Typical buyer`s fee is 0.75 percent, but notes that in underdevelopedcountries it can range from 1.5 percent upward.
4. Main documentation of L/C
Commercial invoice (Proof of Value
Bill of Lading (Proof of Shipment)
Packing list (Proof of Packing)
Certificate of Origin (Proof of Origin)
Inspection Certificate (Proof of quality)
Insurance Certificate ( Proof of Quality)
Health Certificate of phitosanitarycertification
3c. Advantages for seller
2.The beneficary in a L/C
1. DEFINITION
An LC is a financial instrument issued, generally by a bank, to an individual or corporation by which the bank substitutes its own creditworthiness for that of the individual or corporation. LCs facilitate importing and exporting by assuring the seller/exporter’s payment for goods sold against compliant documents. Without such assurances of payment, foreign trade would be severely curtailed.
3a. Advantages for buyer
The seller of goods or services to whom the LC is addressed and who is entitled to itsbenefits.
Payment is not to be effected until the buyers bank has received the docs;
The buyer is only obliged to pay against of complying docs
The letter of credit improves the cash flow
Increased possibility to obtain discount of financing from seller
3b. Disadvantages for buyer
The buyer has an obligation to pay for complying documents, regardless of the condition of the goods
The letter of credit cannot be cancelled unless accepted by the seller
Security for obtain payment
Payment will be predictable
Security against amendment or cancellationof an order without the seller consent
Possibility to obtain finance from the confirming bank
3d. Disadvantages for seller
There may be extra work involved with the preparation of docs. for letter of credit
Delayed receipt of the letter of credit may cause problems with the tinme limit for dispach the goods
It depends of the whole prise of the goods that are imported/exported
There are cheaper means of payments than a letter of credit , but this is the safest.
