How to split payments for a single shipment under a Letter of Credit (L/C)
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I am an L/C specialist. For a specific L/C transaction, I would like to arrange it so that the exporter (Beneficiary) receives 70% of the shipment value first after shipping, and the importer (Applicant) pays the remaining balance through the bank after completing cargo receipt and inspection. If this type of arrangement is possible, I would like to know what specific wording should be included in the L/C. Since the goods being traded are machinery equipment, we want to receive the balance payment only after installation and confirmation of normal operation at the importer's factory.
Answer 1
- 01. Split Payment under LC: Transactions where the payment for a single shipment is divided into two installments and claimed by the exporter to the bank are practiced in actual business operations. However, the clause for split payment must be specified in the LC from the time of issuance. 2. Example of inserting into LC Field 46A (Documents Required): A. Documents for 70% payment — ① Draft for 70% of the C/I amount ② 3 copies of signed Commercial Invoice ③ Full set of clean on board B/L made out to order of Issuing Bank, Freight Collect, Applicant Notify ④ 3 copies of Packing List. B. Documents for 30% payment — ① Draft for 30% of the C/I amount ② Final Acceptance Certificate issued by the Applicant. 3. Presentation of Shipping Documents: After shipment, the exporter must submit the original LC received via advice, the shipping documents required by 46A, the application for negotiation (or collection), the draft, and the Export Declaration Certificate to the bank within the period specified in LC Field 48 (Period for Presentation). At this time, care must be taken regarding the handling of the total C/I amount and the draft amount. The total C/I amount should be issued for the actual shipment value (100%), but if the condition is to receive only 70% of the total amount in the first installment, the draft amount must be stated as 70% of the total C/I amount. Furthermore, the Packing List presented for the 70% payment must list all shipped items identically to the C/I and include packaging information such as CBM and weight. Based on this, all shipped item information must also be recorded in the transport documents (B/L, Waybill) and the Export Declaration Certificate.Machine translated
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