Letters of Credit. Methods of Payment

1. International Methods of Payment. Countries and Payment Terms.
2. Bills of Exchange. Bank Draft. Bank Transfer. Clean Collection.
3. Documentary Collections.
4. Letters of Credit (L/C). Types and modalities. Opening an LC. Availability of LC. Contents of a Credit / Simulation. Documents. Checklist for Documents. Electronic LC.
5. UCP 600.
6. Import Letters of Credit

Available Languages: . Summary in:

Objectives: This Learning Unit aims at:

• Analyzing various methods of payment used in international trade and outlining their differences, advantages and disadvantages both for the importer and the exporter.
• To understand what documentary collections are and how they work. Export and Import Collections will be analyzed.
• Understanding the following:
  - The importance of documentary credits in international trade
  - How a documentary credit works
  - Obligations of the parties involved
• To understand how Import Documentary Credits operate.

Learning Unit Summary

In this Learning Unit we will examine how to receive and effect payment for international contracts of sale. Our focus will be on export methods of payment. The information presented here is also applicable to import transactions. The selection of the most suitable method of payment is a key factor of a successful export sale. We will focus on providing you with an overview of the various methods of payment. The primary methods of payment will be examined in detail in individual learning units.

This course covers all aspects related to obtaining payment. Learners will examine how to receive and effect payment for international contracts of sale. The primary focus is on export methods of payment with the information presented also applicable to import trade transactions. The selection of the most suitable method of payment is a key factor of a successful export sale and these are examined in detail from advance payment and documentary collections through to documentary credits.

A Documentary Collection (Contents: Documentary Collection. Clean Collection. Bill of Exchange. Managing Collections. Doc. Collection Simulation.) is a method of payment whereby the exporter initiates, through the banking system, the collection of money due to him from the importer. Payment will be made against a Bill of Exchange and documents of title. Documents can be released against acceptance of the Bill of Exchange or against payment at sight. This course will give you a practical understanding of this popular method of payment.

The Uniform Rules for Collections, 1995 Revision, ICC publication No. 522, shall apply to all collections where such rules are incorporated into the text of the "collection instruction". In the course of this unit we will provide practical examples of the application of URC 522. All serious international trade specialists should obtain a copy of this ICC Publication.

Learn the differences between clean and documentary collections and analyze the advantages and disadvantages for the importer and for the exporter. Learn how to complete a Bank Documentary Collection order and how to manage export collections at the bank. Understand the difference between documents against acceptance and documents against payment. Bills of Exchange and the Documentary Collection Cycle.

In this unit you will become familiar with the parties, obligations and key terminology used in Documentary Credit operations as will as learn about the key checklists to take into account when preparing documents for presentation under Documentary Credits.

A documentary credit is an agreement under which a bank acting at the request and on instructions of the importer makes an undertaking to effect payment to the exporter against presentation of the required documents within the specified period of time, provided that the documents strictly comply with the terms and conditions stipulated in the credit. Letters of credit are more favorable for exporters rather than importers, as they are aimed at protecting the exporter.

Import Letters of Credit. This is a short but very important learning unit. The ability of the trade practitioner and their bankers to issue documentary credits which are complete and precise is essential. This unit will familiarize you with the role of the Issuing Bank, how to complete the DC application form and most importantly how to analyze the Credit as issued.