LC and DLC – Letter of Credit and Documentary Letter of Credit explained by Geordon Saraveloz

Geordon Saraveloz January 1, 2021 0 Comments

A documentary letter of credit serves as a written promise of payment provided by a buyer to a seller. With a letter of credit, the buyer’s funds for the required payment are held in a separate account for use when needed, similar to the process for escrow. The seller receives payment when all of the terms of the agreement are fulfilled.

• An FFDLC is a letter of credit backed by funds in escrow.
• Businesses can use an FFDLC to obtain some or all of the funds moved to an escrow account for final payment.
• Letters of credit can come in many different variations and may be either funded or unfunded.

Specimen of a Documentary Letter of Credit issued via SWIFT MT700

DATE OF ISSUE : XXXXX
FORM OF CREDIT : IRREVOCABLE DOCUMENTARY LETTER OF CREDIT
ISSUER : PRIVATE BANK
CREDIT NUMBER : DLC/XXXXX
CURRENCY CODE : EUR/USD
CREDIT AMOUNT : XXXXX
DATE AND PLACE OF EXPIRY : XXXXX
APPLICANT : XXXXX
BENEFICIARY : XXXXX
BANK OF BENEFICIARY : XXXXX
PLACE FOR PRESENTATION : AT OUR COUNTERS
FORM OF PRESENTATION : PAPER / BY COURIER SERVICE
LANGUAGE OF ANY
REQUIRED DOCUMENTS : ENGLISH

27: SEQUENCE OF TOTAL 1/1
40A: FORM OF DOCUMENTARY CREDIT IRREVOCABLE
20: DOCUMENTARY CREDIT NUMBER SBLC/XXXXXX/1
31C: DATE OF ISSUE YY/MM/DD
40E: APPLICABLE RULES UCP LATEST VERSION
31D: DATE AND PLACE OF EXPIRY YY/MM/DD
51D: APPLICANT BANK – NAME & ADDRESS PRIVATE BANK, XXXXX
59: BENEFICIARY – NAME & ADDRESS XXXXX
32B: CURRENCY CODE, AMOUNT CURRENCY: EUR/USD AMOUNT: XXXXX
39A: PERCENTAGE CREDIT AMOUNT TOLERANCE
0/10
41D: AVAILABLE WITH… BY… – NAME & ADDRESS ANY BANK IN XXXXX
BY DEFERRED PAYMENT
42P: DEFERRED PAYMENT DETAILS XXXXX DAYS FROM B/L DATE
43P: PARTIAL SHIPMENTS NOT ALLOWED
43T: TRANSSHIPMENT ALLOWED
44A: PLACE OF TAKING IN CHARGE / OF RECEIPT XXXXX
44B: PLACE OF FINAL DESTINATION / OF DELIVERY XXXXX
44E: PORT OF LOADING/AIRPORT OF DEPARTURE XXXXX
44F: PORT OF DISCHARGE/AIRPORT OF DESTINATION XXXXX
44D: SHIPMENT PERIOD
WITHIN XXXXX DAYS FROM ISSUING DATE OF L/CY
45A: DESCRIPTION OF GOODS &/OR SERVICES
AS PER PROFORMA-INVOICE NO. XXXXX DD/MM/YY SIGNED BY THE BENEFICARY. MODEL DESCRIPTION XXXXX QUANTITY XXXXX PRICE XXXXX TOTAL XXXXX OF GOODS XXXXX PER UNIT.
DELIVERY TERMS: XXXXX

46A: DOCUMENTS REQUIRED:

COMMERCIAL INVOICES, CERTIFYING THAT THE QUALITY, QUANTITY AND DESCRIPTION OF MERCHANDISE SHIPPED ARE STRICTLY IN ACCORDANCE WITH ATTACHED PROFORMA-INVOICE NO. XXXXX, DD/MM/YY, TO BE SIGNED AND STAMPED BY THE BENEFICIARY IN 1 ORIGINAL AND 2 COPIES.
PACKING LISTS, CERTIFYING THAT THE QUALITY, QUANTITY AND DESCRIPTION OF MERCHANDISE SHIPPED ARE STRICTLY IN ACCORDANCE WITH ATTACHED PROFORMA-INVOICE NO. XXXXX, DD/MM/YY, TO BE SIGNED AND STAMPED BY THE BENEFICIARY IN 1 ORIGINAL AND 2 COPIES.
FULL SET (3/3) OF CLEAN, SHIPPED ON BOARD OCEAN BILLS OF LADING PLUS 2 COPIES ISSUED BY THE CARRIER OR AGENT MADE OUT TO THE ORDER OF ISSUING BANK, SHOWING GROSS AND NET WEIGHT, DISPATCH DATE, VESSEL NUMBER, MARKED FREIGHT PREPAID AND NOTIFY THE COMPANY XXXXX.
INSURANCE CERTIFICATE/POLICY, TO BE COVERED BY SELLER AND ENDORSED TO THE ORDER OF PRIVATE BANK FOR 110PCT OF CIF-INVOICE VALUE, COVERING ALL RISKS AND SHOWING CLAIM PAYABLE TO THE ORDER OF PRIVATE BANK.
CERTIFICATE OF ORIGIN ISSUED BY XXXXX COMPETENT AUTHORITY IN 1 ORIGINAL AND 2 COPIES.
HEALTH CERTIFICATE ISSUED BY XXXXX COMPETENT AUTHORITY IN 1 ORIGINAL AND 2 COPIES.
47A: ADDITIONAL CONDITIONS
a. DRAWING UNDER THIS CREDIT MUST BE FOR 100PCT OF THE INVOICE VALUE.
b. DOCUMENTS BEARING A DATE PRIOR TO THE ISSUING OF THIS LETTER OF CREDIT ARE NOT ACCEPTABLE.
c. THIRD PARTY DOCUMENTS ARE NOT ACCEPTABLE.
d. INVOICE EXCEEDING THIS CREDIT AMOUNT IS NOT ACCEPTABLE.
e. TOLERANCE IN QUANTITY OF GOODS +/-10PCT ALLOWED.
f. DISCREPANT DOCUMENTS WILL BE SUBJECT TO A DISCREPANCY HANDLING FEE OF EUR 300.00 FOR BENEFICIARY’S ACCOUNT.
g. ALL DOCUMENTS MUST BE ISSUED IN THE ENGLISH LANGUAGE.
h. ALL SIGNATURES OR SEALS REQUIRED ON ANY DOCUMENTS MUST BE AS PER THE APPLICANT’S BANK RECORD.
i. WE, XXXXX, SEND THIS MESSAGE WITHOUT ANY UNDERTAKING, RESPONSIBILITY OR LIABILITY WITH RESPECT TO THE TRANSACTION AND THE APPLICANT BANK.
j. THIS LETTER OF CREDIT IS SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS, ICC PUBLICATION NO. 600,
LATEST REVISION AND SHALL BE INTERPRETED IN ACCORDANCE WITH THE LAWS OF ENGLAND. ANY DISPUTE ARISING OUT OF OR IN CONNECTION WITH THIS DOCUMENTARY CREDIT SHALL BE SUBJECT TO THE EXCLUSIVE JURISDICTION OF THE COMMERCIAL COURT OF ENGLAND.
k. THIS IS AN OPERATIVE INSTRUMENT AND NO CONFIRMATION SHALL FOLLOW. 71B: CHARGES
ALL BANKING CHARGES OUTSIDE ISSUER COUNTRY ARE FOR BENEFICIARY’S ACCOUNT.
48: PERIOD FOR PRESENTATION
WITHIN 21 DAYS AFTER B/L DATE (DOC.3 DATE) BUT WITHIN L/C VALIDITY.
49: CONFIRMATION INSTRUCTIONS WITHOUT
78: INSTRUCT TO PAYG/ACCEPTG/NEGOTG BANK
PAYMENT UNDER THIS CREDIT WILL BE EFFECTED BY THE APPLICANT BANK AT MATURITY UPON RECEIPT OF COMPLYING DOCUMENTS
AT COUNTERS OF PRIVATE BANK.
57A: ADVISE THROUGH BANK – FI BIC SWIFT CODE
72: SENDER TO RECEIVER INFORMATION
YOUR CHARGES FOR BENEFICIARY’S ACCOUNT.

FOR AND ON BEHALF OF (NAME OF THE ISSUING BANK)

AUT HORIZED OFFICER AUTHORIZED OFFICER
(NAME, TITLE. PIN CODE) (NAME, TITLE, PIN CODE)

Principles of Project Finance 1/3

The need for Guarantees to enable Funding and Project Finance. Project finance is a method of raising long-term debt financing ...
Read More

Common Aspects of Project Agreements 2/3

There are important issues which are common to any of these types of Project Agreement, namely: contract term, Payment Mechanism, ...
Read More

Project Finance and Financial Structuring 3/3

The need for Guarantees to enable Funding and Project Finance (3 of 3). Financial-structuring issues are likely to arise once ...
Read More

Does your own banker ask for a collateral “PRE-ADVICE”?

Your banker would provide you with funding if you came up with collateral? Would he be happy to help if ...
Read More

So you are qualified to receive a loan or borrow a bank instrument?

So you are qualified to receive a loan or borrow a bank instrument? When you seek credit support, is your ...
Read More

Validity Term in a Borrowing and Lending Transaction

ICC 600 URDG 758 and ISO15022International Chamber of Commerce (ICC) and International Organization for Standardization (ISO) In a Borrowing and ...
Read More

This is how you can pay for Borrowing and Lending fees only after 180 days!

We deliver a highly rated Financial Instrument to you now, and you only pay for it later! With the ...
Read More

In a Back-to-Back transaction you can issue your own bank guarantee instrument!

When negotiating terms to issue a bank guarantee instrument with any bank, a BG or an SBLC for a certain ...
Read More

Why there is a Reservation Call Option Fee requirement?

A client will have to have a complete understanding of the transaction basics and know how we generate genuine instruments ...
Read More

What do you need to borrow genuine and verifiable Prime Bank collateral?

What do you need to borrow genuine and verifiable Prime Bank collateral? The consent of your bank to issue a ...
Read More

This is how you can get a Loan to start your Project right now

Do you need a Business Loan, or would like to start a Project right now? You have a bank, an ...
Read More

How to rent Financial Capacity to leverage your Investment Possibilities

You can now rent financial capacity and leverage your investment possibilities and benefit from high yielding Private Placement Programs! ...
Read More

These Bank Guarantees support Commodity Trading in Bulk

Bank Guarantees support Commodity Trading in Bulk How to issue an SBLC to your commodities seller on a back to ...
Read More

This monetizer can fund against borrowed financial Prime Bank collateral

Monetization can be a great way to get a project in funds and there are clients served who are successful ...
Read More

The aim of our Bank Guarantee Collateral Program

Bank Guarantees are powerful collateral for an agreed upon period of time, provided on the basis of collateral borrowing and ...
Read More

This is how you can expect a High Net Worth Investor to risk his cash funds for you and provide you with a valid, fully verifiable Bank Guarantee or Standby Letter of Credit

Do you need a business loan, or would like to start a project right now? You have a bank, an ...
Read More

Steps to a successful transaction.

This summary explanation is available for educational purposes only and explains how Securities Borrowing and Lending is utilized by qualified ...
Read More

If you are qualified, we can provide all the collateral you need!

We lend highly rated Securities in the format of an SBLC or BG to back up your Credit Line ...
Read More

Why should a client be qualified to receive a multi million Euro bank guarantee instrument?

The instrument that you probably seek should be valid and fully verifiable, correct? If an instrument is genuine it is ...
Read More

The way you can expect a third party to provide you with a valid, fully verifiable cash backed, divisible and assignable Bank Instrument.

If you are interested to obtain a valid fully verifiable Bank Guarantee instrument from a third party to trigger a ...
Read More

Pennies can help you access valid BG or SBLC collateral – issued for you on the back of highly rated, verifiable and publicly listed Securities

You are in contact with us, probably since the banks you deal with do not provide a bank guarantee service ...
Read More

“Solving financial issues through Credit Enhancement”

You can directly download the Summary of the eBook "Solving financial issues through Credit Enhancement" by Geordon Saraveloz here You ...
Read More

Here is how you can access Credit Enhancement

Credit Enhancement and what is available in your situation?Here you will learn about terms and concepts and available working procedures ...
Read More

The Leverage Effect.

Opportunity explained: The Leverage Effect. In business, credit enhancement is usually applied to make a company more creditworthy to reduce ...
Read More

This is the bank that has never asked for any money in advance!

This is the bank that has never asked for any money in advance! – Isn’t that really good news? ...
Read More

Prime Bank Instrument without advance fees. This is how we even advance the call option fees for you and issue a Prime Bank instrument for you!

There is a call option fee to be placed for this transaction to block the securities which build the basis ...
Read More