The Commercial Letter of Credit Final NA TALAGA

I. OBJECTIVES

This research aims to educate the readers about commercial letters of credit. The

researchers want the readers to fully understand the nature of letters of credit in a banking

institution, its function and its importance to a business. The researchers expect that after

reading this study, they would be able to define the terms related to letters of credit on their

own.

II. INTRODUCTION

The term Letter of Credit seems to be uncommon to every individual who doesn’t

engage in business or legal aspects of an international transaction. Some might conclude that

letter of credit is a document which proves that a person bind himself to pay for a certain

amount to his creditor. Others may think that it is merely a document stipulating the terms of a

credit agreement. To lessen the confusion or vague understanding of credit, we aim to present

the different factors involving credit.

Trading internationally can involve risks. Exporters run the risk of buyers failing to pay

for goods, while importers may risk paying but never receiving anything. Because of the

distances involved, it may be difficult to resolve any disputes. One way of reducing the risks is

to use a letter of credit. It is a document issued by one bank to another to serve as a guarantee

for payments made to a specified person. This can offer assurance to the seller that they will be

paid, and the buyer can be sure that no payment will be made until they receive the goods.

This Term paper explains what letters of credit are its types, how they work, and when

you might consider using one. It also looks at some of the drawbacks of using a letter of credit

and explores some possible alternatives and international rules that govern most letters of

credit.

There are several different types of letters of credit available to use, depending on the

circumstances.At the end of this term paper, readers are expected to

learn the functions of a foreign department in a bank, classification of letter of credit, parties to

letter of credit, issuance process, flow of payments and methods of payments in letter of credit,

documentation, benefits to the banker, advantages of letter of credit, and lastly the risk

associated in letter of credit.

III. BACKGROUND OF THE INSTITUTION

UnionBank is a partnership among the Aboitiz Group, Insular Life and Social Security

System. It started operations in 1981 and became a commercial bank by January 19, 1982. In

July 1992, UnionBank was granted the license to operate as a universal bank. The bank

acquired the International Corporate Bank (Interbank) in 1994.

Among Philippine banks, UnionBank stands out for its strategy, execution and

performance. While many banks went for size and market share via large balance sheets,

UnionBank has followed a highly focused differentiation strategy that emphasizes innovation

and service. It has put technology at the heart of its business. Information and network access

are a core UnionBank offer. Today multiple channels are available for transaction and

information access: 190 branches nationwide, 224 ATMs (as of January 2012), a call center and

Internet bank, www.unionbankph.com.

UnionBank is among the industry's best in key performance measures: absolute profit,

http://www.unionbankph.com/

cost-to-income ratio, return on equity, return on assets, revenue/expense ratios, market

capitalization, and earnings per share. In 2002 & 2003, the bank was recognized as among

Asia's best companies by Euro money and Finance Asia. UnionBank is also the country's only

bank to make it to the list of the world's 25 soundest banks for four consecutive years by The

Banker of London.

In strategic business, the bank is a recognized leader and premier provider of corporate

cash management & B2B solutions to leading local and multinational companies. Its other

strengths are in Treasury services & capital markets, Internet banking, consumer finance and

distribution network

The Corporate Vision of the UnionBank is to become one of the three Universal Banks in

the Philippines in the first decade of the 21st century, With a full range of financial products and

services for which we shall be the acknowledged leader in service, innovation and value-for-

money, Conveniently accessed anytime, anywhere by delighted customers, for whom we shall

be a dominant financial services portal, All enabled by bold, smart and self-driven professionals.

On the other hand the UnionBank’s mission is to provide product solutions, information and

network access that customers need to become financially and operationally efficient.

Justo A. Ortiz

Chairman and Chief Executive Officer

Member:

Executive Committee

Risk Management Committee

Market Risk Committee

Nomination Committee

Compensation Remuneration Committee

Corporate Governance Committee

Victor B. Valdepeñas

Director, President and Chief Operating Officer

Member:

Trust Committee


Alternate Member:

Executive Committee


Jon Ramon M. Aboitiz

Vice Chairman of the Board

Chairman:

Executive Committee





Vicente R. Ayllon

Vice Chairman of the Board

Vice Chairman:


Alternate Member:

Trust Committee

Chairman and Chief Executive Officer

The Insular Life Assurance Co. Ltd.

Erramon I. Aboitiz

Director

Chairman:


Member:

Executive Committee




Corporate Governance Committe

Juan Antonio E. Bernad

Director

Chairman:

Trust Committee

Senior Vice President

Aboitiz Equity Ventures, Inc.

Armand F. Braun

Independent Director

Chairman:

Audit Committee

Member:

Executive Committee




Iker Markel M. Aboitiz

Director

Alternate Member:

Audit Committee

FVP/ Chief Finance Officer/

Chief Information Officer

Aboitiz Power Corporation

Stephen G. Paradies

Director

Chairman:

Operations Risk Management Committee

Vice Chairman:

Audit Committee

Mayo Jose B. Ongsingco

Director

Vice Chairman:


Member:

Audit Committee

Operations Risk Management Committee


Justice Cancio C. Garcia (ret)

Independent Director

Member:


Audit Committee


Emilio S. De Quiros, Jr.

Director and Vice Chairman of Trust Committee

Member:

Executive Committee



Alternate Member:


Eliza Bettina R. Antonino

Director

Ricardo G. Librea

Director

Daniel L. Edralin

Director

IV. FUNCTIONS OF UNION BANK’S FOREIGN DEPARTMENT

The foreign exchange department is responsible for dealing with and managing the

purchase and sale of foreign currencies and is a highly specialized business. It could mean the

exchange of goods and services between international buyers and sellers. Or it may refer to the

means of payment in international trading.

The banks deal mostly in the transfer of funds without the physical use of cash from the

simplest to the most complicated type of exchange. It is, therefore, fit for the discussion on

foreign exchange in this chapter to focus on the bank’s foreign exchange function relating to

the mean of payment and the instruments used therein.

All banks, private or state owned, have foreign exchange departments that work closely

with the foreign exchange markets in each country trading with other financial centers

worldwide.

The functions are as follows:

1. Dealers’ Section

This section is the nerve of the foreign exchange department as the exchange rates are

computed and advised by this section. The exchange rates are the on a foreign exchange and so

any incorrect fixation of rates (price) will turn the profits of the bank into losses and instead of

earning from the foreign exchange transactions, the bank may keep on losing.

* Exchange Rates are the rate at which one currency may be converted into another. It

is determined by supply of and demand for foreign exchange.

2. Foreign Remittances Section

This section deals with the inward and outward remittances received in the country and sent

outside, both on behalf of the transactions taken up by residents and non-residents. Foreign

remittances are carried out in the form of cable transfers, mail transfers, demand drafts,

http://www.investorwords.com/1240/currency.html

traveler’s checks and payment instructions by letters. All these forms are widely used both for

inward remittances as well as outward remittances

3. Import Section

Import section can be sub-divided into import letters of credit both opening and payment

thereof. In developing and developed countries, there is Import and Export Trade Control

Regulations and such regulations are enforced through a licensing procedure. Hence the Import

section has to take care of the Import Trade Control Regulations as well as Exchange Control

Regulations before allowing import transactions to be put through.

4. Export Section

The section deals with various exchange operations arising out of export trade. The principal

functions of this sub-section are:

1. Advising and confirming letters of credit received from abroad:

2. Extending financial assistance to exporters as and when required.

3. Acting as an agent for collection on behalf of the clients;

4. Negotiation of export bills drawn under letters of Credit whereby the dealer acts as an

agent of overseas bank and facilitates smooth function/operation of international

trade

Other related topics:

The Balance of Payments is a statement that reflects the transactions entered into our country

and foreign country. It includes all goods, services, factor income and current transfers an

economy receives from or provides to the rest of the world.

Three Major Accounts of BOP

Current Account

-It records the net flow of goods, services and unilateral transfer.

*Unilateral Transfer- An economic transaction between residents of two

nations over a stipulated period of time, usually a calendar year. Typically, these

transactions consist of gift exchanges, pension payments and the like, but they

can encompass other goods and services as well.

Capital Account

-It records public and private investment and lending.

Official Reserves

- It accounts changes in international reserves owned by central banks and

reflects surplus/deficit of current account and capital account

Methods of Transfer

Wire or cable transfer- This is accomplished by one party (a local bank) ordering

another party (a bank in another country) through cable or telephone to pay a certain in

money to a specified beneficiary.

Mail Transfer- An order to pay from one party to another, except that it is sent through

the mail if not, airmail.

The Commercial Letter of Credit

A binding document that a buyer can request from his bank in order to guarantee that

the payment for goods will be transferred to the seller. Basically, a letter of credit gives the

seller reassurance that he will receive the payment for the goods. In order for the payment to

occur, the seller has to present the bank with the necessary shipping documents confirming the

shipment of goods within a given time frame. It is often used in international trade to eliminate

risks such as unfamiliarity with the foreign country, customs, or political instability.

A key principle underlying letters of credit is that banks deal only in documents and not

in goods. The decision to pay under a letter of credit will be based entirely on whether the

documents presented to the issuing bank appear on their face to be in accordance with the

terms and conditions of the letter of credit. It would be prohibitive for the banks to physically

check whether all merchandise has been shipped exactly as per each letter of credit.

Parties to Letters of Credit

Applicant (Opener): Applicant which is also referred to as account party is normally a

buyer or customer of the goods, who has to make payment to beneficiary. LC is initiated

and issued at his request and on the basis of his instructions.

Issuing Bank (Opening Bank): The issuing bank is the one which create a letter of credit

and takes the responsibility to make the payments on receipt of the documents from

the beneficiary or through their banker. The payment has to be made to the beneficiary

within seven working days from the date of receipt of documents at their end, provided

the documents are in accordance with the terms and conditions of the letter of credit. If

the documents are discrepant one, the rejection thereof to be communicated within

seven working days from the date of receipt of documents at their end.

Advising Bank: An Advising Bank provides advice to the beneficiary and takes the

responsibility for sending the documents to the issuing bank and is normally located in

the country of the beneficiary.

Confirming Bank: Confirming bank adds its guarantee to the credit opened by another

bank, thereby undertaking the responsibility of payment/negotiation acceptance under

the credit, in additional to that of the issuing bank. Confirming bank play an important

role where the exporter is not satisfied with the undertaking of only the issuing bank.

Negotiating Bank: The Negotiating Bank is the bank who negotiates the documents

submitted to them by the beneficiary under the credit either advised through them or

restricted to them for negotiation. On negotiation of the documents they will claim the

reimbursement under the credit and makes the payment to the beneficiary provided

the documents submitted are in accordance with the terms and conditions of the letters

of credit.

Reimbursing Bank: Reimbursing Bank is the bank authorized to honor the

reimbursement claim in settlement of negotiation/acceptance/payment lodged with it

by the negotiating bank. It is normally the bank with which issuing bank has an account

from which payment has to be made.

Classifications of Letter of Credit

There are two types of letters of credit, revocable or irrevocable.

1. A revocable letter of credit can be revoked without the consent of the exporter. It may be

cancelled or changed up to the time the documents are presented. Revocable letters of credit

are very rarely used.

2. An irrevocable letter of credit cannot be cancelled or amended without the consent of all

parties including the exporter.

Unless otherwise stipulated, all letters of credit are irrevocable.

Letters of credit may be settled either by sight or by acceptance:

• If payment is to be made at the time that documents are presented, this is referred to as a

sight letter of credit.

• If payment is to be made at a future fixed time from the presentation of documents, this is

referred to as a term letter of credit.

The following table highlights the key elements of the two settlement types in letters of credit:

IMPORTER

SIGHT LETTER OF CREDIT TERM LETTER OF CREDIT

Assured that all conditions of letter of credit must be met prior to payment being made to exporter.

Same as for sight letter of credit with additional advantage of deferred payment.

Ability to negotiate more favorable terms with exporter when letter of credit offered.

No guarantee that goods will be as specified.

Ties up line of credit.

EXPORTER

SIGHT LETTER OF CREDIT TERM LETTER OF CREDIT

Undertaking from issuing bank that you will be paid if you meet all terms of the letter of credit

Same as for sight letter of credit but payment is deferred

Shifts credit risk from importer to the issuing bank

By offering a deferred payment to the importer, you may secure a sale or a better price

Not obliged to ship goods if letter of credit is not as agreed in sales contract

Documents must be prepared in strict compliance with letter of credit

Failure to comply with the letter of credit leaves you at risk of non-payment

Issuance process

1. The exporter and importer sign a bill of sale contract.

2. The importer applies to his bank, the issuing bank, to open a letter of credit.

3. The issuing bank sends the advice of the credit to the advising bank.

4. The exporter is advised of the credit.

5. Following shipment of the goods, the exporter presents the documents to the advising bank

(the paying agent).

6. After checking the documents and confirming that they agree with the letter of credit terms,

payment is made to the exporter. At the same time, the advising bank sends the documents to

the issuing bank and requests reimbursement for the letter of credit amount plus the advising

bank's fees and expenses.

7. The issuing bank sends the documents to the importer and debits his account for the letter of

credit amount plus the fees and expenses of the banks involved.

Flow of Payments

The payment under the letter of credit is either made at the time the documents are released

to the importer (sight letter of credit) or on acceptance of the bill of exchange (term letter of

credit). The importers bank then sends the payment or advice of acceptance to the exporter’s

bank.

Methods of Payment

The following are the methods on how to make payments upon the issuance of letters of credit.

CASH

DEBIT ACCOUNT

MANAGERS CHECK

Documentation

International trade involves documentation, there is no escaping it. The documentation

provides evidence that goods have been shipped, that legal and regulatory requirements are

met and that the goods are described correctly. They also confirm the financial arrangements

and the method of payment. The commercial contract you agree with the supplier or customer

will detail all the documentation that will be required.

The following are the required documents to obtain letter of credit:

COMMERCIAL INVOICE- document is provided by the seller to the buyer. Also known as

export invoice or import invoice, commercial invoice is finally used by the custom

authorities of the importer's country to evaluate the good for the purpose of taxation.

The invoice must:

Be issued by the beneficiary named in the credit (the seller).

Be address to the applicant of the credit (the buyer).

Be signed by the beneficiary (if required).

Include the description of the goods exactly as detailed in the credit.

Be issued in the stated number of originals (which must be marked "Original) and

copies.

Include the price and unit prices if appropriate.

State the price amount payable which must not exceed that stated in the credit

Include the shipping terms.

BILL OF LADING- Bill of Lading is a document given by the shipping agency for the goods

shipped for transportation form one destination to another and is signed by the

representatives of the carrying vessel.

PACKING LIST- Also known as packing specification, it contain details about the packing

materials used in the shipping of goods. It also include details like measurement and

weight of goods.

The packing List must:

Have a description of the goods consistent with the other documents.

Have details of shipping marks and numbers consistent with other documents.

Benefits to the banker

Increased Balances. There is no doubt that banks charge low rates of commission but

they offset this advantage by maintaining balances up to the line of credit so that the

drawings of the exporters are met under the credit. The balances, of course, are the life-

blood of every commercial bank.

Commission. The commissions charged by the banks vary with the kinds of letters

issued by them. Though the commissions are small yet when counted on the whole they

form a significant part of earnings of the commercial banks.

New Business Opportunities. The letters of credit provide new business opportunities

to the banks. The new firms which are engaged in the export and import of merchandise

are introduced to the banks which by serving them effectively develop profitable

relationship.

Interchange. When a letter of credit is opened by the importer the importers bank

sends a cable to its corresponding bank in the foreign country to notify the exporter of

the letter of credit and its terms and conditions If the importer s bank serves effectively

and honours the drafts promptly of the corresponding bank, it creates good impression

of the credit standing at the importer’s bank. The exporter’s bank reciprocates by

sending the bulk of the business of the bank which has given better services.

Advantages of Letters of Credit to the exporter.

The advantages of letter of credit to the exporter are summed up as under:

Provision of finance. The exporter on the production of shipping documents to the

advising bank can obtain necessary finance. He has not to wait till the money is received

from the importer.

Credit standing. Through the letter of credit, the exporter can establish his credit

standing both on the importer and the buyer s bank by proper delivery of the

merchandise and the shipping documents.

Legal right. The export letter of credit establishes legal right of getting payment of the

goods exported to the foreign country.

Advantages to importer.

Risk covered. The importer does not like to undertake an unwanted risk He by opening.

a letter of credit in favour of seller is saved risk of making payments before the receipt

of goods. The importer will make payment to a bank in his own country against delivery

of shipping documents.

Business expansion. The letter of credit greatly facilitates overseas business and makes

the payments of goods easy.

Bridges credit gulf. The letter of credit also helps the importer and exporter of

merchandise to rely on the credit standing of each other. It bridges credit gulf between

two parties.

Payment in documents currency. The importer has not to send the yellow metal (gold)

to the exporter. The importer pays for the goods received in the currency of his own

country and the exporter is also paid by the advising bank in the currency of his own

country.

Some disadvantages of Letter of Credit are:

The main disadvantages are the fees charged by the importer's bank for issuing LC and the

possibility that the letter of credit reduces the credit line to borrow from your bank.

There are some risks that LC can only alleviate but not prevent. Exposure to movements in the exchange

rate: Fluctuations in exchange rates may affect the demand of the product of a foreign company, when

the currency strengthens national product denominated in that currency become more expensive for

foreign customers, which may cause a decrease in demand and therefore a decline in inflows of cash.

Corporations working abroad are also vulnerable to the economies of the countries to which

they export their goods. Corporations need to do their own research before entering a new

market because LC may not protect them from negative economic dynamics.

Exposure to political risk: When multinational corporations, establish subsidiaries in other

countries are exposed to political risk, which represents political actions taken by the host

government or the public that affect the cash flows of multinational corporations. Letters of

Credit have advantages, disadvantages and risks. We will call them LC throughout this

document.

Disadvantages for the Importer/Buyer:

Ties up the business credit line

Unless currency-hedging strategies are utilized, the actual cost of the goods can increase

do to vulnerability to currency fluctuations.

Costs involved with issuing, negotiating, and other fees (like amendments), can make

L/C expensive.

Seller's bank controls the shipping documents

The goods shipped may not conform (inferior quality for example) to the order

(remember L/C’s are strictly about documents and are separate from the actual goods).

Unless the seller “makes good” the only recourse is through legal proceedings.

Disadvantages to the Exporter/Seller:

Strict compliance is required for payment. Unless all the documents are 100%

compliant with the terms and conditions of the L/C the bank will not issue payment.

Still subject to political risk of the country the L/C originates

Subject to the financial strength and stability of the Issuing bank

More cumbersome - requires a high level of expertise to successfully navigate the

process

More expensive than other methods of payment

Receiving, negotiating, and other fees associated with L/C can be expensive. The

paperwork can be very time consuming and cumbersome to produce

Risk Associated with Opening Imports L/cs

The basic risk associated with an issuing bank while opening an import L/c are :

The financial standing of the importer

As the bank is responsible to pay the money on the behalf of the importer, thereby

the bank should make sure that it has the proper funds to pay.

The goods

Bankers need to do a detail analysis against the risks associated with perishability of

the goods, possible obsolescence, import regulations packing and storage, etc. Price

risk is the another crucial factor associated with all modes of international trade.

Exporter Risk

There is always the risk of exporting inferior quality goods. Banks need to be

protective by finding out as much possible about the exporter using status report

and other confidential information.

Country Risk

These types of risks are mainly associated with the political and economic scenario

of a country. To solve this issue, most banks have specialized unit which control the

level of exposure that that the bank will assumes for each country.

Foreign exchange risk

Foreign exchange risk is another most sensitive risk associated with the banks. As

the transaction is done in foreign currency, the traders depend a lot on exchange

rate fluctuations.

Correspondent Banks

These are the correspondent banks of Union Bank outside the country:

CURRENCY CORRESPONDENT

BANK

SWIFT CODE

(BIC)

ABA/ IBAN No

US Dollar JPMorgan Chase Bank,

New York

CHASUS33 21000021

US Dollar Citibank, New York CITIUS33 21000089

US Dollar Bank Of New York, New

York(FCDU)

IRVTUS3N 21000018

US Dollar Wachovia Bank, New

York (FCDU)

PNBPUS3NNYC 26005092

US Dollar Bank Of America, New

York

BOFAUS3N 26009593

US Dollar Deutsche Bank, New

York

BKTRUS33 21001033

US Dollar Standard Chartered Bank,

New York

SCBLUS33 26002561

Canadian Dollar Canadian Imperial Bank

Of Commerce, Toronto

CIBCCATT -

Euro Deutsche Bank, Frankfurt DEUTDEFF DE95500700100956275200

Euro JPMorgan Chase Bank,

Frankfurt

CHASDEFX DE57501108006231603108

Euro Standard Chartered Bank,

London

SCBLGB2L GB74SCBL60910417070233

Great Britain

Pound

Standard Chartered Bank,

London


Great Britain

Pound

JPMorgan Chase Bank,

London

CHASGB2L -

Swiss Franc Standard Chartered Bank,

London


Australian

Dollar

Australia New Zealand

Bank, Melbourne

ANZBAU3M -

New Zealand

Dollar

Australia New Zealand

Bank, New Zealand

ANZBNZ22058 -

Japanese Yen Bank Of Tokyo

Mitsubishi, Tokyo

BOTKJPJT -

Japanese Yen JP Morgan Chase Bank,

Tokyo

CHASJPJT -

Singapore

Dollar

Deutsche Bank, Singapore DEUTSGSG -

Singapore

Dollar

United Overseas Bank,

Singapore

UOVBSGSG -

Hong Kong

Dollar

Standard Chartered Bank,

Hong Kong

SCBLHKHH -

V. CONCLUSIONS:

The foreign exchange department is responsible for dealing with and managing the purchase

and sale of foreign currencies and is a highly specialized business. The bank’s foreign

department focuses more on issuing letters of credit. A letter of credit is a binding document

that a buyer can request from his bank in order to guarantee that the payment for goods will be

transferred to the seller. There are different parties involved in a letter of credit: The applicant

(Opener), issuing bank (Opening Bank), advising bank, confirming bank, negotiating bank,

reimbursing bank. Letters of credit can be classified as: Revocable, irrevocable, sight and term

letters of credit. It can be paid through cash, debit account and manager’s check. The

documents attached to letter of credit are commercial invoice, bill of lading and packing list.

Applying LC takes only couple of days. It depends upon the completion of requirements or

completion of terms and conditions agreed by both parties. Banks of both parties communicate

through e-mails, correspondent banks and telegraphic transfers. There are advantages and

disadvantages involved upon acquiring LCs by the client and upon issuance of LCs by a bank. All

in all, letters of credit plays a very important role in banking , importing and exporting

industries.

VI. GLOSSARY:

Advising Bank provides advice to the beneficiary and takes the responsibility for sending the

documents to the issuing bank and is normally located in the country of the beneficiary.

Applicant (Opener) is one party to a LC normally a buyer or customer of the goods, who has to make payment to beneficiary.

Balance of Payments is a statement that reflects the transactions entered into our country and foreign country. It includes all goods, services, factor income and current transfers an economy receives from or provides to the rest of the world.

Bill of Lading is a document given by the shipping agency for the goods shipped for

transportation form one destination to another and is signed by the representatives of the

carrying vessel.

Capital Account it records public and private investment and lending.

Commercial Invoice is a document that is provided by the seller to the buyer. Also known as

export invoice or import invoice, commercial invoice is finally used by the custom authorities of

the importer's country to evaluate the good for the purpose of taxation.

Confirming Bank adds its guarantee to the credit opened by another bank, thereby undertaking the responsibility of payment/negotiation acceptance under the credit, in additional to that of the issuing bank.

Current Account records the net flow of goods, services and unilateral transfer.

Dealers’ Section it is the nerve of the foreign exchange department as the exchange rates are

computed and advised by this section.

Export Section deals with various exchange operations arising out of export trade.

Foreign exchange department is responsible for dealing with and managing the purchase and

sale of foreign currencies and is a highly specialized business.

Foreign Remittances Section deals with the inward and outward remittances received in the

country and sent outside, both on behalf of the transactions taken up by residents and non-

residents.

Import Section takes care of the Import Trade Control Regulations as well as Exchange Control

Regulations before allowing import transactions to be put through.

Irrevocable letter of credit is also a type of LC that cannot be cancelled or amended without the

consent of all parties including the exporter.

Issuing Bank (Opening Bank) is also a party to LC which creates a letter of credit and takes the responsibility to make the payments on receipt of the documents from the beneficiary or through their banker.

Letter of Credit is a binding document that a buyer can request from his bank in order to

guarantee that the payment for goods will be transferred to the seller.

Mail Transfer is an order to pay from one party to another, except that it is sent through the

mail if not, airmail.

Negotiating Bank is the bank who negotiates the documents submitted to them by the

beneficiary under the credit either advised through them or restricted to them for negotiation.

Official Reserves it accounts changes in international reserves owned by central banks and

reflects surplus/deficit of current account and capital account.

Packing List is also known as packing specification, it contain details about the packing

materials used in the shipping of goods. It also includes details like measurement and weight of

goods.

Reimbursing Bank is the bank authorized to honor the reimbursement claim in settlement of negotiation/acceptance/payment lodged with it by the negotiating bank.

Revocable letter of credit is a type of LC that can be revoked without the consent of the exporter.

Sight letter of credit is a type of LC whose payment is to be made at the time that documents

are presented.

Term letter of credit is a type of LC whose payment is to be made at a future fixed time from

the presentation of documents.

Unilateral Transfer is an economic transaction between residents of two nations over a

stipulated period of time, usually a calendar year.

Wire or cable transfer it is accomplished by one party (a local bank) ordering another party (a

bank in another country) through cable or telephone to pay a certain in money to a specified

beneficiary.

VII. APPENDICES