The Hashemite universityDept of Business AdministrationInternational business (Full-time)Letters of Letters of CreditCreditStudent: Faissal AlhawamdehInstructor : Dr. Radwan AlharabshehTable of contentsTable of contents!"s simpl# de$ned %%%%%%%%%%%%%%%%%%%%%%% (&)'he parties in !" transaction%%%%%%%%%%%%%%%%%..(())h# we use !"s **.................................................................. (+)Basic '#pes of !"s %%%%%%%%%%%%%%%%%%%%...... (,--)Bene$ts ofan !" %%%%%%%%%%%%%%%%%%%%%%(.-/0)Special t#pes of !"s %%%%%%%%%%%%%%%%%%%.(//-/,)Steps in an import !" transaction %%%%%%%%%%%%%..( /1)Documents usuall# re2uired underthe !" %%%%%%.. (/--3/)Steps in an e4port !" transaction %%%%%%%%%%%%%.. . (33)5a#ment procedure %%%%%%%%%%%%%%%%%%%%%% (3&)Letters of credit simply Letters of credit simply defneddefned-aletterofcreditisaban6underta6in7of pa#ment .-separate from the sales or other contracts on which it is based. -It is a wa# of reducin7 the pa#ment ris6s associatedwiththemo8ementof 7oods.The parties in an LC The parties in an LC transactiontransactionWhy we use letter of Why we use letter of creditcredit??)hen the seller has doubts about the credit-worthinessofthebu#er and wishestoensure promptpa#ment9thesellercaninsistthatthe sales contract pro8ides for pa#ment b# irre8ocable letter of credit. if the ban6 issuin7 theletterofcredit(issuin7ban6)isun6nown tothe selleror if the seller is shippin7 to a forei7n countr# and is uncertain of the issuin7ban6:sabilit# to honor its obli7ation9 the seller can9 with the appro8al of the issuin7 ban69re2uest its own ban6 ora ban6 of international repute to assume theris6ofthe issuin7 ban6b# con$rmin7 the letter of credit.Basic Types of LCsBasic Types of LCsSight O Term!"sance-!ettersofcreditcanpermit thebene$ciar# to be paid immediatel# upon presentationofspeci$eddocuments (sight letter of credit).-or at a future dateasestablishedinthesalescontract( term !usance letter of credit).Basic Types of LCsBasic Types of LCsevocable O #rrevocable-!ettersofcreditcanbe revocable. 'his means that the# can be cancelled oredited atan# time b#theissuin7 ban6without notice to the bene$ciar#. -An irrevocable letter of creditcannot be cancelled without the acceptanceof the bene$ciar#.Basic Types of LCsBasic Types of LCs"nconfrmed O Confrmed-An unconfrmed letter of credit carries the obli7ation of the issuin7 ban6 to honoralldrawin7s9 pro8ided that the terms and conditions of the letter of credit ha8e been complied with. -Aconfrmedletterofcreditalsocarriestheobli7ationof another ban6 which is normall# located in thebene$ciar#:scountr#9thereb#7i8in7the bene$ciar# the comfort of dealin7 with a ban6 6nown to him.Benefts of a letter of creditBenefts of a letter of credit/) !etters ofcreditopendoors to international trade b# pro8idin7 a secure mechanism for pa#ment.3) A ban6issubstitutedforthe bu#er as the source of pa#ment.&) Ban6e4pertise is made a8ailable to help complete trade transactions successfull#.() 5a#mentfor the 7oodsshippedcanberemitted to #our own ban6 or a ban6 of #our choice.To the $%porter!SellerBenefts of a letter of creditBenefts of a letter of credit/) 5a#mentwillonl# be made to the seller when the termsandconditions of the letter of credit are complied with.3) 'he importer can control the shippin7 dates for the 7oodsbein7 purchased.&) "ash resources are not tied up.To the #mporter!BuyerSpecial types of letters of Special types of letters of creditcredited Clause Letter of CreditAredclauseletterof creditincorporatesaclause9traditionall#written in red9 which authori;es theban6actin7as thene7otiatin7orpa#in7ban6topa#the bene$ciar#inad8ance ofshipment.'his enablesthe purchase and accumulation of 7oods from a number ofdi