KHONDAKER BAKY BILLAH

ASSIGNMENT: 02

Answer to the Question no.1

The bank guarantees to the exporter on behalf of the importer that, if the importer refuses to pay
the price of the product for any reason, the bank will or will be obliged to pay the price of the
product to the exporter.

How to LC work

Buyers of major purchases may need a letter of credit to assure the seller that the payment will be
made. A bank issues a letter of credit to guarantee the payment to the seller, essentially taking
responsibility that the seller will be paid. A buyer must prove to the bank that they have enough
assets or a sufficient line of credit to pay before the bank will guarantee the payment to the seller.
Because a letter of credit is typically a negotiable instrument, the issuing bank pays the
beneficiary or any bank nominated by the beneficiary. If a letter of credit is transferable, the
beneficiary may assign another entity, such as a corporate parent or a third party, the right to
draw. The International Chamber of Commerce’s Uniform Customs and Practice for
Documentary Credits oversees letters of credit used in international transactions
 Answer to the Question no.2

Importance of Bill of Exchange

In the modern world, industry and commerce have expanded greatly. Along with that, the
amount of buying and selling in the rest has also increased. Bills of exchange are of immense
importance in the settlement of debts related to purchase and sale and foreign trade. Moreover,
the importance of bill of exchange is increasing in financing and as a document of credit in
trade. The following describes the importance of Bills of Exchange from various perspectives.

1. In Foreign Trade:

A country cannot produce all the goods and services it needs, so it engages in foreign trade. In
foreign trade it is not possible to pay import and export debts in cash. Because the currency of
different countries is different. Such as Taka in Bangladesh, Yen in Japan, Dinar in Kuwait etc.
Therefore, bills of exchange are used to settle debts between traders in different countries.

2. In Financing:

Creative traders can raise money for their working capital at any time by preparing money
raising bills of exchange. Which plays an important role in the expansion of business activities.

3. To reduce the risk and cost of remittance:

Transferring money from one place to another is risky and costly by using bills of exchange to
settle debts easily thereby reducing the risk and hurdles of remittance.
4. Per capita income to improve living standards:

The expansion of business and trade leads to an increase in employment and people's income,
resulting in an improvement in per capita income and standard of living. Bills of exchange play
an important role in the expansion of trade. As a indirectly helps in improvement of per capita
income and standard of living.

Answer to the Question no.3

Different with chartered party and house BL

A charter party is a written agreement. whereby the ship owner hires out the whole of the ship to
a merchant for the carriage of goods on a particular voyage. On a larger scale, traders who
import raw materials generally hire whole vessels.

A house bill of lading (HBL) is a document issued by a freight forwarder or a non-vessel

operating company (NVOCC) to a shipper to acknowledge receipt of their items for shipment. In
other words, it's a receipt for the goods.

The shipper is the exporting company, and the freight forwarder or NVOCC (which can also be
referred to as a forwarding agent) is the company they’ve hired to arrange transportation of their
goods to a foreign destination. The freight forwarder or NVOCC then books cargo space with
carriers.
Carriers are the transportation providers—the trucking companies, shipping lines and airlines
that physically move the shipment. Some freight forwarders have in-house carrier services,
while others contract with third-party carriers.

Answer to the Question no.04

Different with FCR & HOUSE BILL

1. FCR is not transferable. House bill is transferable.

2. FCR Issue by freight forwarder to shipper. House bill issue by the freight forwarder or NVOCC.

FCR & HOUSE BILL are basically same thing. Basically there is no big difference between
them.