How Payment by Documentary Credit in International Commerce Works?
Documentary Credit (also known as letter of credit or bankers commercial credit, or letter
of undertaking) is one of the payment instruments that institutions providing
non-cash payment services (banks, foreign bank branches, etc.) deal with to
make a valid payment transaction at the request of the account holder. Documentary
credit is the most commonly used for payment of international sales of goods.
The
supply of international payment services by institutions providing non-cash
payment services shall be conducted in accordance with regulations of the law
on foreign exchange management, treaties to which Vietnam is a member and
commercial practices (including international commercial practices provided by
the International Chamber of Commerce; and other commercial practices which are
not contrary to the Vietnamese laws) which agreed upon by the parties.
According
to UCP 600, credit means any arrangement, however named or described, that is
irrevocable and thereby constitutes a definite undertaking of the issuing bank
to honour a complying presentation. Documentary credit is an independent
and separate transaction from the sales and other contracts on which it may be
based. The Issuing Banks and Advising Banks are in no way concerned with or
bound by contract between the Applicant (purchaser) and the Beneficiary
(seller), even if any reference whatsoever to it is included in the credit. Banks
deal with documents only. Goods, services or performance to which the documents
may relate are not under scope of handling of the Banks. When the issuing bank
determines that a presentation of documents is complying, payment shall be
made.
The
independence between the documentary credit and the sales contract ensures that
the seller definitely receives payment if complying presentation, however, does
not protect the interests of the purchaser when there is any dispute about the
quality of the delivered goods or any other dispute after delivery. When the
seller presents complying documents, the issuing bank is obliged to make
payment without any doubt whether the goods have actually been delivered
according to the specifications as specified in the contract. At the same time,
the cancellation or termination of contract does not affect the effectiveness
of documentary credit, payment still is made if presentation is complying.
International
payment instruments play an important role in commercial transactions between
parties residing in different countries. Each payment method reflects the way
of receiving and paying for goods amount between the buyer and the seller. The
parties participating in international commerce transaction need to understand
the characteristics of each payment instrument to protect their rights and
obligations, and avoid disputes in international sales of goods, or disputes in
financial service using letter of credit or other forms, disputes in
performance of contract and should involve lawyers in early stage if possible
to avoid mishap.
ANT Lawyers - a banking and finance dispute law firm in
Vietnam with international standard, local expertise and strong
international network. We focus on customers’ needs and provide clients with a
high quality legal advice and services. For advice or service request, please
contact us via email ant@antlawyers.vn, or call us +84 24 730 86 529.
Source ANTLawyers: https://antlawyers.vn/letter-of-credit-lawyers/how-payment-by-documentary-credit-in-international-commerce-works.html
0 nhận xét:
Đăng nhận xét