Documentary Letters of Credit have been used as a payment term for centuries to facilitate global trade deals. Mostly, LC Terms and Conditions are governed by the ICC and UCP for Documentary Credits. There are certain LC Terms and Conditions that every buyer needs to be aware of to get the issued LC. Let us discuss the LC Terms and Conditions.
LC Terms and Conditions
Letter of Credit is a written undertaking issued by a bank upon request of its clients to conclude their trade deals. Further, this LC is issued on behalf of the buyer & in favour of the seller as an assurance of payment to the seller. Further, there are some risks involved in trading including trust issues, distance, different laws, and risks in each country. Using LC as the payment term can reduce the risks involved & now has become a vital aspect of global trade.
Further, by having MT700, buyers have the facility via documentary credit, that verifies the quality of goods before making the payment to the seller. Also, on the other side, sellers are assured that they will receive the payment. Also, only if they comply with the terms of the issued MT700.
LC Terms and Conditions – A to Z Glossary
Applicant
The one who requests that the bank issue MT700 on their behalf. Further, they can be a buyer or an importer.
Advising Bank
The bank receives an MT700 from the buyer’s end. Further, they forward it to the seller.
At Sight
Under an LC at Sight, it means payment is to be made upon submission of documents as stated in the issued LC. Moreover, this acts as a popular method of payment for global trade.
Back-to-Back LC
A beneficiary of an MT700 opens up new Letters of Credit from their bank on the basis of that LC they have received. Further, this helps the traders to continue their trade globally.
Beneficiary
The one in whose favour an MT700 is issued. Mostly, in imports and exports, the seller is the receiver.
Bill of Lading
A document issued by a transport carrier, also, shows the receipt of goods for shipment by sea, air, or by road to a certain place. Further, it also serves as the contract between the shipper and the transport carrier.
Certificate of Inspection
A document shows that goods were in good condition at the time of inspection. Also, the pre-shipment inspection is often required in global trade.
Certificate of Origin
A written statement by the Chamber of Commerce to verify the origin of goods. Moreover, this contains info about the product, its destination, and the country of export.
Confirming Bank
This may confirm the LC to the seller. Also, upon request from the issuing bank, they are obligated to make the payment, and this should be mentioned under MT700.
LC Terms and Conditions – Definition
Deferred Payment LC
Payment under this is made on a specified number of days after shipment or after the submission of documents, as stated in the issued Letter of Credit.
Incoterms
The rules defined by the ICC define the duties of the seller and buyer in global trade. Further, the specific rule is responsible for the shipment, insurance, customs, and other supply chain activities.
Issuing Bank
The issuing bank provides an assurance to the seller that they will receive the payment; also, this will be done only if they submit the stated documents that comply with the T&Cs.
UCP 600
The Uniform Customs and Practice for Documentary Credits (UCP 600) defined a set of rules governed by the ICC. Further, this needs to be followed by all institutions when using Letters of Credit.
LC Terms and Conditions in Trade
To avail of MT700, you need to request your bank with your pro forma invoice. Further, they will perform a study on their client’s credit score and fiscal strength. Moreover, if the client meets all the terms, they will approve their request. If not, the bank may decline to provide the MT700.
So, to help the clients to facilitate their imports, Bronze Wing Trading L.L.C., the LC Providers in Dubai works for you! Also, we provide MT700 to help importers to reduce their fiscal risk. Further, we help the traders to facilitate their trade with minimum investment by providing LC at ZERO Cash Margin!
Avail Letters of Credit – LC MT700 from us to get started with your global imports!