In an import and export contract, if payment is made by letter of credit, the buyer and seller should make clear and specific provisions on matters such as the date of issuance of the letter of credit, the type of letter of credit, the time of payment, the amount of the letter of credit, the validity period of the letter of credit and the place of expiration. The following are some examples of payment terms in letters of credit in my country’s export contracts:
(I) Sight letter of credit payment terms
(1) “The buyer shall open and deliver to the seller a sight letter of credit through a bank accepted by the seller xx days before the month of shipment, which shall be valid for negotiation in China on the 15th day after the date of shipment.”
(2) “The buyer shall open through a bank an irrevocable (transferable) sight letter of credit in favor of the seller (confirmed by xx Bank) for the full invoice amount before xx/xx/xxxx (or within xx days after receiving the seller’s notice of stocking or within xx days after signing the contract). The validity period of the letter of credit shall be extended to 15 days after the date of shipment in China.”
(II) Deferred letter of credit payment terms
“The buyer shall open through xx Bank an irrevocable (transferable) sight letter of credit in favor of the seller (confirmed by xx Bank) before xx/xx/xxxx (or within xx days after receiving the seller’s notice of stocking or within xx days after signing the contract). (iii) Revolving Letter of Credit Payment Terms “The Buyer shall open and deliver to the Seller a revolving letter of credit for immediate negotiation through a bank acceptable to the Seller xx days before the first shipment month, which shall automatically be available for xx (amount) each month during 20xx and remain valid until June 15, 20xx in Beijing for negotiation.”