Unit 9 Payment & Letters of Credit

Unit 9Unit 9Payment & Letters of CrediPayment & Letters of Credi

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精品课程《外贸函电英语》

Text APayment


In international trade, there are three major modes of payment that the buyers may adopt, namely remittance, collection and letter of credit (L/C).


1. RemittanceThe payer (usually the buyer)

remits a certain sum of money in accordance with the parties’ agreement to the payee (usually the seller) through a bank. Payer may remit the sum in the following manner:


a). Mail Transfer (M/T)b). Telegraphic Transfer (T/T)c). Demand Draft (D/D)This method of payment is often

used for down payment, payment of commission and for sample, settlement of claim, or as performance bond etc.


2. Collection The exporter, as drawer of a draft (bill of

exchange), hands the draft to his bank, the remitting bank, who in turn forwards it to the buyer through a collecting bank in the buyer’s country. A draft (also called a bill) is a written order to a bank or a customer to pay someone on demand or at a fixed time in the future a certain sum of money. If shipping documents accompany the draft, the collection is called “documentary collection.”


Documentary collection falls into two major categories: one is documents against payment (D/P), the other, documents against acceptance (D/A).

Documents against payments, as the term suggests, is that the collecting bank will only give the shipping documents representing the title to the goods on the condition that the buyer makes payment.


Where the paying arrangement is D/A, the collecting bank will only give the buyer the shipping documents after buyer’s acceptance of the bill drawn on him, i.e. the buyer signs his name on the bill promising to pay the sum when it matures. In return he gets what he needs --- the shipping documents.


Under D/A, the seller gives up the title to the goods --- shipping documents before he gets payment of the goods. Therefore, an exporter must think twice before he accepts such paying arrangement.


Text B Irrevocable Documentary Credit


Bank of Brazilia London Office110,Leadenhall Street, London, E.C. 3.

No. 3776 16th March, 20__


The Argo Expor Co. Ltd.240,Billiter StreetLondon, E.C.4.


Dear Sirs, On the advice of our Bahia branch we wo

uld inform you that they have opened in your favor an Irrevocable Letter of Credit No. 3776 under which we will accept a bill drawn on us by you at 90 days sight for an amount not exceeding US $14000 (FOURTEEN THOUSAND USDOLLARS ONLY) on account of Messrs. Jose Carcia & Co. Bahia, Brazil.


All bills drawn under this Credit must be marked ‘Drawn under Bank of Brazilia, Bahia Branch Credit No.3776 and must be accompanied by the following documents:

--- Full set of Clean On Board Bill of Lading, made out to order and endorsed in blank;

--- Invoice; --- Insurance Policy or certificate for the C

IF value plus 10%;精品课程《外贸函电英语》

Evidencing the shipment of eight motorcycles to Bahia.

This Credit expires on 15th September, 20__

Part shipments are not permitted.


We hereby undertake to honor all drawings presented to us in accordance with the terms of this Credit. Please note that the conditions of this Credit must be strictly complied with, as otherwise we may not be able to accept bills drawn under it.

Yours faithfully, For bank of Brazilia

Pedro Gonzales ( Manager)精品课程《外贸函电英语》

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Here are two letters of credit. You are asked to explain what they say or translate them into Chinese:


(1) Irrevocable Credit BANK OF NORTH ITALY

No. 3586 Milano,

Dec. 27, 19__ 、 To: China National Metals & Minerals Import & Export Corporation,

Tianjin Branch, Tianjin, China. Advised through Midland Bank, London


Dear Sirs, We hereby establish an irrevocable credit in your favor for

account of Italiano Cement Inc., 53 Milano Street, Milano, for a sum or sums not exceeding a total of US $ 37,000 (USDOLLARS THIRTY SEVEN THOUSAND ONLY) and available by your draft(s) drawn on us at sight for 100% of the invoice value, accompanied by the following documents:

1. Signed Commercial Invoice in triplicate, indicating Contract No. AB 108;

2. Packing & weight List in triplicate;


3. Full set of clean shipped on aboard ocean Bill of Lading made out to order and blank endorsed, marked “Freight Prepaid”, notifying the applicant;

4. Insurance policy or certificate for 110% of the invoice value, blank endorsed, covering WPA and War Risk, claims payable at Milano （在米兰理赔） ;

5. Inspection Certificate （检验证书） on quality and weight issued by the Commodity Inspection Bureau in triplicate;

6. Certificate of Origin （产地证书） in triplicate.


We hereby undertake to honour （担保承兑） all drafts drawn in accordance with the terms of the above credit. The amount and date of each negotiation must be endorsed on the back hereof by the negotiating bank which is to forward all documents to us by first and second airmails.

In reimbursement （偿付） the negotiating bank may draw sight drafts on the confirming bank, which is to debit our account （借记我册） with them, and accompany such drafts with their statement that all terms and conditions of the Credit have been complied with and the required documents airmailed to us. Yours faithfully,

for BANK OF NORTH ITALY


……………… ( Signature) Chop: We add our confirmation hereto. Our reference No.29806 For Midland Bank (December 29, 19__)


(2) Letter of Credit Irrevocable THE CHARTERED BANK

NO. 958/7132 Singapore

21 August, 19__ To: China National Metals & Minerals Import & Export Cor

poration, Tianjin Branch, Tianjin, China.


Dear Sirs, You are hereby authorized to draw on x x x Co., Singapo

re not exceeding RMB ￥ 2,375.00 CIF ( SAY RENMINBI TWO THOUSAND THREE HUNDRED AND SEVENTY-FIVE ONLY.) available by your draft, drawn in duplicate, on them at … sight accompanied by the following documents:

Complete set of not less than two clean Ocean Bills of Lading to order and blank endorsed. “Shipped on Board” Bills of Lading are essential and the statement “Freight Paid” must appear thereon. The Bills of Lading must cover shipment as detailed below:


--- Insurance Policies (or Certificates) in duplicate covering Marine and War Risk for full CIF invoice value plus 10% ;

--- Signed commercial invoices in triplicate indicating Import License No. CH/13178/96;

--- Certificate of Origin in triplicate evidencing shipment from China Port to Singapore of the following merchandise:

. . . Conditions of Shipment: Transshipment is PERMITTED. Shipment Date: shipment is to be effected not later than 2

0th, October, 19__ Partial shipments are PERMITTED. Expiry Date: This credit expires on 27th OCT., 19__ for nego

tiation in China.


Drafts should bear the following clause “Drawn under The Chartered Bank, Singapore, Credit No.958/7132 dated 21st August, 19__ ”.

Purchasers are to note the amount of the drafts separately on the back hereof.

Drafts drawn under this Credit should bear an interest clause where applicable.

We hereby engage with the drawers, endorsers and bona fide holders of bills drawn and presented in accordance with the terms of this credit that the bills shall be duly honored on presentation.


This credit is subject to the Uniform Customs and Practice for Commercial Documentary Credits (19__ revision) except as otherwise expressly stated herein.

Yours faithfully,
