3/29/2023 0 Comments C letter chain![]() ![]() We reiterate that it is the buyer that begins the whole process. So, if there is any doubt as to who is the one to begin the letter of credit process. The applicant (buyer) presents all supporting documents as evidence that the sales contract is enforced. The mark of the beginning of an international trade is the sales contract (commercial invoice) the mark of the beginning of the Letter of Credit is when the buyer starts an application with the issuing bank. Participating Banks in a Letter of Credit Issuing Bank Both the advising bank and the issuing bank has a vested interest in knowing whether the remitted amount is for the promised quantity of goods sold. The quantity of goods sold is equally as important as the price of the goods sold. Evidently, the letter of credit requires this to determine the payment. The price displayed in the commercial invoice (the international sales contract) is the amount the letter of credit financing. INCOTERMĪdditional Reading: Which INCOTERM Should I Use? Price Some examples of an INCOTERM include: –Īn INCOTERM exists specifically to draw the line as to which part of the logistic leg the seller or buyer is responsible for. Shipping Terms, or INCOTERM has to be prominently displayed in an international sales contract. This can be interpreted as a deliberate way to hide what is actually imported, the penalties for this type of misrepresentation may vary, but strict. Because in an international trade’s supply chain, any goods coming in-and-out of a country requires custom approval.Īmbiguous descriptions such as “ Sole” can easily be misunderstood as a type of fish, instead of the intended footwear sole. Without a doubt, the second description is preferred. Here are two examples of a goods description, take a gander and guess which one is preferred: – Moreover, it is better to incorporate the nature of the goods as well. Goods description has to be as precise and concise as possible. Here are some details that is non-negotiable: – Description of Goods But for all international sales contracts. Of course, both the buyer can add in additional exceptions and clauses to reflect both party’s request in a sales contract. The UCP 600 publication provided sales contract guidelines for the sellers to follow. Whatever is comprised in the letter of credit is directly based upon the international sales contract drawn and agreed by the seller and the buyer.Ĭonsequentially, the first order of the letter of credit process is actually the preparation of a proper international sales contract. To elaborate further, international sales contracts and letters of credit go hand-in-hand One cannot exist without the other. International Sales Contract and Payments
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