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LETTER OF CREDITContents: Meaning of letter of creditParties to a letter of creditProcedure to letter of creditTypes of letter of creditAdvantages of letter of credit
MEANING OF LETTER OF CREDIT The D /P (Documents against payment) and the D / A (Documents against acceptance) modes of
payment suggest that there is a certain degree of lack of confidence of the parties in each other.
The exporter is not willing to send the goods on D /P or D / A basis because he is not sure as to
whether the importer would make the payment and if the importer doesn't pay, then he runs the
risk of non-payment. Similarly, importer may also have the feeling that if he makes advance
payment to the exporter and he does not supply the goods of the quality desired by him on the
due date, then he would also suffer loss. Both the parties would be able to conduct their part of
the transaction smoothly if there is an assurance to them as regards protection of their interests.
The exporter requires an assurance for payment of the goods if he has sent the shipment as per
export order. The importer on the other hand, requires an assurance that the payment would be
released to the exporter only when he has supplied the goods as per the terms and conditions
stipulated in the export contract. This assurance is provided by the importer's bank and is known
as Letter of Credit or the Documentary Credit.
Letter of Credit refers to a written undertaking made by the importer's bank to the exporter that
the payment shall be made to him provided the shipment is sent by him in strict compliance with
the terms and conditions of the export contract. The terms and conditions of the export contract
form part of the letter of credit and are known as the terms and conditions of the letter of credit.
The essential characteristic of the Letter of Credit is that it relies on the doctrine of strict
compliance for release of payment to the exporter against the draft(s) drawn by him. The banks
do not deal in goods; they deal in documents. As such, the importer has to specify to the bank the
documents which it should examine as evidence to the effect that the exporter has sent the
shipment in strict compliance with the terms and conditions of the export contract.
The operations of Letters of Credit have been regulated and are governed by the articles of
'Uniform .Customs and Practice for Documentary Credits' of International Chamber of
Commerce adopted by more than 165 countries which were latest revised in 1993 for
implementation w.e.f. 1st January 1994.
PROCEDURE FOR OPENING LETTER OF CREDIT
The following is the procedure for opening a letter of credit:
(a) Importer's Request: - If the method of payment agreed between the importer and exporter is
through letter of credit then the importer requests his bank to open a letter of credit in favour of
exporter, either by paying the amount of letter of credit or by requesting credit to that extent.
(b) Issue of Letter of Credit: - The issuing bank issues letter of credit in favour of the exporter
and sends it to its -branch located in exporter's country (advising bank). The issuing bank may
also request advising bank to add its confirmation, if desired by the beneficiary.
(c) Receipt of Letter of Credit: - The exporter takes the possession of the letter of credit from the
advising bank. He should check the relevant details in the letter of credit and in case there is any
discrepancy, the same should be brought to the notice of the advising bank.
(d) Shipment of Goods: - The exporter fulfils the shipping and customs procedure and collects
the required documents from various authorities for negotiation.
(e) Negotiation of Documents: - The exporter submits the required documents to the negotiating
Bank, which scrutinizes the documents and makes payment to the exporter.
(f) Re-imbursement of Payment:- The negotiating bank gets the payment reimbursed from the
issuing bank..
(g) Documents to Importer: - The documents forwarded to the issuing bank by the negotiating
bank are handed over to the importer and the amount is debited to his account.
CONTENTS OF LETTER OF CREDIT
A Letter of Credit generally contains the following information:
1. Complete and correct name and address of the beneficiary i.e., the exporter.
2. Complete and correct name and address of the applicant i.e., importer
3. Type of the Letter of Credit/Documentary Credit
4. Amount of letter of credit
5. How the credit shall be available e.g., by payment, deferred payment, acceptance or
negotiation
6. The name of the drawee of the draft and the tenor of the draft.
7. Description of goods, quantity of the items and the unit price.
8. List of documents required to be submitted by the beneficiary.
9. Port of discharge and the place of final destination.
10. Terms of delivery i.e., FOB, CFR, CIF etc.
11. Status of transhipment i.e., whether allowed or not.
12. Status of partial shipment i.e., whether allowed or not.
13. The last date of sending shipment.
14. Time period for the presentation of documents for negotiation by the beneficiary after the
dispatch of the shipment.
15. The date and place of expiry of the Letter of Credit.
16. Transfer of the Letter of Credit allowed or not.
17. Mode of advice of the Letter of Credit i.e., by mail or tele-transmission.
DOCUMENTS REQUIRED UNDER LETTER OF CREDIT:-
According to Article 4 of the Uniform Custom and practice for documentary credit in credit operations all parties concerned deal in documents and not in goods, services and or other performances to which the documents may relate. Hence it is necessary that the
Importer Approaches bank to Open to L/C
Importer’s Bank sends L/C to the Advising Bank (in exporter country)
Exporter beneficiary tenders documents in conformity with the requirements of letter of credit.
Usual documents prescribed in letters of credit are discussed below:-
1. Bill of exchange: - It is an instrument drawn by one person (the seller of the goods) on another (the buyer) directing him to pay to or to the order of drawer (i.e. the seller). The person whom payment is to be made is called “payee” who can be either the drawer himself or a third person most letters of credit require that the exporter will prepare the bill called the draft and submit it to the banker along with other documents. It is document through which payment is arranged.
2. Commercial invoice: - It is document of content. It contains details about the goods sold, the price and any other charges which may be on account of buyer. It also contains information about any discounts, if given by the seller. A correctly completed commercial invoice should conform to the sale contract.
3. Packing List:- this gives details of the individual parcels shipped to the buyer.
4. Transport documents:- As shipment is the most crucial condition for payment all letter of credit insist on lodgment of documentary evidence in support of exporter’s contention of having shipped the goods. Bill of Lading is issued by the shipping company in case goods are sent by a sea vessels. Airway bill is used in case of air consignment, railway receipt in case the goods are sent by land route.
5. Inspection Certificate:- As the goods must conform to agreed quality standards all letter of credit require an Inspection Certificate. The Inspection certificate has to be submitted as a proof of the goods having been inspected by a qualified government or private agency.
6. Insurance policy Certificate:- Insurance policy is a legal evidence of contract of insurance showing full details of risks covered. Insurance certificate, applicable in case of floating OR open cover contains a declaration regarding value of each shipment and is signed by the exporter himself. Insurance certificates not normally acceptable unless specifically provided in the letter of credit.
Besides some letters of credit require documents such as Certificate of Origin Analysis and Weight Certificate, health and Sanitary Certificate to be submitted to the negotiating bank.
Precautions to be taken by the Beneficiary on the Receipt of Letter of Credit
An exporter should scrutinize the Letter of Credit carefully before proceeding to execute the export order. He should examine the following points to ensure that:
1. The Letter of Credit appears to be a valid Letter of Credit. He can consult his Banker for this purpose.
2. The type of Letter of Credit and its terms and conditions are as per the agreed terms and conditions of the export contract.
3. All the terms and conditions are acceptable and can be complied with. It should be ensured that the Letter of Credit does not include any condition that is unacceptable or cannot be complied with.
4. The documents required under the Letter of Credit can be obtained and presented for negotiation.
5. The description of the goods, quantity and the unit prices are as per the export contract.
6. There is no clause in the Letter of Credit that requires payment of costs or charges not agreed to with the importer.
7. The last date for sending shipment and the time allowed for presentation of the documents are acceptable. The port of loading and the port of discharge are as per the export contract.
PARTIES TO LETTER OF CREDIT:-
The following parties are involved in the operation of a letter of credit:
(a) Applicant or Opener: - The applicant or opener is the buyer or importer of goods who opens the letter of credit through his bank in favour of exporter.
(b) Beneficiary: - Beneficiary is the exporter of goods in’ whose favour the letter of credit is opened by the importer through his bank.
(c) Issuing Bank: - Issuing bank is the importer's bank, who issues a letter of credit in favour of the exporter on the request of the importer.
(d) Advising Bank: - Advising bank is the branch of issuing bank situated in the exporter's country. Such branch receives the letter of credit and looks after its onward transmission to the beneficiary.
(e) Confirming Bank: - Confirming bank is the bank situated in the exporter's country, which guarantees the credit on the request of the issuing bank. Many times, the advising bank and confirming bank are one and the same.
(f) Negotiating Bank: - Negotiating bank is a bank situated in the exporter's country through which documents are negotiated by the exporters, i.e., exporter's bank.
DOCTRINE OF STRICT COMPLIANCE
The operation of letter of credit as a mode of payment is based on the doctrine of strict
compliance. This doctrine provides that issuing bank would make the payment if the documents
as specified under letter of credit appear on their face to be in compliance with the terms and
conditions of the Letter of Credit. Such documents are termed as no discrepant documents. The
banks follow the international standard banking practices to determine whether the documents
stipulated in the Letter of Credit are in compliance with the terms and conditions or not. The
standard banking practices are given in the Uniform Custom and Practices for Documentary
Credits number 500 (1993 revision) as published by the International Chamber of Commerce.
According to these guidelines, the issuing bank would examine only those documents which
have been stipulated in the Letter of Credit. In case the beneficiary has tendered additional
documents which are not stipulated in the Letter of Credit, then the issuing Bank shall not
examine them and return them to the beneficiary without any responsibility. The documents are
considered discrepant if they do not appear on their face to be in compliance with terms and
conditions of the Letter of Credit or on their face appear to be inconsistent with one another.
If the documents required are without any discrepancy and are as per requirement in the Letter of
Credit, the bank undertakes that the drafts will be honored. The only risk under this mode of
payment is when the documents submitted have discrepancy. Goods are shipped on a date later
than stated in the Letter of Credit or any document is missing or there is a spelling mistake in a
document, then it amounts to discrepancy in the document.
The issuing bank is allowed a reasonable time not exceeding seven banking days following the
day of the receipt of documents to examine them and determine whether the documents are
discrepant or not. In case the documents are non-discrepant; the issuing bank makes the payment
against the draft / s drawn under the Letter of Credit
In case the issuing bank comes to the conclusion that the documents are discrepant, then it would
not make the payment and return the documents to the beneficiary or the other party through
whom it had received them. In such an eventuality, the issuing bank must give notice to this
effect by telecommunication or by other expeditious means with out delay but in any case before
the close of the seventh banking day following the day of receipt of the documents. Such notice
should be given to the bank from which it had received the documents or to the beneficiary if it
received the documents directly from him. Such notice must state all the discrepancies in the
documents. In case the issuing bank fails to examine and determine whether the documents are
discrepant or not within the time limit of seven banking days, then it shall, thereafter, be
precluded from raising the issue of discrepancy to reject the documents. In such a case, it will be
under an obligation to make the payment against the draft/ s drawn under Letter of Credit.
However, the issuing bank may, in its sole judgment, approach the applicant to waive of the
discrepancy or the discrepancies and if the applicant agrees to the request of the issuing bank
then it would make the payment to the beneficiary otherwise the issuing bank would act
according to the decision of the applicant. It is important to emphasize here that the issuing bank
will have the time not later than seven banking days from the day following the receipt of
documents to approach the applicant and take the decision accordingly and communicate the
same to the concerned party that is pre- center of documents or the beneficiary within the
prescribed time limit of maximum seven days.
Under this doctrine, the bank has the right to reject any document, which is not in strict
conformity with what is asked for in the letter of credit. There is no question of minor or major
discrepancy in documents. Any discrepancy makes the documents liable for non-acceptance.
FORM OF DOCUMENTARY CREDIT OR LETTER OF CREDIT
The form of documentary credit is the irrevocable documentary credit or the Letter of Credit.
A Letter of Credit is known as irrevocable Letter of Credit if its terms and conditions can be
cancelled/ modified only with the ex-consent of the beneficiary, the issuing bank and the
confirming bank( if any). Thus, an importer cannot get the terms and conditions of the Letter of
Credit modified/cancelled without the express consent of the exporter. An irrevocable Letter of
Credit gives an assurance to the beneficiary that the issuing bank commits itself to honour the
draft/s drawn by the exporter under the credit provided that all the stipulated documents are
presented and these are in strict compliance with the terms and conditions of the Letter of Credit.
This means that the irrevocable Letter of Credit is an insurance against commercial risks to
payment. Such risks are bankruptcy of the importer; dishonest intentions of the importer to make
the payment or the liquidity problems faced by him and would not affect payment to the
exporter.
On the other hand, a Letter of Credit is known as revocable if its terms and conditions can be
amended, revoked or cancelled without the consent of the beneficiary and even without giving
prior notice to the beneficiary regarding the likely change in the Letter of Credit. Such a Letter of
Credit involves lot of risk to the beneficiary as its terms and conditions can be modified/
cancelled while the goods are in transit or though the documents have been presented but before
payment could be made. In such a situation, the exporter will face the problem of realising
payment directly from the importer.
The banks normally do not issue the revocable Letter of Credit unless there is a specific request
to this effect from the applicant. A Letter of Credit is deemed to be an irrevocable Letter of
Credit unless it is specifically marked otherwise.
KINDS OF LETTER OF CREDIT
There are various kinds of Letter of Credit depending upon the features added to it as desired by the applicant. The different kinds of the Letter of Credit are as follows:
1. Sight or Usance Letter of Credit
2. Confirmed or Unconfirmed Letter of Credit
3. Negotiable Letter of Credit
4. Revolving Letter of Credit
5. Red clause Letter of Credit
6. Green clause Letter of Credit
7. Transferable Letter of Credit
8. Back to back Letter of Credit
9. With recourse or without recourse Letter of Credit
10. Standby Letter of Credit
11. Revocable and Irrevocable Letter of Credit
12. Restricted Credits
Sight or Usance Letter of Credit A Letter of Credit is known as Sight Letter of Credit or the Letter of Credit at sight if it involves
payment to the exporter against sight draft. On the other hand, if the payment is to be made
against usance draft, then the Letter of Credit is known as Usance Letter of Credit. In this case,
the usance draft is accepted jointly by the issuing bank and the importer. Once, the draft is jointly
accepted by the bank and the importer, it becomes the first class commercial paper which can be
discounted through any commercial bank before the due date. This enables an exporter to obtain
funds in advance before waiting for the due date.
Confirmed or Unconfirmed Letter of Credit
An irrevocable Letter of Credit is confirmed when the advising bank add? its confirmation to the
Letter of Credit. This means that the advising bank assumes the primary liability for making
payment to the beneficiary as if it were the issuing bank. This arrangement is beneficial for the
exporter as it enables him to protect himself against the political risks involved in transfer of
funds from the importer's country to the exporter's country. This kind of situation may arise
when the importer's country is at war or is faced with civil/ ethnic disturbances leading to the
imposition of financial emergency or temporary financial crisis leading to the ban on the transfer
of funds out of the country.
It is important to understand that confirmation of Letter of Credit is possible only if there is a
clause in the Letter of Credit which permits the advising bank or any other negotiating bank to
add its confirmation. Thus; if an exporter wants confirmation of Letter of Credit then he must
negotiate for this with the importer so that he can get this clause included in the Letter of Credit.
Confirmation of credit, in fact, operates as an insurance against the political risks to payment.
An irrevocable confirmed Letter of Credit is the most beneficial form of credit for the exporter as
he has obtained assurance of payment from two banks namely, the issuing bank and the
confirming bank. The exporter should take the decision regarding confirmation carefully as it
involves cost in terms of payment of confirmation charges to the bank. It is the most desirable to
opt for confirmation in the case of those countries which are politically unstable or the financial
standing of the issuing bank is not very good.
Once the payment is made by the confirming bank ( it is usually located in the exporter's
country)/ then it claims the amount of Letter of Credit from the issuing bank. In case it fails to
obtain the payment from the issuing bank for any reason, then it cannot claim the amount from
the exporter, i.e. the beneficiary under the Letter of Credit. Confirmation of Letter of Credit is,
thus, without recourse to the beneficiary.
On the other hand, if the irrevocable Letter of Credit does not provide for its confirmation, then it
would be known as unconfirmed Letter of Credit
Negotiable Letter of Credit
A Letter of Credit is known as negotiable if the issuing bank authorises the negotiating bank to
honour the draft/s drawn under the terms of the credit. In such a case, the exporter gets the
payment even before the documents are scrutinised by the issuing bank. The negotiating bank
i.e., the bank through which the documents are presented for negotiation for realisation of the
export proceeds, would examine the documents and if the same are found to be non discrepant,
then the it would release the payment under the terms of the credit to the exporter subject to an
undertaking from the exporter that in case the issuing bank does not release the payment then he
would refund the amount to the negotiating bank. Thus, the negotiating bank reserves to itself the
right to take recourse to the beneficiary in the event of non- payment by the issuing bank under
the credit. This facility of payment would be available to the exporter only if it is stated in the
Letter of Credit that the payment is allowed by negotiation and the name of the bank(s) allowed
to negotiate is also stated in the Letter of Credit. In case the name of the negotiating bank is
stated in the letter of credit, then the negotiation is restricted to the nominated bank and the credit
is then called the restricted credit. In case the issuing bank agrees for negotiation by any bank
then the credit would be called Unrestricted.
Revolving Letter of Credit A revolving letter of credit is one which provides for the renewal of the amount of the credit
without any amendments to the letter of credit in relation to a given time period or a given
amount. The revolving letter of credit may be revocable or irrevocable. For example, a letter of
credit may revolve initially for an amount upto $20,000 per month for a fixed period of say, three
months. In this case, the amount of credit shall be renewed for $20,000 every month for a period
of three months irrespective of whether any credit was utilised or not by the beneficiary during
the month. Thus, while the face value of the letter of credit is $20,000, the undertaking of the
issuing bank is for the total amount of $60,000 in revolving periods each for $20,000 for three
months.
The revolving credits are opened in those cases where the importer regularly imports goods from
a certain exporter. Instead of opening letter of credit for each import, the importer saves on the
transaction costs by opening the revolving credit. The disadvantage of revolving credit from the
point of view of the importer is that he enters into long term commitment with a particular
supplier and thereby deprives him of the possible of opportunities of making imports at
competitive rates in future.
The revolving credit may be cumulative or non-cumulative. The credit is considered Cumulative
if the unutilised amount of one time period can be carried over to the next period. If the
unutilised amount cannot be carried over, then the credit would be called Non- cumulative.
Red Clause and Green Clause Letters of Credit
A Red Clause letter of credit is a kind of credit which enables the confirming bank or the
nominated bank to make advances to the beneficiary even before the presentation of the
documents. Since this clause used to be written customarily in red ink hence the name Red
Clause letter of credit. This clause states the amount that can be advanced to the beneficiary and
in certain case it may cover even the full amount of the letter of credit.
The confirming or the nominated bank recovers the amount of advance with interest out of the
payment realised under the credit. In case the documents presented by the exporter are found to
be discrepant then the bank which had given the advance will have the right to demand
repayment of the advance amount with interest from the issuing bank. The issuing bank would
have the right of recourse against the applicant Le., the importer. This means that the liability
will fall on the applicant. Whether such a clause would be included in the letter of credit or not
depends upon the agreement between the exporter and the importer. On the other hand, the letter
of credit is known as Green Clause letter of credit if it provides for the credit given to the
exporter to cover the period of storage of goods at the sea port.
Transferable Letter of Credit Transferable letter of credit is a credit which authorises the advising bank to transfer part or full
amount of the credit to any other party at the request of the beneficiary. In this case, the importer
runs the risk of accepting the shipment of goods from a party other than with whom the order
was placed and the party supplying the goods may not have had any business dealings in the past
with the importer. However, once the credit is transferred, the transferee gets the right to make
presentation of the draft/.s and the documents and claim payment for the goods supplied. This
kind of credit is very useful in those cases where the importer is making imports through an
agent in the exporting country. Such agents, known as buying agents in the exporting country,
maintain the list of reliable exporters for the supply of goods to their Principals in the foreign
country. The transferable credits help the buying agents to transfer part of the credit amount to
different exporters who have been given the orders for the supply of goods to the importer.
Back -to- Back Letter of Credit Back -to- Back letter of credit is a credit which is issued at the strength of another letter of credit.
For example, an exporter who has received a letter of credit for the export of goods may have to
import goods from another country for the execution of the order. The foreign supplier may ask
for payment against letter of credit. The exporter can request for the issue of import letter of
credit on the strength of the export letter of credit. The second letter of credit is known as the
back-to -back letter of credit. Thus, the back- to-back letter of credit involves two separate letters
of credits as follows:
1. One opened in favour of the primary beneficiary or the original exporter.
2. The credit opened in favour of the second beneficiary who would supply goods to the first
beneficiary. Thus, the first beneficiary becomes the applicant for opening of the second letter of
credit. It is important to ensure that the second letter of credit specifies all the documents
required by the first credit and the time limits set for presentation of the documents in such a
manner that it will enable the primary beneficiary Le., original exporter to present the documents
within the time limits set by the primary letter of credit
With Recourse or Without Recourse Letter of Credit A letter of credit is with recourse when under the terms of the credit, the negotiating bank or the
nominated bank cannot approach the beneficiary for the refund of the payment made under the
letter of credit. It is without recourse when the negotiating or the nominated bank cannot
approach the beneficiary to refund the payment under the letter of credit. A confirmed letter of
credit is without recourse to the beneficiary and the unconfirmed or the negotiable credits are
always with recourse to the beneficiary.
Standby Letter of Credit Standby letter of credit is an assurance to the beneficiary that the applicant shall perform his part
of the obligation undertaken by him under the contract between the applicant and the beneficiary.
It is, in fact, a kind of performance guarantee to support the beneficiary in the event of default by
the applicant. The subject matter of this kind of letter of credit could be :
1. Repayment of the money borrowed by the applicant from the beneficiary or
2. Payment on account of any indebtedness undertaken by the applicant or
3. Payment on account of any default by the applicant in the performance of any obligation
undertaken by the applicant.
Revocable and Irrevocable Letter of Credit:- Under the revocable letter of credit, the issuing bank retains the right to cancel or modify the
credit, whereas in an irrevocable letter of credit, the issuing bank gives a binding undertaking to
the beneficiary.
Restricted Letter of Credit:- This refers that negotiations under a credit may be restricted by the issuing bank to a named bank.
Advantages of Letter of Credit Advantages of Letter of Credit to Exporters
a. Prevents Blockage of Finance: - The letter of credit received from the importer can be discounted with the confirming bank and money can be realised immediately. This prevents blockage of funds. At the same time, after fulfilling the required formalities the exporter gets immediate payment.
b. Prevents Bad Debts: - In the case of a letter of credit, the payment is I guaranteed by the issuing bank and therefore, the risk 'of bad debts is less. A confirmed letter of credit is more secured due to double guarantees from the issuing bank and the confirming bank.
c. Fulfillment of Import Regulations: - The letter of credit is issued by the issuing bank after the importer complies with the import regulations and exchange control regulations in his country. Thus, after getting letter of credit unnecessary delays caused by import regulations can be avoided.
d. Importer's Obligation: - The importer may refuse to accept goods in the case of other methods of payment. But in the case of the letter of credit, the importer cannot do so because it is obligatory for him to accept goods and make payment once he gets the documents negotiated in his favour.
e. Helps to Procure Pre-shipment Finance: - In India an exporter can obtain pre-shipment finance from commercial banks on the strength of a letter of credit issued by the importer's bank in his favour.
ADVANTAGES OF LETTER OF CREDIT TO IMPORTER
a. Better Terms of Trade :- Since in the case of a letter of credit, payment is assured, the importer is in a better position to negotiate the terms of trade with foreign suppliers which otherwise is not possible. b. Guaranteed Shipment: - Shipment of goods cannot be delayed once a letter of credit is issued. Therefore, the importer is assured of the delivery of goods in time.
c. Delivery in Time: - A letter of credit is honored only after the exporter dispatches. the shipping documents to the importer. Thus, a letter of credit assumes timely delivery of goods to the importer.
d. Overdraft Facility: The importer may also get a letter of credit issued in favour of the exporter on the basis of overdraft facility extended to him by the issuing bank. Thus, the importer gets possession of goods without making actual payment.
e. No Advance Payment:- The importer is not required to make any advance payment to the exporter once a letter of credit is issued.
SETTLEMENT OF PAYMENT UNDER LETTER OF CREDIT
The procedure for the settlement of payment against the export shipment sent under a letter of credit depends upon the payment mode stated in the letter of credit. Generally, the sequence of steps involved in this procedure is as follows:
1. The beneficiary (exporter) sends the shipment as per the terms and conditions of the credit.
2. Exporter collects the required set of documents and draws the bill of exchange as per the requirements of the credit.
3. The set of documents as stated in (2) above are presented by the exporter to his bank, called beneficiary's bank.
4. The beneficiary's bank forwards these documents to the issuing bank
5. The issuing bank scrutinizes the documents and if the same are found to be non discrepant, then it sends the remittance to the beneficiary's bank for its onward credit to the beneficiary. But in case the documents are found to be discrepant then the issuing bank may approach the applicant to decide the course of action it would take in regard to the discrepant set of documents. The possible options are rejection of documents; ignoring the discrepancies and making payment to the beneficiary or sending documents to the beneficiary for removal of the discrepancies. The issuing bank would follow one of the options as desired by the applicant.
