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| Issuance of Documentary Credit
(LC) |
| It
is a written undertaking by a bank given to a seller
at the request of the buyer to pay at sight or at a
determinable future date up to a stated sum of money
against stipulated documents and compliance of the terms
and conditions within a prescribed time limit. |
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| Salient features of LC |
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LC
can be issued either to local or foreign supplier
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If
a buyer requires marine insurance for the LC, we may
arrange the insurance with our Mayban General Assurance
Berhad (MGAB) |
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Our
LC is governed by UCP 500 which is formulated by the
International Chamber of Commerce and is accepted and
recognized worldwide |
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All matters pertaining to LC will
be governed by UCP 500 |
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| Why would the customer want
LC? |
| Buyer
: |
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Obtain financing when making
payments to the seller (beneficiary) |
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Fulfill sales contract
requirement |
| Seller : |
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Obtain payment upon presentation
of compliant documents |
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As an added confidence
since LC is issued by a bank |
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| Benefits of LC to the customer |
| Buyer
(Applicant) |
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Can
stipulate type of documents required as per terms agreed
upon sales contract |
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Can
assure payment is made to the beneficiary |
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Obtain
import financing from the bank |
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Good
status from seller's perspective when he produces the
LC |
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Able
to negotiate favourable terms from seller |
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Provide
legal protection as UCP 500 is the set of universally
recognized rules governing LC operations |
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Documents
presented will be examined by experienced banking personnel |
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Need
not communicate with the foreign seller often as the
whole transaction will be routed through and handled
by the bank |
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| Seller (Beneficiary) |
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Guaranteed
payment upon presentation of compliance documents |
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Can
opt to have the bank to confirm the LC as an additional
security |
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Can
request pre-shipment financing from the bank to purchase
or process the goods before shipment |
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Can
request the bank to transfer the LC to the actual supplier
i.e. trading companies |
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Able
to reduce exchange risk |
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Able
to reduce or eliminate commercial risks as payment is
assured by the bank |
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Provide
legal protection as UCP 500 is the set of universally
recognized rules governing LC operations |
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