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Unit Three

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  12. EXERCISE 11. Arrange the following reduplicative compounds in three groups: a) reduplicatives proper, b) ablaut combinations, c) rhyming combinations.

Documentary Letter of Credit

Active Vocabulary:

expiry dale

— 1) истечение срока действия
контракта

2) истечение срока опциона

— условия кредита

— отзывный/безотзывный

— аннулировать

— вносить изменения, поправки

— авизовать аккедитив

— банк, производящий выплаты
по аккредитиву

— подтверждающий банк

— эмиссионный банк

— совместимей, сочетаемый

— погашать (кредит,
задолженность и т.д.)

— дебетовать, относить на дебет
счета



TEXT

Read Иге lexl below concentraliiig on Us contents and ter­minology:

By sending documents through the banking system in a documentary bills collections, both an exporter and an over­seas buyer have some degree of security in completing the commercial contract. Bui a more secure method of carrying out the transaction is by a documentary letter of credit. This

165


 


documentary letter of credit when transmitted through a bank, Usually in the exporter's country, becomes the means by which the exporter obtains payment.

The necessary documents, correctly completed, are pre­sented to a bank by the expiry date of the credit. If the terms of the credit are met an exporter can receive payment from a UK bank. The buyer is in effect providing the exporter with immediate payment in return for a guaranteed assurance from a reputable bank that the export documents required to de­liver the goods have been completed to the bank's satisfac­tion.

Documentary credits may be revocable or irrevocable. A revocable letter of credit is rather rare nowadays because it means that the terms of the credit can be cancelled or amended by an overseas buyer at any time without prior notice to the exporter. Most letters of credit are irrevocable, which means that once a buyer's conditions in the letter have been agreed by an exporter, they constitute a definite un­dertaking by the buyer's bank and cannot be revoked with­out the exporter's agreement.

UK banks advise letters of credit, i.e. on presentation of documents required in a letter of credit, they send them for collection and payment by the issuing bank of an overseas buyer. The letter of credit in this situation is only as good as the strength of the overseas bank involved. An exporter's advising bank undertakes no responsibility itself to pay the exporter.

Even better security is achieved if the irrevocable letter is confirmed by an advising bank in the UK. Then the UK con­firming bank stands fully in place of the issuing bank abroad, and provided all the terms and conditions of credit are ful­filled by an exporter, payment is assured by the banking system without recourse, i.e. without further call on the ex­porter. So when an exporter has negotiated in the contract with the buyer for a confirmed irrevocable letter of credit then security of payment, as far as humanly possible, is achieved.


But whether or not the credit is confirmed it is essential that the exporter checks the credit terms immediately to make sure they are compatible with the commercial contract made with the buyer. In dealing with documentary credits the bank is concerned only with the documents to be presented and not with the goods or services involved.

Documentary credits may provide for payment at sight or for acceptance of a term bill of exchange by either the issuing bank in a buyer's country or the correspondent bank in the UK.

Comprehension. Answer the following questions:

1. Which method of payment provides the greatest security

for the exporter?

2. Who provides the buyer with the assurance that the goods
will be shipped in accordance with the terms of the con­
tract?

3. Why are revocable letters of credit seldom used in foreign

trade?

4. On what condition can an irrevocable letter of credit be
cancelled?

5. Does an irrevocable letter of credit provide the exporter
with assurance that he will be paid on shipment of goods
under all circumstances?

6. To achieve better security who should a letter of credit be
confirmed by?

7. What is the first duty of an exporter when he is advised
about a letter of credit? Why?

II

Comprehension. Complete Hie following:

1. The expiry date is the date by which....

2. A revocable letter of credit means that.....


 


166


167


3. An irrevocable letter of credit means that provided...

4. A confirmed irrevocable letter of credit is one confirmed

by......

5. Payment is assured without recourse means that provided
the exporter........

Ill

Give appropriate economic terms for the following:

1. The letter described in this text.

2. The date from which a document ceases to be valid.

3. Banks mentioned in the text.

4. Names of different kinds of a Letter of Credit.

5. Date at which payment is lo be effected.

6. Up to the terms of credit.

7. Annulled or improved.

8. Announcement that the respective documents have ar­
rived or have been opened by the bank.

9. Pay back, repay money lo a firm.

10. Charge somebody with a sum of money (in terms of book
keeping) and ils opposilc.

Now use the terms you have just formed in sentences of your own.

IV

Complete the following:
1. The firsl slep in any business Iransaclion is... belween

The agrecmenl specifies Ihc... in Ihis case by......

2. The issuing bank is..... which.......

3. The issuing bank inslrucls its correspondent bank lo...

about.... in.......

4. The exporter's bank is called...... and il opens...... in


g At the same time the exporter.......

7 When the shipping documents agree with the terms of the

agreement......

8. The next slep is lo......

9 When all Ihe shipping documents comply with the terms

of the conlracl......

10. The issuing bank debils... with........

Ц. When the paymenl has teen effected the buyer.... and

can.......

Test. Fill in the missing words:

The exporter can obtain advance security thai selllcmcnl will be made if he is able lo arrange wilh Ihc buyer for Ihe

issue of an.... crcdil. The buyer will requesl his local bank

to...... a credil reflecting the precise documentation which

he requires and the...... under which selllemcnl may be

made.

The buyer's bankers may send advice of Ihc... cither di­
rect lo the exporter or through the inlcrmcdiary of a.... in

the exporler's country. In the case of an irrevocable credil

Ihc exporter may be certain that Ihc..... bank can neither

cancel the:... nor amend il wilhoul his consent.

Should the exporlcr require greater security than thai af­
forded by the name of the issuing...., he may be able lo

arrange lhal an...... bank in his own country adds ils confir-

malion lo the...... at Ihc requesl of the issuing bank. This

will mean lhal Ihc..... confirming bank stands fully in place

(>l the issuing bank...., and, provided Ihe exporter.......

Ihe terms and conditions of Ihe credil in every respect, he
has assurance of......


5. When Ihe goods are ready for shipment

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