Field 41a: Available With … By …

What is the Meaning of by Payment?

Ozgur Eker (CDCS) At Sight, Payment Types of Letter of Credit 28 February 20196 April 2019At Sight, Available By, By Payment, Field 41a: Available With ... By ...

At sight payment is a payment due on demand.

At sight letter of credit can be defined as a letter of credit that is payable as soon as the complying documents have been presented to the issuing bank or the confirming bank.

Some credit do not mention at sight term, instead issued available by payment.

Is “by payment” the same as “at sight payment” in a letter of credit transaction?

What happens if the letter of credit does not mention at sight but states only by payment?

When should the issuing bank pay to the exporter if credit available by payment?

How long should an exporter wait for the payment when credit states that the payment terms is by payment only?

Let me try to answer all of these questions via case study.

Case Study: What is the Meaning of by Payment?

Dear Sir,
I find your website very useful. I think you have published more than 300 articles and they are very helpful to me. I am working as an export manager in an international steel manufacturing firm in India.
I would like to ask you a question regarding letter of credit payment terms.
A while ago I have received an irrevocable letter of credit, but in the letter of credit there is no specific payment date and also the credit does not mention a sight draft. In the letter of credit issuing bank only put below statement in “Field 41D : Available with… by..” section.
” :41D/AVAILABLE WITH … BY … : ANY BANK IN INDIA
BY PAYMENT “
What I would like to learn is that if the meaning of “BY PAYMENT” and “AT SIGHT” is the same or not?
Some of my friends here suggested that we should amend the “by payment” statement with “at sight”. Is he correct?
Regards
Durai Raj
Answer:
Dear Duraj thanks for your question. Actually “by payment” and “at sight” have the same meaning in letters of credit. Swift rule book states that “When code contains BY PAYMENT, this should be understood to mean payment at sight.”
Issuing banks have 5 banking days to check your documents after day have received your presentation. If they find your presentation complying, then they have to pay the letter of credit amount to you without losing time under at sight letters of credit.
If I were you I would not count too much on confirming banks when a letter of credit is available with at sight payment. In most cases confirming banks do not pay your money until they have been reimbursed by the issuing banks.

Ozgur Eker (CDCS) MT 700 Issue of a Documentary Credit, Swift Messages 11 September 20187 April 2019Field 41a: Available With ... By ..., MT 700 Issue of a Documentary Credit, Swift, Swift Messages

What is Field 41a: Available With … By …?

Field 41a: Available With … By … is a field in MT 700 swift message type that is used to identify the bank with which the credit is available (the place for presentation) and indicates of how the credit is available.

This is a mandatory field, which means that it must be stated in all of the letters of credit issued via MT 700 swift format.

This field identifies the bank with which the credit is available (the place for presentation) and an indication of how the credit is available.

FORMAT

Option A : (Identifier Code BIC )

BY ACCEPTANCE
BY DEF PAYMENT
BY MIXED PYMT
BY NEGOTIATION
BY PAYMENT

Option D : (Name and Address)

BY ACCEPTANCE
BY DEF PAYMENT
BY MIXED PYMT
BY NEGOTIATION
BY PAYMENT

MT 700
Field 41a: Available With … By … :
USAGE RULES

If the credit is to be freely negotiable by any bank, option D must be used with the phrase Any bank in … (city or country).

If the credit is to be freely negotiable by any bank anywhere in the world, an indication of country is not required.

When Code contains either BY DEF PAYMENT or BY MIXED PYMT, the specific details of the payment terms must be specified in field 42P and 42M respectively.

When Code contains BY PAYMENT, this should be understood to mean payment at sight.

For credits subject to eUCP:

If presentation of both electronic records and paper documents is allowed, the place for presentation of the electronic records (ie, the electronic address to which presentation must be made) as well as the place for presentation of the paper documents must be specified in field 47A and not in this field.
If presentation of only electronic records is allowed, the place for presentation of the electronic records (ie, the electronic address to which presentation must be made) must be specified in field 47A and not in this field.