The letter of credit ("L/C") is an important tool for settlement of international trade transactions.
The applicable rules for letters of credit ("L/Cs") are the UCP 600 (Uniform Customs and Practice for Documentary Credits, 2007 Revision, ICC Publication No. 600), which apply to all LCs which expressly indicate that they are subject to the rules. LC practitioners are also guided by the ISBP745 (International Standard Banking Practices for the Examination of Documents under UCP 600).
The parties involved in an LC include the applicant of the LC, the beneficiary of the LC, the issuing bank, the advising bank, the confirming bank (if any) and the nominated bank(s) (if any). If you are an applicant or a beneficiary, how well do you understand LCs?. Why do you need LCs (do you)? What do you need to know about UCP 600? What about ISBP 745? What is "international standard banking practice"? How can you make complying presentations?
If you are managing trade finance in an issuing bank, a confirming bank or a nominated bank, how well do you understand the applicable rules? For example, are you able to articulate the differences between the different methods of availability (sight payment, acceptance, deferred payment and negotiation), and consequently your roles, actions, responsibilities and risks thereunder? What does acting on a nomination mean? Understand what circumstances are you entitled to reimbursement (and when you are not entitled?)? Can you decline payment or be declined payment for fraud?
SCFA can provide you, whether you are a bank, or the customer of a bank, training, consultation and services on letters of credit. The services which SCFA can provide include:
• Reviewing your LC operating procedures and policies to ensure that they are up to date and standard with UCP 600, ISBP 745 and International standard banking practice.
• Training on LCs based on a curriculum, and follow up consultations to define practice.
• Advising you on a digital solutions and automation. We are not a vendor of technology, but can point you in the right direction.
• If you are an exporter, document preparation services or document pre-check for complying presentations, efficiency, and shorter working capital cycle. We can help you find the right service providers for such services.
• Assist you in specific LC transactions, e.g. review of the terms of the LC for workability, advise you on disputes and on your first eUCP credits etc.
For further dialogue, please consult us for an initial quote.
Written by Tat Yeen Yap
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