2. Negotiation with recourse
3. Negotiation against indemnity
4. Negotiation under reserve
Let me explain Negotiation without recourse first and the rest at a later posting. A seller may present his documents drawn under LC directly to either a) The issuing Bank (bank that issues the LC) or
b) The confirming bank (bank that adds its confirmation at the request of the issuing bank) or c) To his own bank
If the seller chooses to present the documents directly either to the ISSUING BANK or to the CONFIRMING BANK, these banks make payment WITHOUT RECOURSE to him. Meaning, the payment that has been paid to the seller shall not in any way become claimable by these banks in the event the documents are found not in order after making such payment. These banks cannot have recourse to the seller because by issuing or confirming the LC, they have taken upon themselves the risk that the party from whom reimbursement is to be obtained may become insolvent. I hope this would give traders a general idea of how the LC operates and the implications to buyer and seller. BANKING FORMALITIES :OBTAINING PACKING CREDIT AND POST SHIPMENT FINANCE Packing Credit : Overview
Packing credit is a loan/ cash credit facility sanctioned to an exporter in the Pre-Shipment stage. This loan facilitates the exporter to purchase raw materials at competitive rates and manufacture or produce goods according to the requirement of the buyer and organize to have it packed for onward export.. The lending institutions seek a Letter of Credit opened in favour of the exporter from the overseas buyer along with the irrevocable (cannot be canceled once drawn) Purchase Order favouring the exporter. Packing Credit facility will cover all the working capital needs of the exporter including raw materials, wages, packing costs and all pre-shipment costs. Packing credit is available for generally a period of 90 days and the exporter has to pay lower rate of interest compared to traditional Overdraft or Cash Credit facility. Exporters use this facility so they can bid the most competitive price for export thus gaining more business opportunities for export. Packing Credit : Documents
The borrower and/or the guarantors have to provide the following documents to the banks or the lending institutions while submitting Packing credit Application. Certain documents may be demanded by the bank or the lending institutions in post sanction phase or on periodical basis....