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Q.

What is Letter of Credit and Bill of Lading?

Tags: credit, money, letter
Asked by jafar, 12 Nov '12 11:09 pm
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Answers (4)

1.

Letters of Credit and Bills of Lading are the two important documents commonly required for a Export Businee involving the exchange and transport of a good between a buyer and a seller:
Letter of credit. A document issued by a financial institution that provides a promise of payment for a trade transaction, implying that it can be redeemed if certain conditions are satisfied. They are mainly used in international trade for transactions between actors, such as a buyer and a seller, in different countries.
Bill of lading. A document that establishes evidence and the terms of a contract between a shipper, a transportation company and the agents providing and receiving the cargo. It serves as a document of title, a contract of carriage and a receipt for goods
Answered by joyesh chakraborty, 12 Nov '12 11:14 pm

 
  
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2.

Letter of credit. A document issued by a financial institution that provides a promise of payment for a trade transaction, implying that it can be redeemed if certain conditions are satisfied. They are mainly used in international trade for transactions between actors, such as a buyer and a seller, in different countries.

Bill of lading. A document that establishes evidence and the terms of a contract between a shipper, a transportation company and the agents providing and receiving the cargo. It serves as a document of title, a contract of carriage and a receipt for goods.
Source: http://people.hofstra.edu/geotrans/eng/ch7en/conc7en/creditlading.html
Answered by anantharaman, 12 Nov '12 11:10 pm

 
  
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3.

LETTER OF CREDIT:- A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. In the event that the buyer is unable to make payment on the purchase, the bank will be required to cover the full or remaining amount of the purchase.

BILL OF LADING:- A bill of lading (sometimes abbreviated as B/L or BOL) is a document issued by a carrier which details a shipment of merchandise and gives title and requires a carrier to deliver the merchandise to the appropriate party. An order bill of lading is used when shipping merchandise prior to payment, requiring a carrier to deliver the merchandise to the importer, and at the endorsement of the exporter the carrier may transfer title to the importer.
Source: Book
Answered by Deepak Gupta, 13 Nov '12 09:06 pm

 
  
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4.

Let's say that if you are exporting goods worth One Crore to a party in another country.
You want a guarantee of receiving your payment.
So, you will tell that person to open a Letter of Credit (LC. Not LoC as LoC means Line of Control on Indo-Pak border).
That person will open an LC and deposit One Crore in a bank at his place, who will make payment to your bank from where you can take it. YThere are certain terms of payment which will be followed by banks.
There are TWO types of LCs. One is plain LC and the other is ILC, that is, Irrevocable Letter of Credit. ILC cannot be revoked and his bank will have to make the payment to your bank for you no matter what happens.
The terms ofor receiving your payment will be on the basis of Bill of Lading.
This document is issued to you after the goods are loaded on the ship and this is called FoB, that is Freight on Board.
So, the terms of payment usually would be through Bill of Lading, on FoB.
Answered by QueSera Sera, 12 Nov '12 11:45 pm

 
  
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