Director J.J.Smith

An important feature of the bill of exchange is that it is negotiable, which means that it can be used by the holder to pay debts of his own, or in other words, he can negotiate it. To do this, the holder must endorse it, i.e. sign his name on the back of the bill before passing it on to the new holder.

Other ways in which the holder can use a bill are:

1. Sell it to a bank, which will pay lace value, less interest: this is called discounting a bill.

2. Leave it with a bank as security for a loan.

It is this free negotiability of the bill which makes it a practical means of payment in foreign trade. Of course, its successful operation depends on confidence and trust. Each individual firm's standing and reputation is known and taken into account in handling bills.

The advantages of the bill will be clear to a student who understands something of modern commerce; perhaps the two chief assets are: (a) it simplifies the financing of export and import trade; (b) it saves innumer­able individual money transactions, or movements of currency.

Failure to meet a bill on the due date would result in total discredit for the drawee, and legal action can follow. An unpaid bill is said to be dishonoured, and the drawer can protest it, which clears the way for him to prosecute (i.e. take legal action against) the drawee. (See end of this chapter for special terminology)

THE LETTER OF CREDIT (L/C)

The most generally used method of payment in the export trade today is the letter of credit. It is ideal for individual transactions or for a series, makes trade with unknown buyers easy, gives protection to both seller and buyer and overcomes the credit gap (i.e. the time-payment loss between order and delivery).

A letter of credit starts with the buyer. He instructs his bank to issue the L/C for the amount of the purchase and in favour of the seller. This is usually done by special printed form. The instruction, or form, contains full details of the transaction as agreed between buyer and seller. The buyer's bank sends these instructions to its agent (i.e. a bank co-operating with it) in the seller's country. On receiv­ing these instructions, the agent bank writes to advise the seller of the credit. In foreign trade it is normal for the agent bank to confirm the credit. This means that the agent bank undertakes to pay the seller the money due to him, provided the conditions set out in the L/C have been complied with. The seller can now execute the buyer's order, knowing that when he has done so, the money will be paid at once by the agent bank The buyer is equally secure, because the agent bank will pay on his behalf only if the conditions of the transaction are fully carried out by the seller. For this reason, great care and accuracy are needed in giving the original instructions

It is not essential that a L\C be paid to the seller immediately upon execution of the order. If agreed between seller and buyer, the arrange­ment could be for the agent bank to accept a B/E drawn by the seller on the agent bank. This gives the buyer credit and is, of course, absolutely safe for the seller, who can discount the bill for ready cash if he needs it. From these outlines of the methods used in financing foreign trade, the student will realise the vital part played by banks; without them, modem trade could not exist. Their services are paid for by their charges and these are kept low by the security they normally require against the risks taken.

Note: American importers often open the letter of credit at an Ameri­can bank. This bank then confirms the credit to the foreign seller and requests him to draw on them for the amount of the invoice, and to send them all documents required by the buyer.

Form 99 (1975) Duplicate to Overseas. Dept. Import Credits Section London/Chief Accountant’s Dept..

See notes Head Office (delete as appropriate)

o n reverse

TO LLOYDS BANK LIMITED Advise by: Airmail/Telex or Urgent/Ordinary/Cheap Ratе Cablе quoting full/brief details

Please open on our account a Credit in the following terms:

1. This Credit is to be (i)²

2. and advised through (Correspondent) (ii) —————————.

3. In favour of (Beneficiary) (Address)³

Delete inappropriate words.

(i) State whether

(a) Revocable

(b) Irrevocable or

(c) Irrevocable and Confirmed by Correspondent

NJB. If Credit if to be transferable sее Note 12 on reverse

4. To the extent of 4 (in words)

5. The Credit is to expire on ————— in —————

(State/Town/ Country) (Unless previously cancelled - if Credit is revocable)

6. The Credit is to be available by the beneficiary's draft(s)

*(a) at ———————— sight in sterling/currency on

Lloyds Bank Limited, London. '(b) at ———————— sight in currency on the Corres­pondent.

As regards (b) where payment is to be made at sight, the bene­ficiary's draft need not be presented.

Drafts to be drawn/payments to be made for the full invoice value and submitted with the under-mentioned documents at­tached (iii).

(ii) Fill in ONLY when.Correspondents

espe­cially nominated. See Note 2 on reverse.

7. Documents required:

(a) Invoice

(b) Policy or Certificate of Insurance in the same currency

as the Credit for C.I.P. Invoice value plus ————————— per

cent covering Marine and War Risks and also ———————

(IV)

(If shipment effected in a Container this must be indicated

on the insurance document.)

(iii) If for less than full in­voice

value delete and give instructions under 12.

(с) •Complete set of clean "On Board" Shipping Company's

Bill of Lading/Shipping Company's Combined Transport Bills of Lading

made out to order and endorsed in blank marked

Freight Paid/Freight Payable at Destination. Documents must be presented

to the paying/accepting/negotiating bank not later than —— days after the

date of the Bills of Lading or other shipping documents stated herein and within the credit validity.

(d)

8. Covering Shipment of: -

FOB/C&F/CIF

9. Price

10. Shipment from to

11. Partial shipment allowed/prohibited Transhipment allowed/prohibited

12. Special Instruction (if any)

(iv) If insurance documents are not required state

who is covering insurаnсе or If insurance is

to be effected in a currenc y different from that

of the Credit the wording of 7 (b) must be stated accordingly

(v) Please complete "Exchange Control" details overleaf

13. We give overleaf the information required for Exchange Control

purposes and we agree to pay you a commission of ——-— %

(minimum £ —————— for each three months or part thereof

for this Credit and when applicable an acceptance commission of ———— %

per month minimum two months minimum £—— (V)

1 The documents and the goods and all proceeds of sales thereof and of insurance thereon and all our rights as unpaid sellers when shall be security to you for all obligations and liabilities incurred by you as Correspondents in connection with this Credit and for all disbursements in connection with the goods or otherwise (which we hereby authorise you to pay for our account) and all other our liabilities to you present and future.

2 You may on payment debit our account with all sums paid in con­nection with this Credit or the goods, also with any commission and interest, or with the whole or part of the amount of the Credit at any time if you think fit, and on demand we will place you in funds to meet such debts, and we will at the latest place you in funds to meet any acceptances throe days before their due date or earlier if required. In the case of Credits in foreign cur­rency you may pass any such debits in sterling at your rate of exchange, and if passed after payment, at your rate ruling when you receive advice of payment when otherwise arranged. In the event of any default you may sell the documents or goods before or after arrival and any defect we will pay you on demand, and we will indemnify you against all claims, demands, costs, charges, and expenses incurred in connection with this Credit.

3 Your rights against us hereunder shall not be affected by, and you and/or Correspondents shall not be responsible for any loss or damage to the goods however and whenever caused, this quantity, quality, condition or their detention by any person whatsoever and howsoever caused, the loss, validity, sufficiency, genuineness or ac­curacy of the shipping, insurance or any other documents or fail­ure from any reason by you. Correspondents or any other person shall be at our risk.

4 If the Credit is revocable it may be cancelled by you at any time, but cancellation by you or by us shall be without prejudice to our respective obligations as regards any bills negotiated or accepted or payments made thereunder before notice of such cancellation has been received at the place where the Credit is available.

5 A11 cables/telex messages in connection with this Credit shall be despatched at our risk and cost and shall not be responsible for any loss caused by mistakes, mutilations or omissions in their transmission coding or decoding or interpretation when received or by delay on the part of the cable or telegraph companies con­cerned.

6 If two or more parties sign this document the obligation hereunder are joint and several

7 This Credit is to be subject to the Uniform Customs and Practice for Documentary Credits (1974 revision) International Chamber of Commerce Publication No. 290.

Accounter's Name and Signature.

Date —————————————

NOTE FOR BRANCH MANAGERS. A copy of this form as signed to be sent to the Overseas De­partment or Chief Accountant's Department (if beneficiary in UK. or Eire). It the instructions are telegraphed/telephoned to one of those Departments the copy should follow by post marked clearly “Confirmation or Telegram/Telephone".

INSURANCE. - If Insurance documents are not called tar, the Branch Manager should confirm below under "Remarks" that he is satisfied that the Insurance к actually covered and available for the Bank's protection.

The above instructions are confirmed (STATE HOW SANCTIONED).

М.D.Р. —————— BRANCH

BRANCH CODE NUMBER MANAGER

Explanation of reference numbers on the form:

1. Indemnity: Release from liability (Note: Indemnity clauses are not reproduced in the above form.) ‘освобождение от материальной ответственности, га­рантия от убытка').

2. Correspondents: The buyer's agent (if any) in seller's country ('представитель, агенты’).

3. Beneficiary: The seller ('бенефициар, выгодоприобретатель').

4. The amount to be paid is given here ('сумму выплаты указать здесь').

Дата добавления: 2015-11-16