L/C Samples – Letter of Credit Consultancy Services

How Does a Negotiable Letter of Credit Work?

Ozgur Eker (CDCS) How to Work With a Letter of Credit, L/C Samples, Letter of Credit Basics, Negotiation, Payment Types of Letter of Credit 18 November 20186 April 2019Negotiation

What Does Negotiation Mean?

Negotiation means the purchase by the nominated bank of drafts (drawn on a bank other than the nominated bank) and/or documents under a complying presentation, by advancing or agreeing to advance funds to the beneficiary on or before the banking day on which reimbursement is due to the nominated bank.

What Are the Benefits of a Negotiable Letter of Credit to the Exporters?

Exporters can reach the payment sooner with negotiable letters of credit, while offering usance terms to the importers.

With the help of the negotiable letters of credit, exporters can balance their cash flows, and able to propose competitive payments terms to the importers.

Who Should Pay Negotiation Fees?

Negotiation fees generally covered by the exporters, although this is contrary to the letter of credit rules.

How to Understand if a Letter of Credit Negotiable or Not?

In order to understand if a letter of credit is negotiable or not, you need to look at field “41A-Available with/by” field in a MT700 swift message.

If letter of credit is negotiable, it must be mentioned under field 41A that the letter of credit is available by negotiation.

How Does a Negotiable Letter of Credit Work?

Step 1: Exporter and importer enter into a sales contract by agreeing on the terms and conditions of the business transaction.
Step 2: Importer contacts to the issuing bank for the issuance of the negotiable letter of credit.
Step 3: Issuing bank issues negotiable letter of credit in swift format and sends it to the nominated bank, who is also negotiating bank and advising bank.
Step 4: Negotiating bank advices the letter of credit to the exporter. Exporter checks the letter of credit conditions, if they are acceptable to the exporter, he starts production of the goods.
Step 5: Exporter ships the goods within the validity of the letter of credit and not later than latest date of shipment indicated in the L/C.
Step 6: Exporter presents the documents to the negotiating bank within the presentation period allowed under the letter of credit. Remember if presented documents contain a transport document, presentation must be completed within 21 days after date of shipment.
Step 7: Negotiating bank checks the documents presented by the exporter and, if determines that they are compliant, advances cash to the exporter. The “negotiation” is effectively the purchase of documents from the exporter at a discount.
Step 8: Negotiating bank presents the documents to the issuing bank.
Step 9: Issuing bank checks the documents and, if compliant, accepts them to be paid to the negotiating bank at maturity. At the same time, issuing bank gets in touch with the importer and delivers documents to him according to the financial agreement between the issuing bank and the importer.

Sample Negotiable Letter of Credit Swift Message

————————————- Message Header ——————————————-
Swift OUTPUT FIN 700 Issue of a Documentary Credit
Sender : COBADEFFXXX
COMMERZBANK AG
(HEAD OFFICE)
FRANKFURT AM MAIN DE
Receiver : BOBIHKHH
BANK OF BARODA, HONG KONG
Hong Kong HK
————————————- Message Text———————————————–
27: Sequence of Total
1/1
40A: Form of Documentary Credit
IRREVOCABLE
31C: Date of Issue
140922
40E: Applicable Rules
UCP LATEST VERSION
31D: Date and Place of Expiry
05FEB15 HONG KONG
41A: Available With…By… – BIC
ANY BANK
BY NEGOTIATION
42C: Drafts At
AT 90 DAYS AFTER BL
42A: Drawee
BOBIHKHH

Confirmed Letter of Credit Sample

Ozgur Eker (CDCS) Confirmed Letter of Credit, L/C Samples, Letter of Credit Types 15 January 20189 February 2025Confirmation, Sample Letter of Credit

Confirmation means a definite undertaking of the confirming bank, in addition to that of the issuing bank, to honour or negotiate a complying presentation.

Confirming bank means the bank that adds its confirmation to a credit upon the issuing bank’s authorization or request.

If a confirming bank adds its confirmation to a letter of credit, the credit becomes a confirmed l/c.

On today’s post, I am going to share a confirmed letter of credit sample, which is issued in a swift format.

Recently I have explained the reasons why I have started to put sample letters of credit on my website.

Please read my previous post titled “Sample Letters of Credit – Part I” “Introduction to working with a letter of credit sample” to understand pros and cons of lc samples.

I also highly recommend you read “Sample Letters of Credit – Part II” – “Guidelines How to read sample letter of credit texts on my web site” before starting to study my irrevocable deferred payment letter of credit sample.

Standby Letter of Credit Sample in Swift Format

Ozgur Eker (CDCS) L/C Samples, Letter of Credit Types, Standby Letter of Credit 14 January 20189 February 2025Sample Letter of Credit, Stand-by Letter of Credit

A standby letter of credit is a financial instrument issued by a bank guaranteeing payment to a beneficiary if the applicant (the bank’s client) fails to fulfill the terms of an agreement.

A standby letter of credit is issued as a financial guarantee and is not intended to serve as the primary payment method, unlike a commercial letter of credit. It is only utilized if the applicant fails to fulfill their obligations under the underlying contract, making it a secondary payment option.

On today’s post, I would like to share a standby letter of credit sample in swift format.

Recently I have explained the reason why I have started to put sample letters of credit on my website.

Please read our previous article titled “Sample Letters of Credit – Part I” “Introduction to working with a letter of credit sample” to understand pros and cons of lc samples.

I also highly recommend you read “Sample Letters of Credit – Part II” – “Guidelines How to read sample letter of credit texts on my web site” before starting to study my standby letter of credit sample.

Irrevocable Deferred Payment Letter of Credit Sample in Swift Format

Ozgur Eker (CDCS) L/C Samples 13 January 20189 February 2025Sample Letter of Credit

Deferred payment is one of the payment options available under letters of credit, along with sight payment, acceptance and negotiation.

Under deferred payment terms, exporters receive letter of credit amount not at sight but after a certain period of specific date, such as 30 days after shipment, 60 days after commercial invoice date etc.

Today, I would like to share an irrevocable deferred payment letter of credit sample in swift format.

Recently, I explained why I began sharing sample letters of credit on my website.

Please read my previous post titled “Sample Letters of Credit – Part I” “Introduction to working with a letter of credit sample” to understand pros and cons of lc samples.

I also highly recommend you read “Sample Letters of Credit – Part II” – “Guidelines How to read sample letter of credit texts on my web site” before starting to study my irrevocable deferred payment letter of credit sample.

How to Read Sample Letter of Credit?

Ozgur Eker (CDCS) L/C Samples 12 January 20189 February 2025Sample Letter of Credit

On my previous post, I have explained “How to Work with a Letter of Credit Sample.”

Today’s post is the second part of the explanatory articles regarding the letter of credit samples.

After reading this article, you should comprehend how to read a sample letter of credit.

On this page, you can find detailed explanations each field of a letter of credit, which is issued in a swift format.

Please click related below links for further explanations in each letter of credit field.

How to Work with a Letter of Credit Sample?

Ozgur Eker (CDCS) How to Work With a Letter of Credit, L/C Samples, Letter of Credit Basics 12 January 20189 February 2025Sample Letter of Credit

Each letter of credit is unique, varying by industry, document requirements, and even modified UCP 600 terms.

While our samples don’t provide a one-size-fits-all solution, they offer a broad understanding of how letters of credit function in real-world scenarios.

Drawn from over 16 years of consultancy experience, these examples have been modified for privacy.

By studying them, you can learn how to read letter of credit texts in SWIFT format, identify key transaction elements, and understand common document requirements and bank expectations, helping you navigate real-life letter of credit scenarios with greater confidence.

Irrevocable Letter of Credit Sample

Ozgur Eker (CDCS) L/C Samples 11 January 201815 February 2025Irrevocable Letter of Credit, Sample Letter of Credit

On today’s post, I would like to share an irrevocable letter of credit sample in swift format.

Recently, I explained why I began sharing sample letters of credit on my website.

Please read my previous article titled “Sample Letters of Credit – Part I” “Introduction to working with a letter of credit sample” to understand pros and cons of lc samples.

Also, I highly recommend you read “Sample Letters of Credit – Part II” – “Guidelines How to read sample letter of credit texts on my web site?” before starting to study my irrevocable letter of credit sample.