Detailed explanation of the main contents and terms of cross-border e-commerce letters of credit
Letter of credit plays an important role in international trade. Although there is no unified format, its basic items are the same. This article aims to provide a detailed introduction to the basic components of a letter of credit, as well as the specific requirements for each part.
Description of the letter of credit itself
Information such as the type, nature, validity period and expiration location of the letter of credit constitutes the description of the letter of credit itself. This information ensures that both parties to the transaction can clearly understand the validity scope and time limit of the letter of credit.
Requirements for goods
The letter of credit has strict requirements for the goods, including but not limited to the name, variety, specification, quantity, packaging, amount, price and other detailed information of the goods. In addition, the description of the goods on the letter of credit should be accurate, clear and complete to avoid unnecessary trouble for the beneficiary.
Transportation requirements
The letter of credit clearly stipulates the deadline for shipment, origin and destination, mode of transportation, whether partial shipments are allowed, and whether midway transshipment is allowed. These requirements ensure smooth transportation of goods.
Requirements for documents
Documents are mainly divided into three categories: cargo documents, transport documents and insurance documents. Among them, cargo documents center on invoices, and also include packing lists, weight lists, certificates of origin, commodity inspection certificates, etc.; transport documents, such as bills of lading, are important documents representing the ownership of the goods; insurance documents ensure the safety of the goods during transportation. . In addition, depending on actual needs, there may be other documents, such as proof of sample delivery, copy of shipping notification telegram, etc.
Special requirements
Based on changes in the political, economic and trade situation of the importing country (region) or the different needs of each specific business, the letter of credit may contain some special requirements, such as requiring the advising bank to add confirmation, restricting negotiation by a certain bank, or pending The letter of credit will only become effective after the specified conditions are met.
Special terms of letter of credit
Sometimes a letter of credit will come with special terms for the beneficiary, advising bank, paying bank, accepting bank, confirming bank or negotiating bank. When encountering unacceptable terms, you should promptly negotiate with the issuing bank or the issuing applicant for modifications.
Letter of credit reimbursement terms
The reimbursement clause clarifies how the issuing bank repays the amount of the letter of credit to the paying bank, accepting bank, confirming bank or negotiating bank. In order to ensure the security of foreign exchange collection, complex reimbursement terms should require the issuing bank to simplify them.
Issuing bank guarantee terms
The issuing bank indicates its payment responsibility through guarantee terms, usually using statements such as “We hereby engage (agree)” or “We hereby undertake”. However, UCP600 has clearly defined the bank’s responsibilities, so this clause is no longer required when modern letters of credit are passed via SWIFT.
To sum up, cross-border e-commerce letters of credit cover specific requirements for the letter of credit itself, goods, transportation, documents and various terms. Through the above content, we can better understand and master the operation process of letter of credit.