Letter of Credit Advising

Letter of Credit Advising

Letter of Credit Advising is a service provided by Standard Chartered Bank whereby an Issuing Bank, on behalf of the Applicant or Importer (bank‟s customer‟s customer) duly transmits a Letter of Credit by SWIFT, authenticated telex or dispatches, or by mail or courier to Standard Chartered Bank. Standard Chartered Bank will check the LC for its authenticity. If deemed authentic, Standard Chartered Bank will then notify it‟s customer to collect the said Letter of Credit.

Benefits
  • As the Beneficiary, the customer may be reasonably assured that the Letter of Credit is genuine and if the customer presents the documents stipulated under the Letter of Credit, it is unlikely that the Issuing Bank should challenge the authenticity of such Letter of Credit.
  • If the customer decides to lodge the Original Letter of Credit and amendments with Standard Chartered Bank for safe-keeping, the customer will not need to worry about misplacing it (Note: Original Letters of Credit are required for negotiation)

Letter of Credit Confirmations

Letter of Credit Confirmations

  • Confirmation of a Letter of Credit constitutes an undertaking on the part of the Confirming Bank, in addition to that of the Issuing Bank, to pay a customer, without recourse, if documents are presented in compliance with the terms and conditions of the credit.
  • Standard Chartered Bank has a large branch and correspondent banking network across the globe and is a leading banking facilities provider in the Middle East, Asia Pacific, Africa, Latin America and other emerging markets. Standard Chartered Bank offers Letters of Credit confirmations to exporters to help mitigate sovereign and bank risks subject to its internal approvals.
Benefits
  • Confirmation of a Letter of Credit protects the customer and the exporter, against Issuing Bank and country risk. This means that if the customer had successfully performed under the terms and conditions of the Letter of Credit, Standard Chartered Bank will guarantee the export proceeds, irrespective of whether the Letter of Credit Issuing Bank honors its obligations or not
  • In gaining protection against country risks the customer can access new and emerging markets since the risk of non-payment are borne by the Confirming Bank
  • The customer can secure non-recourse financing upon presentation of compliant documents Bank Requirements
  • The Letter of Credit should clearly allow for Confirmation, or instruct Standard Chartered Bank to confirm the Letter of Credit and indicate whether confirmation charges are for the account of beneficiary or applicant
  • The Letter of Credit should not usually have a credit period of more than 180 days
  • The Letter of Credit normally has to be restricted to Standard Chartered Bank before the confirmation is effected
  • Reimbursement should be clearly defined and available by telegraphic transfer
  • All confirmations are subject to internal approvals and availability of bank and country limits.
  • The Letter of Credit should not permit the original bills of lading to be sent directly to the applicant nor should the bill of lading/Airway bill be consigned to the importer
  • The Parties in the Letter of Credit should not be related parties.
  • The type of goods and trade should be normal for the customer (the Exporter) and related to the customer‟s core business

Letter of Credit Negotiations

Letter of Credit Negotiations

  • Letter of Credit negotiation is defined within Uniform Customs & Practice for Documentary Credits as the “giving of value”. In effect, by negotiating export documents under a Letter of Credit, Standard Chartered Bank will pay the customer and the Exporter, with its own funds, and will rely on the reimbursement by the Issuing Bank at a later date. Letters of Credit that are both available at sight or Usance are capable of being negotiated.
  • Negotiation of documents under a Letter of Credit can either be with or without recourse to the customer. If the export documents are compliant with the Letter of Credit terms and the Letter of Credit is confirmed by Standard Chartered Bank, then negotiation will be without recourse to the customer. On the other hand, if the Letter of Credit is not confirmed, then negotiation will be with recourse to the customer. (What is meant by “with recourse” is that in the event the Issuing Bank refuses to pay or accept documents under the Letter of Credit, Standard Chartered Bank will have the right to claim reimbursement, with interest, on the funds that have been advanced to the customer.).
Benefits
  • The customer will be able to receive funds in advance, which can be used to repay the pre-shipment loans that the customer may have taken to produce the goods, pay the suppliers if the customer was a an intermediary or fund the working capital requirements. This is especially useful if the customer had granted credit terms to the buyer under the Letter of Credit.
Bank Requirements
  • The Letter of Credit should not usually have a credit period of more than 120 days
  • The Letter of Credit must state that it is a freely negotiable instrument (i.e. It is available for negotiation at any Bank), or state that it is available for negotiation at Standard Chartered Bank counters.
  • Standard Chartered Bank Standard Chartered Bank must be in possession of the original Letter of Credit
  • The Letter of Credit must not be transferable.
  • The Letter of Credit should not permit the original bills of lading to be sent directly to the applicant or should the bill of lading/Airway bill consigned to the importer
  • All Negotiations are subject to internal approvals and availability of credit limits
  • A Negotiation Application in Standard Chartered Bank’s standard form must be submitted
  • The Beneficiary must be a customer of Standard Chartered Bank.
  • The parties in the Letter of Credit should not be related parties Export Documents presented under the Letter of Credit must be in strict compliance with the stipulated terms and conditions Note: If the export documents are not in strict compliance the customer may still request for an advance of funds subject to the customer having an appropriate facility with Standard Chartered Bank. However, it is important to note that any such advances against discrepant documents are with full recourse to the customer and if the discrepancies are considered by Standard Chartered Bank to be “material”, Standard Chartered Bank reserves the right not to advance funds against such Letters of Credit

Letter of Credit Collections

Letter of Credit Collections

  • A Letter of Credit Collection is similar to a Letter of Credit Negotiation in that Standard Chartered Bank, as the nominated bank will handle the export documents and present these to the Issuing Bank for payment or acceptance under the framework of UCP. The key point to note is that Standard Chartered Bank will continue to examine the documents, and will notify the customer if any of the documents that have been presented do not conform to the Letter of Credit.
  • The material difference is that Standard Chartered Bank does not guarantee that funds will be made available to the customer even though the customer has performed in strict compliance with the terms and conditions under the Letter of Credit.

Typically, a Letter of Credit collection is presented under the following conditions:

  • The customer presents conforming documents under a restricted or freely negotiable Letter of Credit, but chooses not to avail of the negotiation of proceeds since the customer will have to pay transit interest if in case of availing of advanced funds under such a negotiation
  • The customer presents non-conforming documents (ie discrepant documents) under the Letter of Credit and instructs Standard Chartered Bank to forward them to the Issuing Bank for payment or acceptance
  • Standard Chartered Bank elects not to negotiate documents at its own discretion or due to concerns regarding the issuing Bank or the country in which the Issuing Bank is located
  • The customer is currently a non-borrowing customer, and presents non-conforming documents ( which does not allow the Standard Chartered Bank to negotiate the documents for the customer under reserve)
Benefits
  • By presenting documents through Standard Chartered Bank for presentation and examination, the bank will be in a position to notify the customer of any discrepancies under the Letter of Credit. If such documents can be amended by yourselves and represented as clean it will save the customer valuable time, money and risk since the Issuing Bank will not be obliged to reimburse the customer if documents are non-conforming (in this instance the Issuing Bank may also return documents, at the customer‟s cost)
Bank Requirements
  • Standard Chartered Bank’s standard form for handling Export bills should be completed with sufficient instructions to enable the Standard Chartered Bank to process the documents including the customer‟s consent to forward the documents on a collection basis.
Letter of Credit Advising Letter of Credit Advising/ Confirmation/ Negotiation/ Collections

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