Documentary Credit Transaction Case Study Example | Topics and Well Written Essays - 750 words

Documentary Credit Transaction - Case Study ExampleAs on that point is a gamble of non payment by the importer, sellers can enter into an agreement with the importers depone through a letter of credit ( lc).When there is a enumerational credit clause in the agreement between the buyer and the seller, a letter of credit is issued by the buyer and the bank makes the payment to the seller.An lc is issued by the customers bank naming the seller as the beneficiary, and as soon as the conditions mentioned in the lc are met by the seller, the payment is made by the bank. A bank in the country of the buyer issues the LC and is referred to as the Issuing Bank. A bank that advises the LC to the Seller is called the Advising Bank and is generally in the country of the Seller.While lcs are a safe, fast and convenient method of payment for exporters, there might be a few pitfalls that the seller might have to consider before signing the contract.The risk shifts from the actual buyer to the bank.Since accedeation of documents to the bank within the stripulated time frame is the only criteria for payment, the buyer runs the risk of not getting the goods in good condition, trance the payment would already have been made through the issuing bank. A seller might run the risk of not being able to present the LC before the stipulated date. There could be delays in legal transfer and the LC migth expire before the issuing bank gets a confirmation from the buyer about the proper delivery of goods.A signature from the buyers side migth also be required to honour the LC, but it might not be possible to obtain it before the expiry of the LC.The document itself might have some discrepencies which could render the document invalid, thus putting the exporter to risk of non payment for his goods.References1. GERTRUDE NIMAKO BOATENG, ONUG, Documentary Credit Transactions A Case Of echo Standards, accessed on 01-03-09.http//www.unspecial.org/UNS671/t41.html2.EPASS International, D ocumentary Credit Transactions , accessed on 01-03-09.http//www.epassinternational.com/topics4.html3. CreditGuru.com , Letter of Credit, accessed on 01-03-09http//www.creditguru.com/guestarticleLC.htmMajor Journals - Journal of World passel - Journal of International Economic honor - Journal of Business Law 4.Websites of Interest Name of Organization Web Site Address International Organizations United Nations Commission on International Trade Law (UNCITRAL) http//www.uncitral.org/ World Trade Organization (WTO) http//www.wto.org Intl Trade Center (ITC) (UNCTAD/WTO) http//www.intracen.org Asia-Pacific Economic Cooperation http//www.apecsec.org.sg Commission for Environmental Cooperation (CEC) http//www.cec.org Commission for Labor Cooperation (CLC) http//www.naalc.org Intl Court of Justice (ICJ) http//www.law.cornell.edu/icj/ Intl Monetary entrepot (IMF) http//www.imf.org/ MERCOSUR http//www.americasnet.com/mauritz/mercosur/ Org. for Econ. Cooperation and Dev. (OECD)