Comparison of common foreign trade letters of credit in international import and export trade
Comparison of common foreign trade letters of credit in international import and export trade
Today, we will talk about the differences between foreign trade letters of credit, including the comparison between sight payment letters of credit, negotiation letters of credit, acceptance letters of credit, deferred payment letters of credit and false usance letters of credit:
(1) Sight payment letter of credit refers to the letter of credit in which the beneficiary (exporter) issues a sight draft according to the instructions of the issuing bank, or can present a request for payment to the designated bank only by virtue of the transport document without a draft.
(2) Negotiation letter of credit refers to the letter of credit in which the issuing bank undertakes to extend to the third party, that is, the negotiating bank, which has the right to negotiate or purchase the beneficiary's right to submit bills of exchange / documents specified in the letter of credit. If the letter of credit does not restrict the negotiation of a bank, the beneficiary (exporter) can choose any bank willing to negotiate, and the letter of credit that submits bills of exchange and documents to the selected bank for negotiation is called free negotiation letter of credit, otherwise it is restricted negotiation letter of credit.
(3) Acceptance letter of credit refers to the letter of credit that stipulates that the issuing bank should accept the bill of exchange and pay on the due date after the beneficiary issues a usance bill with the issuing bank as the payer or other banks as the payer after reviewing the document.
(4) Deferred payment letter of credit refers to a letter of credit that does not need a bill of exchange, and only relies on the documents submitted by the beneficiary, which are verified to be consistent, and the payment is extended until the due date from the time when the designated bank assumes the responsibility for deferred payment. This letter of credit is similar to a usance letter of credit, except that importers in Europe can avoid paying stamp duty to the government and issuing bills of exchange.
(5) Fake usance letter of credit is also called buyer's (importer's) usance letter of credit. The bank provides financial facilities for the buyer (importer). In order to obtain financial facilities in the bill discount market, the buyer applies to open a letter of credit with the bank where the bill discount market is located as the drawee of the bill for the contract proof spot letter of credit.
