Export Payment Method

8/8/2019 Export Payment Method

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EXPORT PAYMENT

LETTER OF CREDIT

REFERS TO A WRITTEN UNDERTAKING BY THEIMPORTERS BANK TO THE EXPORTER THAT THEPAYMENT SHALL BE MADE TO HIM PROVIDED THESHIPMENT IS SENT BY HIM IS IN STRICTCOMPLIANCE OF THE EXPORT CONTRACT.

Defined as a bank [ the issuing bank ] acting at therequest of and instruction of the customer [ the applicant]or on its own is to

Make a payment to the beneficiary or to the third party or

Accept and pay bills of exchange [ drafts drawn by thebeneficiary or


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EXPORT PAYMENT

DOCUMENTARY CREDIT

Authorises another bank to effect such

payment or to accept and pay such bills ofexchange or

Authorises another bank to negotiate.

Against stipulated documents provided theterms and conditions of the credit are

complied with.


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RED CLAUSE / GREEN CLAUSE

CREDIT L/C which allows for advances to be made

to the beneficiary against their statementthat goods will be shipped within the expiry

of the credit or the funds will be repaid. The applicant takes a risk as the

commitment to pay is from the beneficiary

without any undertaking of a bank orguarantee to refund in the event of defaultby the beneficiary.


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STAND BY CREDIT

THE branch of a bank in another countryis considered another bank for purposes ofdocumentary credit operations. It can

therefore issue stand by L/C. The issuing bank can request one of its

branches to add its confirmation to a credit

which is similar to a stand by credit. Beneficiary has to decide whether risk isadequately covered.


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D/A --- D/P

D/A Documents against acceptance. Also known astime draft / time bill. On presentation of requireddocuments the exporter is handed a draft drawn on afuture date 90 days, 180 days after shipment date i.e

after sight. The L/C is sent to the exporter who is reqd toproduce the draft at the set time and the importer willesecute the payment. All interest charges borne by theexporter.

D/P Documents against payment. Also known as Sight

credit / sight bill. Payment is executed on presentation ofthe documents as soon as shipment is effected.


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NEGOTIATING BANK

L/C is negotiable if the issuing bank

authorises the negotiating bank to honour

the draft drawn under the terms of thecredit. .

The exporter gets the payment before the

documents are scrutinised by the issuing

bank.


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REVOLVING CREDIT.

IT provides for the renewal of the amount

of the credit without any amendments to

the original L/C for a given time period fora given amount.

Maybe cumulative or non cumulative in

nature i.e facility provided for carry forward

balance of utilisation.


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BILL OF EXCHANGE

IT IS AN UNCONDITIONAL WRITTEN

ORDER PREPARED BY AN EXPORTER

ASKING THE IMPORTER TO PAY A

SPECIFIED SUM OF MONEY TO A

SPECIFIED PERSON AT A SPECIFIED

TIME.


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