7-Explain the 5 different Special Letters of Credit.

1. Revolving Letter of Credit: A revolving letter of credit is a line of credit that can be drawn against
multiple times up to a certain limit over a specific period of time. This type of letter of credit is
particularly useful for businesses that have ongoing, predictable costs and need to make regular
payments.

2. Standby Letter of Credit: A standby letter of credit is a guarantee of payment issued by a financial
institution on behalf of a customer. This type of letter of credit is typically used as a form of security for
a loan or other type of obligation.

3. Transferable Letter of Credit: A transferable letter of credit allows the beneficiary of a letter of credit
to transfer all or part of their rights under the letter of credit to a third party. This type of letter of credit
is useful for businesses that need to make payments to multiple parties.

4. Back-to-Back Letter of Credit: A back-to-back letter of credit is a combination of two separate letters
of credit, where one letter of credit is used to guarantee payment for another letter of credit. This type
of letter of credit is often used to finance international trade transactions.

5. Documentary Letter of Credit: A documentary letter of credit is a guarantee of payment issued by a

financial institution that is based on documents that are presented by the beneficiary. This type of letter
of credit is commonly used in international trade transactions.

8- Mention as many points as possible which should be included in the L/C ?

1. Issuing Bank: Details of the bank issuing the letter of credit.

2. Beneficiary: Details of the party to whom payment is to be made.

3. Expiry Date: The date by which payment must be made.

4. Credit Amount: The amount of money to be paid.

5. Goods or Services: A description of the goods or services to be provided.

6. Documentary Requirements: The documents required from the beneficiary to be presented to the
issuing bank for payment.

7. Applicable Law: The governing law for the letter of credit.

8. Dispute Resolution: The means by which any disputes should be resolved.

9. Transferability: The ability to transfer the letter of credit to another party.

10. Charges: The charges associated with the letter of credit.

11. Time Limit for Presentation: The deadline for the beneficiary to present documents.

12. Place of Payment: The location where payment must be made.

13. Presentation Period: The time period in which the beneficiary must present the documents.

14. Confidentiality: A clause specifying the confidential nature of the letter of credit.
15. Exceptions: Any exceptions to the terms and conditions of the letter of credit.

9-What is a Bill of Exchange? Example ?

A bill of exchange is a legally binding document that requires one party to pay a specified sum of money
to another party at a predetermined date in the future. It is commonly used in international trade, and is
similar to a promissory note in that it creates an obligation on the part of the issuer to pay the recipient.

10-Mention how the bill of exchange function as means of payment ?

A bill of exchange is a written instrument used as a means of payment. It is an unconditional order from
one party (the drawer) to another (the drawee) to pay a specified amount of money on a specified date.
The party issuing the bill is usually a seller of goods or a supplier of services, and the party receiving the
bill is usually a buyer. The bill is often used in trading between two parties when the buyer needs more
time to pay for the goods or services. The bill of exchange functions as a means of payment as it
provides a secure and reliable way of making payments between parties. The seller can be assured of
payment at the specified date and the buyer can be assured of receiving the goods or services.

11-Explain why using L/C ?

Using a Letter of Credit (L/C) is a good payment option because it provides protection to both the buyer
and seller. The L/C guarantees that payment will be made to the seller upon delivery of the goods and
that the buyer will receive the goods as specified in the L/C. The L/C is also a secure method of payment,
as it is guaranteed by a third party, usually a bank, and does not require payment until the goods are
delivered. In addition, a L/C is a flexible payment option that can be tailored to the needs of the buyer
and seller.

12-How is the L/C function as means of payment ?

A Letter of Credit (L/C) is an invaluable tool for international trade and is a widely accepted means of
payment. It is a payment mechanism used by importers to guarantee payment to exporters for goods
and services. It is a financial instrument issued by a bank, on behalf of an importer, that guarantees
payment to an exporter for goods and services provided. The L/C provides assurance to the exporter
that they will receive payment as long as they comply with the terms and conditions of the letter of
credit. Additionally, the L/C provides assurance to the importer that the goods and services they are
paying for will be delivered as specified in the letter of credit.

13-How many banks are involved in a L/C ?

A letter of credit typically involves three banks: the issuing bank, the advising bank, and the reimbursing
bank.

14-Can you stipulate more or less everything concerning products and shipment in a L/C?
Yes, in a letter of credit, you can stipulate just about anything related to the products and shipment.
Depending on the specific terms of the L/C, you can stipulate requirements such as the type of products,
the quality and quantity of the products, the payment terms, the shipping date, the country of origin,
the freight terms, the insurance coverage, and any other requirements that are important to the parties
involved.