Letter of Credit
Letter of Credit is a written commitment for payment of a definite amount of money on spot or on a certain date in future.
In such arrangement, the bank (issuing bank) issues the letter of credit to the exporter (beneficiary) according to the importer's (applicant) request and instruction;
the bank makes the prior mentioned payment in a certain period of time based on the bills and documents stipulated in accordance with the terms and conditions of credit.
«First Sino Bank» L/C service includes export L/C and import L/C.
Import Letter of Credit
According to the customer's (L/C applicant) request, «First Sino Bank» issues the assurance document to the beneficiary promising payment, acceptance, or draft negotiation for the stipulated amount and within the deadline.
Importer with import/export license and opened RMB or foreign currency settlement account at «First Sino Bank».
Functions and Advantages
1. Import L/C is an international settlement tool for importers in China.
2. «First Sino Bank» as the issuing bank is charged for primary payment responsibility.
3. The exporter's collection is ensured by the bank, which reduces the settlement risk in trade where the parties to the trade are not familiar to each other.
4. Customers having overall (master) credit line at «First Sino Bank» are not required to pay the full L/C issuance security deposit upon application, which reduces the occupation of working capital. In the event of fund shortage upon payment, the customer is also eligible for inward documentary bill.
1. Application: Customer presents the L/C application and the relevant documents. In case the writing of L/C requires credit approval, the customer is also expected to complete procedures for credit approval. The customer shall also specify if it needs inward documentary bill.
2. L/C approval: «First Sino Bank» examines and approves L/C according to the relevant procedures. The approval process normally requires 1 ~ 2 banking days for customers already granted with the credit lines.
3.Issurance of L/C: «First Sino Bank» sends L/C through SWIFT after selection of advising bank according to the L/C application.
4. L/C amendment: In case the customer needs to amend the issued L/C, the customer shall present to «First Sino Bank» the L/C revision application. «First Sino Bank» sends the amendment information through cable accordingly. When the amendment increases the amount on L/C, the customer is expected to complete re-approval procedures similar to L/C application.
5. L/C document receipt: Upon receipt of overseas documents, «First Sino Bank» launches through examination and verification on the documents according to the principle of the documents presented in accordance with the stipulations of credit ,and the documents in accordance with each other.
6. Document receipt advice: «First Sino Bank» will advise the customer of the document receipt in the same day and state if there are discrepancies on the documents.
7. Customer confirmation: The customer shall make written confirmation within the stipulated time as to its approval for payment/acceptance. In case the customer fails to reply within the stipulated deadline, the silence is deemed as payment approval.
8. Customer payment: The customer shall reserve adequate fund within the stipulated time for payment. Upon payment, the customer shall file for international balance of payment according to the regulations. In case the customer needs financing, it shall apply for inward documentary bill in advance.
9. Overseas payment/acceptance/protest
(1) Payment: «First Sino Bank» makes overseas payment within the deadline and according to the overseas bank's instructions.
(2) Acceptance: For Usance L/C, «First Sino Bank» issues acceptance or payment advice to the overseas bank within the deadline and makes overseas payment on due date.
10. L/C revocation
In case the customer intends to revoke L/C before expiration, the customer must seek permission by the importer/exporter and the relevant banks.
The bank may revoke the unused line in the L/C three months after the expiration without need for applying for revocation.
Sight Credit is letter of credit enabling payment collection by the beneficiary only based on sight documentary bills or documents according to the stipulations in the L/C.
Its characteristics are safe and speedy fund collection for the beneficiary.
Usance Credit refers to arrangement where the issuing bank or its designated drawee bank does not make immediate payment upon receipt of the Usance bill presented by the beneficiary, rather, the bank makes the early acceptance or confirms its payment approval before payment upon maturity of the bill.
Usance Credit Payable at Sight
Usance Credit Payable at Sight refers to L/C arrangement where the bank grants financing for the importer; the importer makes forward payment whereas the exporter makes sight collection. In other words, the trade contract by and between the buyer and the seller originally stipulated sight payment, however, L/C requires the exporter to write Usance bill with the note on the L/C that the Usance bill is capable for sight negotiation, the drawee bank is responsible for discounting, and the applicant affords the discounting expenses and interest for overdue payment.
Export Letter of Credit
Export Letter of Credit is an export financial service arrangement where «First Sino Bank» advises the customer for L/C pickup upon receipt of letter of credit, the customer is the beneficiary; the bank negotiates the L/C through verification of the documents against L/C terms and conditions.
Export companies with import/export license and opened settlement account in RMB or foreign currencies at «First Sino Bank».
Functions and Advantages
1. Export L/C is an international settlement tool for exporters in China.
2. The issuing bank or confirming bank (if any) is held for primary payment responsibility. The issuing bank or the confirming bank must make the payment as soon as the exporter presents documents stipulated on the letter of credit. It is backed by bank credit that effectively ensures the safe collection. It also promotes trade where the parties to the trade are not familiar to each other.
3. When the collection is certain, the exporter finds easy loans from «First Sino Bank» (such as packing loan, Outward Documentary Bill), which contributes to fund utilization.
4. Under the circumstances of the administration and control of importing nation's trade and foreign exchange, the exporter may avoid risks of import bans or foreign currency transfer limit. This is because, in these nations, imports and letter of credit is permissible only through approval by the trade and foreign exchange administration authorities.
1. Export letter of credit notification: Upon receipt of official copy of L/C from the issuing bank, «First Sino Bank» examines the truthfulness and validity of L/C; when the L/C is acceptable, the bank compiles export L/C notification and advises the exporter of the L/C receipt.
2. Exporter delivers the documents: After the exporter shipped the goods, the exporter prepares all the relevant documents according to L/C stipulations and fills out document delivery letter of authorization under L/C. The exporter delivers the documents to «First Sino Bank». In case the exporter needs to file for Outward Documentary Bill, it may also submit credit application at the same time.
3. Document examination and reimbursement claim: After «First Sino Bank» examines and verifies the documents, it compiles the relevant bills to claim reimbursement from the reimbursement bank.
4. Fund receipt: After receipt of payment, «First Sino Bank» deducts all the dues for the bank and credits the balance to the customer's foreign currency account or credits the customer's RMB account after foreign exchange. For trade financing, the customer needs to firstly repay «First Sino Bank» loan principal and interest.
Letter of Credit/Revision Advice
As the advising bank, «First Sino Bank» accepts appointment by the foreign issuing bank and takes the responsibility to advise the L/C beneficiary of the L/C issuance and L/C revision, which is done through means of cable/correspondence by the issuing bank.
Upon receipt of the entire documents under L/C presented by the exporter, «First Sino Bank» examines the documents and processes the documents for reimbursement claim. Upon fund receipt, «First Sino Bank» books the relevant fund into the customer's designated account.
Electronic Advice of Discrepancy
In case there is discrepancy of the customer's documents, «First Sino Bank» may contact the issuing bank and advise discrepancy in the documents according to the customer request before delivering the documents. «First Sino Bank» also advises the issuing bank to contact with the importer (applicant) and verify if the importer accepts the discrepancy. The issuing bank then confirms with «First Sino Bank».
Discrepancy in the documents when file for reimbursement claim on export document at «First Sino Bank».
Functions and Advantages
Broad correspondent bank network for prompt contacts and responses «First Sino Bank» confirms with the overseas importer for its opinion on discrepancy, effectively avoids losses of the exporter, and facilitates exporter financing.
This product is a special type of document delivery and reimbursement claim under export credit. Under the situation where the L/C is not capable for reimbursement claim through TT, «First Sino Bank» cables the overseas correspondent bank and provides the necessary reimbursement claim information.
The overseas correspondent bank fills out draft, prints cover letter, and presents the claim letter to the reimbursement bank according to L/C stipulations.
It is applicable for situation where «First Sino Bank» processes export document deliver and reimbursement claim, yet the reimbursement bank is overseas and L/C does not permit reimbursement claim through TT.
Functions and Advantages
It accelerates the customers export bill collection and avoids errors/omissions and delay due to postal delivery in correspondent reimbursement claim.