deliver that
freight in good condition to the consignee.

Functions

 Evidence of Contract of Carriage

 Receipt of Goods
  Document of Title to the goods
Contents of Bills of Lading

● Name and address of shipper

● Name and address of vessel

● Name of port of loading

● Date of loading of goods

● Name of port of discharge and place of delivery

● Quantity, Quality, Marks and other Description

● Number of packages

● Freight paid or payable

● Number of original issued

● Name of shipping company

● Voyage number and date

● Signature of the issuing authority

Types:-

• Clean bill of lading

• Claused bill of lading

• Container bill of lading

• House bill of lading

• Master bill of lading

Multiple responsible parties are involved in the bill of lading. The bill must
list these parties to be legally binding.

 Shipper: This is the party that is sending the goods.

 Consignee: The consignee is the other end of the freight. It is the
person or company that is receiving the goods.
 Carrier: This is the shipping company. The carrier takes the goods
from the shipper and carries them to the consignee.
 Notify Party: The notify party is the person that should be informed
when the goods reach their destination port.

Risks of Bills of Lading

• The original bill of lading is not required to be presented by the buyer

or the carrier to get the goods. This may run risks for the payment
under the letter of credit and cash against documents payment
methods.

• Issuing banks may be left vulnerable to various fraud risks especially

under letter of credit payments as they can lose the control of the
goods by using the Straight Bill of Lading.

In conclusion I can confidently state that I found the presentation a

valuable learning experience. I have learnt that I can talk about my ideas
confidently, and so will not need to worry about this in the future, but also
that I need to focus on more concise. I can use this revelation to not only
improve the presentations that I give in the future but also to help me in my
academic writing. It is definitely true to state that you can have too much of
a good thing and to some extent that can be seen as the moral lesson that I
have learnt from this exercise.