Chapter 7 - Method of Doc. Credit

5/26/2023
Chapter 7
METHOD OF DOCUMENTARY
CREDIT
METHOD OF DOCUMENTARY CREDIT

* Objective: to help learners:
• Present definition, participants, and process of
documentary credit method.
• Understand the content of letter of credit, special
types of letter of credit and their cases of usage.
• Apply the operations in documentary credit method:
issuance, amendment, notification, confirmation,
negotiation, document examination, and payment.
• Analyze the advantages and disadvantages of
participants in the documentary credit method.
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METHOD OF DOCUMENTARY CREDIT

* Content:
7.1. Legal framework.
7.2. Definition.
7.3. Participants.
7.4. Process of the documentary credit method.
7.5. Letter of credit (L/C).
7.6. Responsibilities and rights of participants in L/C.
7.7. Application of the documentary credit method:
import and export documentary credit operations.
7.8. Special types of L/C
7.9. Notes on the documentary credit method.
7.1. LEGAL FRAMEWORK

1. Uniform Customs and Practice for Documentary
Credits – UCP hoặc UCP/DC (Quy tắc và thực hành
thống nhất về tín dụng chứng từ) is issued by ICC.
- 1933: First issued with version UCP 82.
- 1951: Revised with version UCP 151.
- 1983: Revised with version UCP 400 .
- 10/2006: Revised with version UCP 600, which is the
latest version, become effective since 01/07/2007. It
consists of 39 articles and is widely used today.
- UCP has the discretionary legal nature, and legal validity
under national law.
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2. International Standard Banking Practice for
Examination of Documents under Documentary Credits –
ISBP (Tập quán ngân hàng theo chuẩn mực quốc tế
trong kiểm tra chứng từ theo tín dụng chứng từ) is issued
by ICC.
- 2002: ISBP 645 was issued, and used with UCP 500.
- 2007: Revised with version ISBP 681, used with UCP 600.
- 2013: Revised again with version ISBP 745, used with UCP
600. This is the latest version of ISBP, widely used today.
* Note: ISBP has discretionary legal nature, used with UCP.
* Question: If using UCP 600, which version of ISBP will be
used, ISBP 681 or ISBP 745?

3. Uniform Customs and Practice for Documentary Credits
for Electronic Presentation–eUCP (Quy tắc và thực hành
thống nhất về tín dụng chứng từ điện tử) is issued by ICC.
- 2002: eUCP version 1.0 was issued to support and be used
with UCP 500.
- 2007: Revised to eUCP version 1.1, used with UCP 600,
effective since 01/07/2007.
- 05/2019: eUCP 2.0 was issued to support and be used with
UCP 600, effective since 01/07/2019.
- eUCP 2.0 consists of 14 articles related to the presentation of
electronic documents under documentary credit method.
- eUCP has the discretionary legal nature, legal validity under
national law.
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4. Uniform Rule for Reimbursement under Documentary
Credits – URR (Quy tắc thống nhất về hoàn trả liên hàng
theo tín dụng chứng từ) is issued by ICC.
- 11/1995: URR 525 is issued, effective since 01/07/1996.
- 04/2008: URR 725 is issued, effective since 01/10/2008,
currently widely used.
- URR 725 consists of 17 articles, presenting the rules in
payment between banks, helping the exporter's bank claim
reimbursement from a third bank (other than the importer's
bank) safely and quickly.
- URR has the discretionary legal nature, with legal validity
under national law.
7.2. DEFINITION OF DOCUMENTARY CREDIT METHOD
* English and Vietnamese terms: “Documentary

Credit (DC) – Tín dụng chứng từ” ; “Letter of
Credit (L/C) – Thư tín dụng hoặc Tín dụng thư” ;
“Credit – Tín dụng”.
* According to the Article 2 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.
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* Thuật ngữ tiếng Anh và tiếng Việt: “Documentary

Credit (DC) – Tín dụng chứng từ” ; “Letter of
Credit (L/C) – Thư tín dụng hoặc Tín dụng thư” ;
“Credit – Tín dụng”.
* Theo Điều 2 UCP 600:
Tín dụng là một thỏa thuận bất kỳ, dù được mô tả
hay gọi tên như thế nào, thể hiện một cam kết chắc
chắn và không hủy ngang của ngân hàng phát
hành về việc thanh toán cho bộ chứng từ xuất
trình phù hợp.

- Exporter only needs to present complying documents, issuing
bank (the bank serving importer) ensure payment for exporter
because this is an irrevocable undertaking of issuing bank.
- Same as the documentary collection method, the presented
documents in this method may include both commercial and
financial (draft) documents, or only commercial documents in the
case of sight payment, without issuing draft.
- According to Article 2 of UCP 600, "complying presentation"
means complying with three elements: 1. Requirements of L/C;
2. Terms of UCP; 3. Terms of ISBP. Therefore, content of L/C
must be reflected in the documents or, in other words, the
content of documents must be in compliance with requirements
of L/C, UCP, and ISBP. In order to determine compliance, in
addition to checking quantity and type of documents,
issuing bank must also check the content of documents.
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** Documentary credit method harmonizes the benefits and risks
for buyer and seller:
- For seller (exporter):
+ After delivering goods and presenting complying documents,
seller will be surely paid by bank, so they can feel more secure.
+ They are not worry about risks that buyer refuses to receive
documents or uses reason of wrong goods to reject payment.
- For buyer (importer):
+ Buyer’s payment is made means that goods have been
surely shipped because seller only prepare the documents for
presentation after complete delivering goods.
+ Buyer surely receive goods because the contents of
documents have been checked by bank, so they do not have to
worry about the risk that there are errors in documents and
cannot do customs clearance for receiving goods.
** Disadvantages of the documentary credit

method:
There is no connection between the delivery of

actual goods with the payment of goods. Buyer
makes payment but they may not receive the
right goods, while seller delivers the right goods
but they may not receive payment.
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* In the definition of documentary credit, “honour”

(according to Article 2 UCP 600) means that:
- To pay at sight if the credit is available by sight
payment
- To incur a deferred payment undertaking and pay
at maturity if the credit is available by deferred
payment
- To accept a bill of exchange (“draft”) drawn by the
beneficiary and pay at maturity if the credit is
available by acceptance.
* Trong đó, “thanh toán” (theo điều 2 UCP 600)

nghĩa là :
- Trả tiền ngay, nếu tín dụng có giá trị thanh toán
ngay (sight payment).
- Cam kết trả chậm và trả tiền khi đến hạn, nếu tín
dụng có giá trị thanh toán trả chậm (deferred
payment).
- Chấp nhận hối phiếu do người thụ hưởng ký phát
và trả tiền hối phiếu khi đến hạn, nếu tín dụng có
giá trị thanh toán bằng chấp nhận (acceptance).
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* In summary, the payment method of

"Documentary Credit" is the payment method in
which bank issues a written undertaking to
beneficiary at the request of applicant to pay a
certain amount of money at sight or at a specified
time in the future, with the condition that beneficiary
presents documents in compliance with the
undertaking.
* This written undertaking is called Letter of Credit –
L/C (Thư tín dụng).
* Tóm lại, phương thức thanh toán “Tín dụng

chứng từ” là phương thức thanh toán mà trong
đó, ngân hàng sẽ phát hành một cam kết bằng
văn bản cho người thụ hưởng theo yêu cầu của
người đề nghị lập cam kết để trả ngay hoặc trả
tại một thời điểm xác định trong tương lai một số
tiền nhất định với điều kiện người thụ hưởng phải
xuất trình bộ chứng từ phù hợp với cam kết.
* Văn bản cam kết này gọi là thư tín dụng (Letter
of Credit – L/C).
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7.3. PARTICIPANTS
- Applicant (Người đề nghị / yêu cầu): The party on whose
request a credit is issued, and is usually importer.
- Beneficiary (Người thụ hưởng): The party in whose favour
a credit is issue (benefits from credit), receives a conditional
undertaking of honour from issuing bank, and is often exporter.
- Issuing Bank (Ngân hàng phát hành): The bank that
issues a credit at the request of an applicant or on its own
behalf, usually the bank serving importer.
- Advising Bank (Ngân hàng thông báo): The bank that
advises the credit to beneficiary at the request of issuing bank,
usually a branch or correspondent bank of issuing bank in the
exporter’s country and may be the bank serving exporter.
7.3. PARTICIPANTS
- Nominated Bank (Ngân hàng được chỉ định): The specific
bank/ any bank with which the credit is available by payment,
acceptance, deferred payment, or negotiation (as indicated in
field 41 of L/C), which includes:
+ Paying Bank (Ngân hàng thanh toán)
+ Accepting Bank (Ngân hàng chấp nhận)
+ Deferred Undertaking Bank (Ngân hàng cam kết trả chậm)
+ Negotiating Bank (Ngân hàng thương lượng / chiết khấu)
- Confirming bank (Ngân hàng xác nhận): The bank that
adds its confirmation to a credit upon the issuing bank’s
authorization or request.
- Reimbursing Bank (Ngân hàng hoàn tiền): The bank that
holds the account of issuing bank, and follows the requests of
issuing bank to reimburse nominated bank. Reimbursement
transactions must comply with the rules of URR issued by ICC.
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7.3. PARTICIPANTS
* Nominated bank: To facilitate for beneficiary, issuing bank
(IB) nominates a bank located in the beneficiary's country to
act on behalf of IB in examining documents presented by the
beneficiary and performing responsibility when documents are
complying. This bank is called Nominated bank (NB).
Therefore, beneficiary presents documents to NB, and if
documents are complying, NB will perform the nominated
responsibility for beneficiary.
* In L/C, field 41 "Available with… by…" indicates:
Name of NB + by + responsibility of NB
- Name of NB: There are two ways to express it.
+ Nominated namely (Chỉ định đích danh).Ex: Bank A by….:
Bank A is NB, and beneficiary presents documents to Bank A.
+ Nominated namelessly (Chỉ định vô danh/ Chỉ định bất
kỳ). Ex: Anybank by…: Any bank can be NB, and beneficiary
has the right to present documents to any bank.
7.3. PARTICIPANTS
- Responsibility of NB: There are 4 types of responsibility.
+ Payment (Thanh toán): Ex: Bank A/any bank by
payment: NB is Bank A/ any bank called Paying bank (NH
thanh toán). If documents presented by beneficiary to Bank
A/ any bank are complying, Bank A/ any bank must pay at
sight to beneficiary.
+ Acceptance (Chấp nhận): Ex: Bank A/ any bank by
acceptance: NB is Bank A/ any bank called Accepting
bank (NH chấp nhận). If documents presented by
beneficiary to Bank A/ any bank are complying, Bank A/ any
bank must accept draft and pay at maturity.
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7.3. PARTICIPANTS
+ Def Payment (Cam kết trả chậm): Ex: Bank A/ any bank by
def payment: NB is Bank A/ any bank called Deferred
undertaking bank (NH cam kết trả chậm). If documents
presented by beneficiary to Bank A/ any bank are complying,
Bank A/ any bank must make an undertaking of deferred
payment and pay at maturity (no issue of draft in this case).
+ Negotiation (Thương lượng/ Chiết khấu): Ex: Bank A/ any
bank by negotiation: NB is Bank A/ any bank called
Negotiating bank (NH thương lượng/ chiết khấu). If
documents presented by beneficiary to Bank A/ any bank are
complying, Bank A/ any bank must negotiate/ discount
documents and make advance payment to beneficiary. Then,
NB will claim reimbursement from issuing bank (claim for
paying at sight or paying at maturity).
7.3. PARTICIPANTS
* There are 2 types of negotiation:
+ Negotiation with recourse (Chiết khấu có truy đòi): If
issuing bank refuses to pay NB, NB has the right to demand
payment from beneficiary.
+ Negotiation without recourse (Chiết khấu miễn truy đòi): If
issuing bank refuses to pay NB, NB bears the loss of money
and is not entitled to demand payment from beneficiary.
** Example: 41: Available with … by…: Bank A by payment /
advising bank by acceptance / any bank by negotiation.
- In practice, NB is usually advising bank.
- NB has the right not to perform the nominated responsibility
and is unnecessary to advise issuing bank or beneficiary.
- L/C may not indicate NB (there is no field 41 or filed 41 is left
blank). In this case, if there is no confirming bank, beneficiary
must present documents directly to issuing bank for payment.
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7.3. PARTICIPANTS
* Confirming bank (CB):
-CB is the second bank for undertaking of honour to beneficiary,
so if L/C is confirmed, it is very safe for beneficiary because
they have two banks undertaking to honour irrevocably.
- CB is also a nominated bank (nominated by issuing bank) but
is separated due to its special operations.
- Beneficiary (exporter) is not sure about the undertaking to
honour of issuing bank, so they require an additional
undertaking to honour of other bank. Therefore, CB acts as the
guaranteeing bank of issuing bank and is trusted by exporter,
so it is often the advising bank in practice.
- If there is CB in L/C, beneficiary presents documents to CB
and CB must honour beneficiary if the documents are
complying. CB then sends the documents to issuing bank to
claim reimbursement.
7.3. PARTICIPANTS
- CB is obligated to perform its responsibility when it is
presented documents by beneficiary, and is not allowed to
refuse (unlike nominated bank).
- If CB performs the responsibility of negotiation, it must be
negotiation without recourse because CB undertakes to honour
irrevocably to beneficiary and has the same responsibility as
issuing bank. If CB determines the compliance of documents
and has already honoured or negotiated, it cannot claim
reimbursement later.
- In L/C, field 49 "Confirmation Instructions" indicates whether
there is CB. Field 49 has three options: + WITHOUT: no CB.
+ CONFIRM: there is surely a CB and in this case, issuing
bank has previously agreed with CB to confirm L/C. Usually, CB
is also advising bank. If it is not advising bank, the name of CB
will be indicated in field 47 of L/C.
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7.3. PARTICIPANTS
+ MAY ADD: there is CB but issuing bank has not yet agreed
with advising bank (AB) on confirming L/C. When receiving L/C,
AB will discuss with beneficiary. If agreeing to confirm, AB will
clearly states in L/C advice as “We advise and confirm L/C
No…”. If AB does not agree to confirm, it only indicates “We
advise L/C No…”, without mentioning the confirmation.
* Reimbursing bank: Issuing bank (IB) may not have an
account relationship with nominated bank (NB). In this case, IB
must nominate another bank that has an account relationship
with both IB and NB to act on behalf of IB to reimburse NB. This
bank is called the reimbursing bank (RB).
RB only relates to the process of claiming and reimbursing
money among banks, so only staff of international payment
department of bank are interested in, while exporters and
importers do not need to pay attention to this bank.
7.3. PARTICIPANTS
- Three types of bank including nominated bank (NB),
confirming bank (CB), and reimbursing bank may appear or
not appear in L/C.
- If an L/C does not have CB and NB, it is called L/C (is)
available with issuing bank (L/C có giá trị tại NHPH):
beneficiary presents documents directly to issuing bank for
honour.
- If an L/C has a CB and/ or a NB, it is called L/C (is) available
with nominated bank (L/C có giá trị tại NHĐCĐ): beneficiary
presents documents to NB or CB for honour.
** Note: There may be the case that the bank serving
beneficiary (holding beneficiary's account) plays all three roles:
advising bank, nominated bank, and confirming bank.
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7.4. PROCESS OF DOCUMENTARY CREDIT
8. Honour/ Refuse
Advising bank 7. Documents Issuing Bank

(Ngân hàng thông (Ngân hàng
báo / chuyển ch.từ) 3. Issue L/C phát hành)
6. Present documents 2. Request for 11.Honour/Refuse

9. Advise result 4. Advise L/C opening L/C 10. Documents
Beneficiary / 5. Shipment Applicant /

Exporter Importer
(Người thụ hưởng) (Người yêu cầu)
1. Sign contract
7.4.1. L/C (IS) AVAILABLE WITH ISSUING BANK
9. Reimburse / Refuse
Nominated bank 8. Present docs. Issuing Bank

(Ngân hàng
Advising bank 3. Issue L/C phát hành)
6. Present documents 2. Request for 11.Honour/ Refuse

7. Honour/
4. Advise L/C opening L/C 10. Documents
Negotiate/ Refuse
Beneficiary / 5. Shipment Applicant /

Exporter Importer
(Người thụ hưởng) (Người yêu cầu)
1. Sign contract
7.4.2. L/C (IS) AVAILABLE WITH NOMINATED BANK
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- Note: When L/C is available with nominated bank (NB),
beneficiary (exporter) has the right not to present documents at
NB, but can present directly to issuing bank unless L/C clearly
states that direct presentation is not allowed.
* However, in practice, exporter prefers presenting documents at
NB to presenting at issuing bank. There are 3 reasons:
+ NB is located in exporter's country and the bank serving
exporter, so in case of discrepancies in documents, NB can
advise exporter on correcting documents easily due to the
familiarity, the same language and customs.
+ The time for exporter to send and receive documents for
correction will be faster since exporter and NB are within the
same country, and therefore, the corrected documents can still
be presented again within presentation period of L/C.
+ The time for exporter to receive payment will be faster. The
reason is that NB is located in the exporter's country.
7.5. LETTER OF CREDIT

* Definition:
A Letter of Credit - L/C (Thư tín dụng) is
an issuing bank’s document of
undertaking to honour beneficiary, with
the condition that beneficiary presents the
documents that comply with the
requirements of letter of credit.
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* Nature:
- L/C is based on foreign trade contract and application for L/C
issuance of applicant.
- L/C is an independent economic contract between issuing
bank and beneficiary.
- The independence nature of L/C is reflected in Articles 4 and
5 of UCP 600, specifically:
+ Article 4: L/C is completely independent of foreign trade
contract (and application for L/C issuance).
+ Article 5: L/C is not related to the actual goods, meaning
that issuing bank does not need to pay attention to the actual
goods. In other words, the principle of L/C: issuing bank and
beneficiary only make transactions on the basis of documents.

* Diagram illustrating the L/C independence:
Issuing bank
Application for
L/C issuance L/C
Applicant Beneficiary
(Importer) (Exporter)
Foreign trade
contract
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* Content of L/C:
- The content of L/C is not bound by any
standard. However, some main contents must
be included in L/C.
- The language used in L/C is usually in
English.
- L/C can be drafted and sent in three ways: by
mail, by Telex or by SWIFT.
- L/C drafted and sent by SWIFT is currently
the most widely used.
* SWIFT message types used in the method of DC :

No. Mes. Type English meaning Vietnamese meaning
1 MT 700 Issue of a DC - Phát hành L/C
MT 701 Documentary Credit
2 MT 707 Amendment to a DC Tu chỉnh L/C
MT 799
3 MT 720 Transfer of a DC L/C được chuyển
MT 721 nhượng
4 MT 730 Acknowledgement Thông báo nhận L/C
5 MT 734 Advice of Refusal TB từ chối thanh toán
6 MT 740 Authorisation to Reimburse Ủy quyền hoàn tiền
7 MT 742 Reimbursement Claim Yêu cầu hoàn tiền
8 MT 750 Advice of Discrepancy TB bộ chứng từ
không phù hợp
9 MT 756 Advice of Reimbursement TB hoàn tiền hoặc
or Payment thanh toán
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* Main contents of L/C: MT700:
- Form of documentary credit, applicable rules, documentary
credit number, date of issue: field 40A, 40E, 20, 31C.
- Date and place of expiry (validity period of L/C and place for
presentation of documents): field 31D.
- Participants in L/C (applicant, beneficiary, related banks):
Sender, Receiver, field 51A, 50, 59, 41A / 41D, 49, 53A, 5.
- Amount of L/C: field 32B, 39A, 39B, 39C.
- Payment term: field 42C, 42A / 42D, 42M, 42P.
- Transport details: field 43P, 43T, 44A, 44E, 44F, 44B.
- Delivery time: field 44C, 44D.

* Main contents of L/C:
- Description of goods and/ or services (name of goods/
services, quantity, quality, specifications, unit price, Incoterms,
packing and marking...): field 45A.
- Documents required(number, type, issuer, content...):field 46A
- Additional conditions: field 47A.
- Period for presentation: field 48.
- Charges: field 71B.
- Instruction to the paying/ accepting/ negotiating bank: field 78.
- Sender to receiver information: field 72.
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+ Field 40A: Form of Documentary Credit (Loại L/C): There
are 4 types: revocable, irrevocable, transferable, and standby.
The most commonly used type is irrevocable.
+ Field 40E: Applicable Rules (Văn bản pháp lý áp dụng):
indicates the UCP and URR versions are applied. The
common way to express: UCP latest version / UCPURR latest
version.
+ Field 20: Documentary Credit Number (Số L/C): shows
L/C number created by issuing bank in its own structure to
track and manage L/C easily.
+ Field 31C: Date of Issue: indicates the date that L/C is
issued (in YYMMDD format).

Field 31D: Date and Place of Expiry (Ngày và nơi hết hạn L/C):
++ Date of Expiry: indicates the validity period of L/C. L/C is
an issuing bank’s time-limited undertaking of honour, meaning
that undertaking of honour begins on the L/C issuance date
and ends on the L/C expiry date.
The presentation of documents by beneficiary (exporter) for
honour must be made within this validity period of L/C.
Presenting documents after the L/C expiry date (the last date
allowed for presentation) makes documents discrepant. This is
the reason L/C available with issuing bank are not preferred.
++ Place of Expiry: is the location where documents are
presented. This place indicates the name of importing or
exporting country. If L/C is available with nominated bank, this
place will show the name of exporting country. If L/C is
available with issuing bank, this place will show the name of
importing country.
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** Participants in L/C:
+ Sender (MT700 sender – L/C sender): is issuing bank.
+ Receiver (MT700 receiver - L/C receiver): the first advising
bank, and correspondent of issuing bank in exporting country.
+ Field 51: Applicant bank: The bank serving applicant/
importer (holds importer's account) in case that issuing bank is
different from bank serving importer because this bank cannot
issue L/C. In such case, field 51 appears. If issuing bank is
also the bank serving importer, field 51 does not appear.
+ Field 50: Applicant: shows the name, address, and account
number of party requesting to issue L/C (applicant/ importer).
+ Field 59: Beneficiary: shows name, address, and account
number of party who benefits from L/C (beneficiary/ exporter).

** Participants in L/C:
+ Field 41: Available with… by…: shows nominated bank.
Field 41 may or may not appear.
+ Field 49: Confirmation Instructions (Chỉ thị xác nhận):
indicates whether L/C is confirmed or not. If confirmed, name of
confirming bank is shown in field 47. If field 47 is not shown,
confirming bank is advising bank (the bank serving exporter).
+ Field 53: Reimbursing bank: shows reimbursing bank. Field
53 may or may not appear.
+ Field 57: “Advise through” bank: shows the second advising
bank, which is the bank serving exporter (holding exporter's
account) in case that correspondent bank of issuing bank in
exporter's country is different from the bank serving exporter. If
these two banks are the same, field 57 does not appear.
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** Amount of L/C:
+ Field 32B: Currency Code, Amount: indicates the value of
LC and the currency unit (type of currency).
+ Field 39A: Percentage Credit Amount Tolerance: allows
for a percentage tolerance in L/C amount.
+ Field 39B: Maximum Credit Amount: allows to indicate the
maximum value of L/C, using phrases such as: UP TO,
MAXIMUM, NOT EXCEEDING.
+ Field 39C: Additional Amount Covered (số tiền được
thanh toán thêm): indicates values added for exporter, such
as freight, insurance premium,... when exporter arranges
transportation or buys insurance for importer, but these costs
are not included in the price of goods.
** Note: When specifying the LC amount, only field 32B is
sufficient and fields 39A, 39B, and 39C may not appear. If they
appear, fields 39A and 39B cannot appear simultaneously.

** Payment term:
+ Field 42C: Draft at: indicates the payment term of draft. This
field specifies whether L/C is at sight or deferred, for how long.
+ Field 42A/ 42D: Drawee: indicates the drawee of draft,
usually issuing bank (sometimes confirming bank or nominated
bank). Draft must not be drawn on the applicant (importer)
because issuing bank will consider documents as discrepant.
+ Field 42M: Mixed Payment Details: appears when L/C
specifies mixed payment, such as sight and deferred payment.
+ Field 42P: Deferred Payment Details: appears when L/C is
available by deferred payment, showing details of payment date.
* Note: Fields 42C and 42A/D must appear together. If both
fields are left blank or not included, L/C does not require the
issuance of draft. In this case, if payment is made at sight, the
invoice is used to demand payment, and if payment is deferred,
Field 42P is used.
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** Transport details:
+ Field 43P: Partial Shipment (giao hàng từng phần): can be
expressed in two ways: ALLOWED and NOT ALLOWED/
PROHIBITED. Partial shipment means dividing the quantity of
goods and delivering them in many shipments.
+ Field 43T: Transhipment (chuyển tải): two ways to express as
field 43P. Transshipment allows goods to be transferred to another
means of transport in the journey from exporting to importing
country.
+ Field 44A: On Board/ Disp/ Taking Charge: Place for delivering
goods (Place of receipt), which is a place in exporting country.
+ Field 44E: Port of Loading/ Airport of Departure: The port/
airport for loading goods, located in exporting country.
+ Field 44F: Port of Discharge/ Airport of Destination: The port/
airport for unloading goods, located in importing country.
+ Field 44B: For Transportation to…: Place for taking delivery
(Place of delivery), which is a place in importing country.

** Delivery time:
+ Field 44C: Latest Date of Shipment (Ngày giao hàng muộn
nhất/ cuối cùng): indicates the latest date by which exporter
must deliver goods. If shipment date on transport documents is
after this date, documents are considered discrepant.
+ Field 44D: Shipment Period (Thời hạn giao hàng): states
period for exporter to deliver goods. If delivery is made outside
this period, documents are considered discrepant. Examples:
++ from date... to date...
++ in May, 2021: from May 01, 2021 to May 31, 2021.
++ in Quarter 2, 2021: from Apr. 01, 2021 to Jun. 30, 2021.
+ Fields 44C and 44D do not appear together since they are
two ways of specifying the delivery time, so only one way is
selected.
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+ Field 45A: Description of Goods and/ or Services (Mô tả
hàng hóa/ dịch vụ): Description must be complete and clear but
concise, avoiding long and detailed description that may cause
errors in document preparation by exporter and time-consuming
examination by banks. Description should avoid being vague or
brief, as this results in wrong goods being received by importer.
+ Field 46A: Documents Required: specifying types and
quantities of presented documents, as well as their content.
+ Field 47A: Additional Conditions (Điều kiện khác):
containing the information that cannot be showed in other fields,
such as the charge for discrepant documents, name of
confirming bank, and special terms of special types of L/C …
+ If the content of fields 45A, 46A, and 47A can be very long and
exceed the allowed number of characters in each field, it
requires the use of MT701. MT701 has only three fields: 45B,
46B, and 47B, with a maximum use of 3 MT701s.

+ Field 48: Period for presentation (thời hạn xuất trình
chứng từ):++ This is the maximum period in which beneficiary
(exporter) must present documents to the bank; presenting
documents after this period will make documents discrepant.
++ The common way to determine the period for presentation:
within X days after the shipment date but within the validity
period of L/C (not exceeding the L/C expiry date).
++ If the shipment date (the date of issuing B/L) + X days >=
the L/C expiry date (field 31D): the latest date of presentation
for exporter is the L/C expiry date.
++ If the shipment date (the date of issuing B/L) + X days < the
L/C expiry date (field 31D): the latest date of presentation = the
shipment date (the date of issuing B/L) + X days.
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+ Field 48: Period for presentation (thời hạn xuất trình
chứng từ): ++ Example: Field 31D: 210628. Field 48:
Documents must be presented within 15 days after the
shipment date but within the validity of the L/C. Calculate the
latest date of presentation if:
a. Shipment date is June 15, 2021.
b. Shipment date is June 10, 2021.
++ If field 48 is left blank, according to Article 14c of UCP 600,
the period for presentation is not later than 21 calendar days
(including Saturdays, Sundays, and holidays) after the shipment
date, but within the validity of the L/C.
++ There is a relationship between the delivery time, the period
for presentation, and the validity period of L/C. In fact, banks
calculate: L/C expiry date (field 31D) = The latest date of
shipment (field 44C/ 44D) + X days (field 48) / 21 calendar
days if field 48 is blank. This is the latest date that L/C allows
documents to be presented, so it must be the L/C expiry date.

** Regulations on cost allocation in documentary credit method:
Field 71B: Charges (Các chi phí): including the charges for L/C
issue, advice, confirmation, amendment, document discount…
+ Because L/C charges are various and expensive, the cost for
using L/C method is much higher than that of remittance or
collection methods. Therefore, in practice, it is usually agreed
that charges are shared by two parties, and it is rare for only
importer or exporter to bear all charges.
+ The way to indicate charges shared by two parties: “all
charges outside importing country are for beneficiary’s
account“, which means that importer only bears domestic
charges in the importer’s country (charges of issuing bank,
reimbursing bank if any), while charges related to other banks
outside the importer's country (advising banks, nominated bank,
confirming bank, reimbursing bank) are borne by exporter. If field
71B is left blank, it means that all charges are borne by importer.
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** Information of issuing bank for relevant banks:
+ Field 78: Instruction to the Paying/ Accepting/
Negotiating Bank (Hướng dẫn của NHPH dành cho
NHĐCĐ): Issuing bank provides instructions to nominated
bank/ confirming bank regarding the presentation of
documents (by what form, splitting documents into two sets to
send twice so that if one set is lost, importer still has the other
set to receive goods), and instructions on the way to reimburse
nominated bank when documents are complying.
+ Field 72: Sender to Receiver Information: This is the
information that sender bank wants to exchange with receiver
bank, such as issuing bank's (sender bank’s) instructions on
how to pay the charge for L/C advice to advising bank
(receiver bank)…

* Các nội dung chính của thư tín dụng: MT700:
- Loại L/C, phiên bản UCP được áp dụng, số hiệu L/C, ngày
phát hành L/C, : trường 40A, 40E, 20, 31C.
- Ngày hết hạn L/C (thời hạn hiệu lực của L/C) và nơi hết hạn
(nơi xuất trình L/C và bộ chứng từ) : trường 31D.
- Các bên liên quan đến L/C (người yêu cầu, người thụ
hưởng, các ngân hàng liên quan) : Sender, Receiver, trường
51A, 50, 59, 41A / 41D, 49, 53A, 57.
- Số tiền của L/C : trường 32B, 39A, 39B, 39C.
- Thời hạn trả tiền : trường 42C, 42A/ 42D, 42M, 42P.
- Các nội dung về vận tải : trường 43P, 43T, 44A, 44E, 44F,
44B.
- Thời hạn giao hàng : trường 44C, 44D.
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* Các nội dung chính của thư tín dụng :
- Các nội dung về hàng hóa (tên hàng, số lượng, chất
lượng, quy cách, đơn giá, điều kiện Incoterm, ký mã hiệu…)
: trường 45A.
- Các chứng từ phải xuất trình (số lượng, chủng loại, người
phát hành, nội dung chứng từ, …) : trường 46A.
- Các điều kiện đặc biệt khác : trường 47A.
- Thời hạn xuất trình chứng từ : trường 48.
- Quy định người trả các loại chi phí :trường 71B.
- Các thông tin của ngân hàng phát hành dành cho các
ngân hàng liên quan : trường 78, 72.

+ Trường 40A: Form of Documentary Credit (Loại L/C): có
4 cách thể hiện: revocable (có thể hủy ngang), irrevocable
(không thể hủy ngang), transferable (có thể chuyển nhượng),
standby (dự phòng); hay sử dụng nhất là irrevocable.
+ Trường 40E: Applicable Rules (Văn bản pháp lý áp
dụng): thể hiện phiên bản UCP và URR. Cách thể hiện phổ
biến: UCP latest version / UCPURR latest version
+ Trường 20: Documentary Credit Number (Số L/C): thể
hiện số L/C, do NHPH đặt theo mã cấu trúc riêng của mình để
theo dõi và quản lý L/C được dễ dàng.
+ Trường 31C: Date of Issue: thể hiện ngày phát hành L/C
(theo dạng YYMMDD).
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+ Trường 31D: Date and Place of Expiry (Ngày và nơi hết
hạn L/C):
++ Ngày hết hạn L/C: cho biết thời hạn hiệu lực của L/C. Vậy
L/C là văn bản cam kết thanh toán hữu hạn của NHPH tức là
cam kết thanh toán của NHPH bắt đầu có hiệu lực kể từ ngày
phát hành L/C và kết thúc vào ngày hết hạn L/C.
Việc xuất trình chứng từ của người thụ hưởng (nhà XK) để
được thanh toán là phải trong khoảng thời gian hiệu lực này
của L/C, để quá ngày hết hạn L/C (là ngày cuối cùng được
phép xuất trình) mới xuất trình thì bộ chứng từ là bất hợp lệ.
Đây là lý do L/C có giá trị tại NHPH không được ưa chuộng.
++ Nơi hết hạn L/C: là nơi bộ chứng từ được xuất trình. Địa
điểm này thể hiện tên quốc gia NK hoặc XK. Nếu L/C có giá trị
tại NHĐCĐ thì địa điểm này sẽ thể hiện tên nuớc XK. Nếu L/C
có giá trị tại NHPH thì địa điểm này là tên nước NK.

** Các bên liên quan đến L/C:
+ Sender (Người gởi điện MT700–gởi L/C): là NH phát hành.
+ Receiver (Người nhận điện MT700–nhận L/C): là NH
thông báo thứ nhất và là NH đại lý của NHPH tại nước XK.
+ Trường 51: Applicant bank: là NH phục vụ nhà NK (nắm
giữ tài khoản của nhà NK) trong trường hợp NHPH khác với
NH phục vụ nhà NK do NH phục vụ nhà NK không thể phát
hành L/C và khi đó, trường 51 xuất hiện. Nếu NHPH cũng là
NH phục vụ nhà NK thì không có trường 51 xuất hiện.
+ Trường 50: Applicant: thể hiện tên, địa chỉ, số tài khoản
của người đề nghị/ yêu cầu mở L/C, chính là nhà nhập khẩu.
+ Trường 59: Beneficiary: thể hiện tên, địa chỉ, số tài khoản
của người thụ hưởng L/C, chính là nhà xuất khẩu.
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** Các bên liên quan đến L/C:
+ Trường 41: Available with… by…: thể hiện NHĐCĐ.
Trường 41 có thể xuất hiện hoặc không.
+ Trường 49: Confirmation Instructions (Chỉ thị xác nhận):
cho biết L/C có được xác nhận hay không. Nếu được xác
nhận thì tên NHXN ở tại trường 47. Nếu trường 47 không thể
hiện thì NHXN là NH thông báo (NH phục vụ nhà XK).
+ Trường 53: Reimbursing bank: thể hiện NH hoàn tiền.
Trường 53 có thể xuất hiện hoặc không.
+ Trường 57: “Advise through” bank: thể hiện NH thông
báo thứ hai, là NH phục vụ nhà XK (nắm giữ tài khoản nhà
XK) trong trường hợp NH đại lý của NHPH tại nước XK khác
với NH phục vụ nhà XK. Nếu hai NH này là một thì trường 57
không xuất hiện.

** Số tiền của L/C:
+ Trường 32B: Currency Code, Amount: thể hiện giá trị của
L/C và đơn vị tiền tệ (loại tiền nước nào).
+ Trường 39A : Percentage Credit Amount Tolerance: cho
phép dung sai tăng giảm của số tiền L/C là bao nhiêu %.
+ Trường 39B: Maximum Credit Amount: cho phép thể hiện
giá trị tối đa của L/C, sử dụng các cụm từ: UP TO, MAXIMUM,
NOT EXCEEDING.
+ Trường 39C: Additional Amount Covered (số tiền được
thanh toán thêm): thể hiện các giá trị tính thêm cho nhà XK,
ví dụ như cuớc phí, phí BH… khi nhà XK thuê vận chuyển hộ,
mua BH hộ cho nhà NK nhưng chưa tính vào giá hàng hóa.
** Lưu ý: Khi quy định số tiền L/C, chỉ thể hiện trường 32B là
đủ và có thể các trường 39A, 39B, 39C không xuất hiện. Nếu
xuất hiện, trường 39A và 39B không xuất hiện đồng thời.
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** Thời hạn trả tiền:
+ Trường 42C: Draft at: thể hiện thời hạn của hối phiếu.
Trường này cho biết là L/C trả ngay hay trả chậm và bao lâu.
+ Trường 42A/ 42D: Drawee: thể hiện người bị ký phát trên
hối phiếu, thường là NHPH (đôi khi là tên NHXN hay NHĐCĐ).
Hối phiếu không được ký phát đòi tiền người yêu cầu (nhà
NK), khi đó NHPH xem bộ chứng từ là bất hợp lệ.
+ Trường 42M: Mixed Payment Details: xuất hiện khi L/C
quy định cách thức trả tiền hỗn hợp như trả ngay và trả sau.
+ Trường 42P: Deferred Payment Details: xuất hiện khi L/C
có giá trị cam kết trả chậm, quy định chi tiết về ngày trả tiền.
* Lưu ý: trường 42C và 42A/D phải xuất hiện đồng thời cùng
nhau. Nếu hai trường này để trống hoặc không có chúng, L/C
không yêu cầu phát hành hối phiếu. Lúc đó, nếu trả ngay thì
dùng Invoice đòi tiền, nếu trả chậm thì có trường 42P.

** Các nội dung về vận tải:
+ Trường 43P: Partial Shipment (giao hàng từng phần): 2
cách thể hiện: ALLOWED và NOT ALLOWED/ PROHIBITED.
Giao hàng từng phần là tách số lượng hàng ra, giao nhiều lần.
+ Trường 43T: Transhipment (chuyển tải): 2 cách thể hiện
như trường 43P. Chuyển tải là cho phép hàng được chuyển
sang phương tiện khác trên đường từ nước XK đến nước NK.
+ Trường 44A: On Board/ Disp/ Taking Charge: Nơi gởi
hàng, là một địa điểm ở nước XK.
+ Trường 44E: Port of Loading/ Airport of Departure: Cảng/
sân bay bốc hàng, ở nước XK.
+ Trường 44F: Port of Discharge/ Airport of Destination:
Cảng/ sân bay dỡ hàng, ở nước NK.
+ Trường 44B: For Transportation to…: Nơi hàng đến, là
một địa điểm ở nước NK.
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** Thời hạn giao hàng:
+ Trường 44C: Latest Date of Shipment (Ngày giao hàng
muộn nhất/ cuối cùng): ngày cuối cùng nhà XK phải giao
hàng. Nếu ngày giao hàng trên chứng từ vận tải sau ngày này
thì bộ chứng từ là bất hợp lệ.
+ Trường 44D: Shipment Period (Thời hạn giao hàng): quy
định khoảng thời gian nhà XK giao hàng. Nếu giao hàng ngoài
thời gian này thì bộ chứng từ bất hợp lệ. Ví dụ thể hiện:
++ from… to …: từ ngày… đến ngày…
++ in May, 2021: từ 01/05/ 2021 đến 31/05/2021.
++ in Quarter 2, 2021: từ 01/04/2021 đến 30/06/2021.
+ Hai trường 44C và 44D không xuất hiện đồng thời vì đây là
hai cách thức quy định thời hạn giao hàng nên chỉ chọn một
trong hai cách.

+ Trường 45A: Description of Goods and/ or Services (Mô
tả hàng hóa/ dịch vụ): mô tả cần đầy đủ, rõ ràng nhưng súc
tích, tránh liệt kê dài dòng dễ làm nhà XK sai sót khi lập bộ
chứng từ và NH mất nhiều thời gian để kiểm tra; tránh mô tả
quá sơ sài, ngắn gọn sẽ không rõ về hàng hóa và gây rủi ro
cho nhà NK không nhận đúng hàng hóa mình mong muốn.
+ Trường 46A: Documents Required: quy định các loại
chứng từ xuất trình và số lượng mỗi loại, nội dung chứng từ.
+ Trường 47A: Additional Conditions (Điều kiện khác): quy
định những nội dung không thể hiện được ở mọi trường như
quy định mức phí thu khi bộ chứng từ bất hợp lệ, quy định tên
NHXN, quy định điều khoản đặc biệt của loại L/C đặc biệt …
+ Nội dung trường 45A, 46A và 47A có thể rất dài và vuợt quá
số ký tự cho phép ở mỗi trường, cần sử dụng tới MT701.
MT701 chỉ có ba trường 45B, 46B và 47B. Tối đa là 3 MT701.
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+ Trường 48: Period for presentation (thời hạn xuất trình
chứng từ):++ Đây là thời hạn tối đa mà người thụ hưởng (nhà
XK) phải xuất trình chứng từ đến NH; quá thời hạn này mới
xuất trình thì bộ chứng từ là bất hợp lệ.
++ Cách quy định thông thường về thời hạn xuất trình: trong
vòng X ngày sau ngày giao hàng nhưng nằm trong thời hạn
hiệu lực của L/C (không vượt quá ngày hết hạn L/C).
++ Nếu ngày giao hàng (phát hành vận đơn) + X ngày > =
ngày hết hạn L/C (trường 31D): ngày xuất trình muộn nhất của
nhà XK là ngày hết hạn L/C.
++ Nếu ngày giao hàng (phát hành vận đơn) + X ngày < ngày
hết hạn L/C (trường 31 D): ngày xuất trình muộn nhất = ngày
giao hàng (phát hành vận đơn) + X ngày.

+ Trường 48: Period for presentation (thời hạn xuất trình
chứng từ):
++ Ví dụ: Trường 31D: 210628. Trường 48: Chứng từ phải
được xuất trình trong vòng 15 ngày sau ngày giao hàng nhưng
trong thời hạn hiệu lực của L/C. Tính ngày xuất trình muộn nhất
nếu: a. Ngày giao hàng là 15/06/2021.
b. Ngày giao hàng là 10/06/2021.
++ Nếu trường 48 để trống, theo quy định của điều 14c. UCP
600: thời hạn xuất trình là không muộn hơn 21 ngày theo lịch
(tính cả thứ 7, chủ nhật, ngày lễ) sau ngày giao hàng nhưng
phải trong thời hạn hiệu lực của L/C.
++ Có mối liên hệ giữa thời hạn giao hàng, thời hạn xuất trình
chứng từ và thời hạn hiệu lực của L/C. Thực tế, các NH tính:
Ngày hết hạn L/C (trường 31D) = ngày giao hàng cuối cùng
(trường 44C/ 44D) + X ngày (trường 48) / 21 ngày theo lịch
nếu trường 48 để trống. Đây chính là ngày muộn nhất L/C cho
phép xuất trình chứng từ nên nó phải là ngày hết hạn L/C.
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** Quy định người trả chi phí trong phương thức TDCT:
Trường 71B: Charges (Các chi phí): là các phí mở L/C, phí
thông báo, xác nhận, tu chỉnh L/C, chiết khấu chứng từ…
+ Do phí L/C có nhiều loại và đắt (tỷ lệ % cao) nên chi phí
cho phương thức L/C cao hơn nhiều so với phương thức
chuyển tiền hay nhờ thu. Vì vậy, thực tế thường quy định là
phí bên nào bên đó chịu, hiếm khi nào một bên XK hoặc NK
dám gánh hết chi phí.
+ Cách thể hiện phí bên nào bên đó chịu: “các chi phí bên
ngoài nước phát hành L/C do người thụ hưởng chịu”, nghĩa là
nhà NK chỉ chịu các chi phí trong nước NK là nước phát hành
L/C (phí của NHPH, NH hoàn tiền nếu có), còn các chi phí liên
quan đến các NH khác ngoài nước NK (NHTB, NHĐCĐ,
NHXN, NH hoàn tiền) thì nhà XK phải chịu. Nếu trường 71B
để trống có nghĩa mọi chi phí do người yêu cầu (nhà NK) chịu.

** Các thông tin của NHPH dành cho các NH liên quan:
+ Trường 78: Instruction to the Paying/ Accepting/
Negotiating Bank (Hướng dẫn của NHPH dành cho
NHĐCĐ) : NHPH hướng dẫn NHĐCĐ/ NHXN về cách gởi bộ
chứng từ xuất trình (bằng hình thức nào, tách bộ chứng từ
thành 2 bộ để gởi 2 lần để nếu một bộ thất lạc thì vẫn còn bộ
khác cho nhà NK nhận hàng), hướng dẫn cách hoàn trả tiền
cho NHĐCĐ khi bộ chứng từ được xác định là hợp lệ.
+ Trường 72: Sender to Receiver Information: đây là các
thông tin mà NH gởi điện muốn trao đổi với NH nhận điện,
chẳng hạn NHPH (NH gởi điện) hướng dẫn cách thức thanh
toán phí thông báo L/C cho NH thông báo (NH nhận điện)…
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* L/C SAMPLE:
Own Address : IABBVNVXAXXX INDOVINA BANK LTD.
HO CHI MINH CITY
Input Message Type : 700 ISSUE OF A DOCUMENTARY
CREDIT
Sent to : SCBLKRSEXXXX STANDARD CHARTERED BANK
27 /SEQUENCE OF TOTAL
1/1
40A/FORM OF DOCUMENTARY CREDIT
IRREVOCABLE
20 /DOCUMENTARY CREDIT NO.
0129/IM/ID/12

31C/DATE OF ISSUE
120331
31D/DATE AND PLACE OF EXPIRY
120505 KOREA
50 /APPLICANT
SAIGON DAKLAK COMPANY ( SADACO )
200 BIS LY CHINH THANG ST., DIST.3
HOCHIMINH CITY, VIETNAM
59 /BENEFICIARY
SHINWOO G.M.T. CO.,LTD.
WOOSUNG B/D. ROOM 302,246-10,
NUNGDONG, KWANGJIN-GU,
SEOUL, KOREA
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32B/CURRENCY CODE AMOUNT
USD63000,00
39B/MAXIMUM CREDIT AMOUNT
NOT EXCEEDING
41D/AVAILABLE WITH/BY-NAME,ADDRESS
ANY BANK BY NEGOTIATION
42C/DRAFTS AT
BENEFICIARY’S SIGHT DRAFT(S) IN
DUPLICATE FOR 100 PCT INVOICE VALUE
42D/DRAWEE – NAME AND ADDRESS
INDOVINA BANK LTD.
40 TON THAT DAM ST., HO CHI MINH CITY,
VIETNAM

43P/PARTIAL SHIPMENTS
NOT ALLOWED
43T/TRANSSHIPMENT
NOT ALLOWED
44A/ON BOARD/DISP/TAKING CHARGE
ANY PORT IN KOREA
44B/FOR TRANSPORTATION TO
HO CHI MINH CITY PORT
44C/LATEST DATE OF SHIPMENT
120428
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45A/DESCR. GOODS AND/OR SERVICES
ONE UNIT ZSK COMPUTERISED EMBROIDERY MACHINE
SPECIFICATION : TYPE : MSCA- X 1809/330-700-9 NEEDLES,
PRODUCTION IN 2005, QUALITY : SECONDHAND 80 PCT,
CURRENT DATA : 1 PHASE AC 220 VOLT, EMBROIDERY
FIELD : 18 HEADS ARE IN OPERATION : 700 X 330 MM PER
HEAD ( SINGLE MOTIFS ),
700 X 5.940 MM-18 HEADS ( BORDER )
FUNCTIONAL FEATURES : MEMORY : 450.000/STITCHES,
COLOUR MONITOR, DOUBLE DISK DRIVE, UPPER AND
UNDER THREAD DEDECTOR SINGLE FRAME
ACCESSORIES
TOTAL AMOUNT : USD 63,000.00 CIF HO CHI MINH CITY
PORT

46A/DOCUMENTS REQUIRED
ORIGINAL DOCUMENTS REQUIRED : ( ALL IN 3 UNLESS
OTHERWISE INDICATED )
+ SIGNED COMMERCIAL INVOICE
+ FULL SET 3/3 OF ORIGINAL CLEAN ON BOARD OCEAN
BILLS OF LADING AND ONE NON NEGOTIABLE COPY
MADE OUT TO ORDER OF INDOVINA BANK LTD. SHOWING
APPLICANT AS NOTIFY PARTY MARKED FREIGHT
PREPAID
+ MARINE INSURANCE POLICY OR CERTIFICATE IN
DUPLICATE FOR 110 PCT OF INVOICE VALUE TO BE
COVERED BY THE SHIPPER, BLANK ENDORSED,
STIPULATING CLAIM PAYABLE IN HO CHI MINH CITY,
VIETNAM COVERING INSTITUTE CARGO CLAUSES ( ALL
RISKS ), INSTITUTE STRIKES, RIOTS AND CIVIL
COMMOTIONS CLAUSES, INSTITUTE OF WAR CLAUSES,
THEFT, PILFERAGE AND NON DELIVERY CLAUSES
+ PACKING LIST
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47A/ADDITIONAL CONDITIONS
+ ALL DRAFT(S) AND DOCUMENTS IN ENGLISH QUOTING
THIS L/C NO.
+ B/L DATED PRIOR TO THIS CREDIT NOT ACCEPTABLE
71B/CHARGES
ALL CHARGES OUTSIDE VIETNAM AND REIMBURSEMENT
CHARGES FOR BENEFICIARY’S ACCOUNT
48 /PERIOD FOR PRESENTATION
DOCUMENTS TO BE PRESENTED WITHIN 07 DAYS AFTER
THE DATE OF SHIPMENT BUT WITHIN THE VALIDITY OF
THE CREDIT
49 /CONFIRMATION INSTRUCTIONS
WITHOUT

78 /INSTRUCTIONS TO PAY/ACC/NEG BK
+ PAYMENT WILL BE EFFECTED AS PER NEGOTIATING
BANK’S INSTRUCTIONS AFTER SHIPPING DOCUMENTS
HAVE BEEN RECEIVED BY US IN STRICT COMPLIANCE
WITH L/C TERMS AND CONDITIONS
+ A DISCREPANCY FEE OF USD 50 WILL BE DEDUCTED
FROM PROCEEDS FOR EACH SET OF DISCREPANT
DOCUMENTS
+ FORWARD DOCUMENTS TO US IN TWO LOTS, FIRST BY
DHL AND SECOND BY REGISTERED AIRMAIL
+ UNLESS OTHERWISE STATED, THIS CREDIT IS SUBJECT
TO THE UCP/DC. 2007, ICC PUBLICATION NO. 600
+ THE REIMBURSEMENT UNDER THIS CREDIT, IF
APPLICABLE, IS SUBJECT TO THE URR, ICC PUBLICATION
NO. 725
57D/ADVISE THRU BANK – NAME / ADDR
INDUSTRIAL BANK OF KOREA
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EXERCISE:
Read the given L/C sample:
Indicate the names of all participants

in this L/C.
7.5. BASIC TYPES OF LETTER OF CREDIT

1. Based on guarantee/ undertaking of honour:
a. Revocable L/C (L/C hủy ngang):
- Issuing bank has the right to amend or even cancel L/C
without the consent of beneficiary.
- L/C amendments are only effective if they are made before
beneficiary presents documents to the bank.
- Due to the high risks for exporter, this type of L/C is rarely
used in practice.
b. Irrevocable L/C (L/C không hủy ngang):
- Issuing bank may amend or even cancel L/C, but it is only
valid with the consent of beneficiary.
- According to Article 7(b) of UCP 600, an L/C without the word
"irrevocable" is still considered an irrevocable L/C.
- With the irrevocable L/C, issuing bank has undertaken to
honour for L/C to beneficiary from the L/C issuance date to the
L/C expiry date. This type of L/C is commonly used.
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1. Based on guarantee/ undertaking of honour:
c. Irrevocable Confirmed L/C (L/C không huỷ ngang có xác nhận):
- This type of L/C is irrevocable, and when it is confirmed,
besides issuing bank, confirming bank also undertakes to
honour beneficiary.
- Beneficiary is better guaranteed for honour due to receiving
two undertakings of honour from two independent banks.
- Beneficiary must agree in advance with applicant about the
confirmed L/C in the foreign trade contract.
* Irrevocable confirmed L/C is used when:
- Beneficiary lacks information about issuing bank.
- Issuing bank is not a reputable brand and does not have
good financial capability.
- The country risk of issuing bank is high.
- Goods are very important to exporter, or have a competitive
advantage.

2. Based on payment term:
a. Sight L/C / L/C at sight (L/C trả ngay):
- It is the L/C that issuing bank pays at sight to beneficiary if
beneficiary presents the complying documents.
- L/C may require beneficiary to issue a sight draft or L/C may
not require to issue draft.
b. L/C (payable) at a future date: There are two types:
* Usance L/C: It is the L/C that issuing bank accepts draft
paying at a future date issued by beneficiary if beneficiary
presents the complying documents, and issuing bank will
make payment when the draft falls due.
* Deferred L/C: It is the L/C that issuing bank makes a
underataking of deferred payment and undertake to pay
beneficiary when payment falls due if the beneficiary presents
the complying documents (no draft is issued).
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3. Based on the place of document presentation:
a. Straight L/C (L/C có giá trị trực tiếp):
- It is the L/C that issuing bank requires beneficiary to
present documents only at issuing bank.
- If documents are complying, issuing bank will make
payment directly to beneficiary through presenter
(presenting bank).
- This type of L/C does not allow to negotiate documents. If
beneficiary wants to negotiate, they must make a separate
agreement with presenting bank, which is not related to L/C.

3. Based on the place of document presentation:
b. Negotiable L/C (L/C có giá trị thương lượng):
- It is the L/C that issuing bank allows beneficiary to
negotiate documents at a negotiating bank nominated by
issuing bank.
- Negotiating bank may be nominated namely or
namelessly in the field 41A /41D of L/C: “Available with
Bank A/ any bank by negotiation”.
- This type of L/C is commonly used in practice as it
provides many benefits for beneficiary.
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7.6. OBLIGATIONS AND RIGHTS OF

PARTICIPANTS IN L/C
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7.6.1. APPLICANT (NGƯỜI YÊU CẦU MỞ L/C)

- Obligation to request L/C issuing/ opening: submit
documents of L/C opening application to issuing bank.
- Obligation to meet issuing bank's requirements to open
L/C: provide a deposit.
- Right to request issuing bank to amend or cancel L/C.
- Right to examine documents to ensure their compliance
with the terms of L/C.
+ Complying documents: receive documents and have
the obligation to make payment to issuing bank.
+ Non-complying/ Discrepant documents: reject
documents and have the right to refuse payment.
7.6.1. APPLICANT (NGƯỜI YÊU CẦU MỞ L/C)

** The documents sent by importer to issuing bank includes:
+ Legal documents: including the Business Establishment
License and the Certificate of Business Registration to confirm
that importer has the legal capacity to import goods. These
documents are only sent to the bank for the first transaction.
+ Documents of L/C application: This is the most important
documents as it relates to the content of L/C, including: 1.
Foreign trade contract in which importer is the buyer; 2. Import
License (if any); 3. Application for L/C opening (with the banks’
form). If approved by issuing bank, this application becomes a
independent contract which legally binds obligations and rights of
issuing bank and importer.
+ Documents of L/C guarantee: These documents are
considered by Credit Department if the importer's deposit is less
than 100% of L/C value, including guarantee contract, business
plan related to imported goods, and collateral (importer's asset,
imported goods, or third-party guarantee for importer).
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7.6.2. BENEFICIARY (NGƯỜI THỤ HƯỞNG L/C)

- Right to request L/C confirmation if beneficiary does not
trust issuing bank.
- Right to examine the content of L/C upon receipt of L/C.
+ Agree: fulfill the obligation to deliver goods.
+ Disagree: have the right to request L/C amendment or
cancellation through the applicant.
- Right to accept or reject L/C amendments made by issuing
bank (see Article 10 of UCP 600).
- Obligation to prepare documents based on L/C and present
them to the bank indicated in L/C for honour.
+ Complying documents: will be honoured.
+ Non-complying documents: will give the opinion for
document handling.

*Rights to accept or reject L/C amendments(Article 10 UCP 600):
+ If L/C is amended many times, each amendment is
independent, and exporter has the right to accept one
amendment and refuse another.
+ Exporter is not allowed to accept a part of L/C amendment, for
example, accepting one modification but refusing another
modification in the same amendment. If exporter accepts only a
part of amendment, it is considered a rejection of amendment.
+ Exporter has two options to accept or reject amendment:
++ Option 1: Direct acceptance or rejection: upon receiving
amendment, exporter notifies advising bank of their acceptance
or rejection, and advising bank transfers this message to issuing
bank. If accepted, amendment becomes effective from the date
of acceptance, and exporter presents documents according to
the amended terms. If rejecting amendment, exporter presents
documents according to the original L/C because the L/C
remains unchanged.
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++ Option 2: acceptance/ rejection through document
presentation: exporter does not need to indicate acceptance or
refusal upon receiving amendment, but only when presenting
documents. If documents comply with the amended L/C, it
means that exporter accepts amendment. If documents comply
with the original L/C, it means that exporter reject amendment.
+ Option 2 provides great advantages for exporter and creates
disadvantages for importer because it puts importer in a passive
position, waiting until exporter delivers goods and presents
documents to know whether exporter accepts or reject
amendment. Therefore, importer needs to urge exporter to
follow option 1 to know exporter's opinion at the beginning.
+ To ensure the importer’s rights, some banks suggest in the
L/C amendment that within a certain period from the date of
issuing amendment, if exporter has no opinion, it is considered
as acceptance of amendment. However, Article 10(f) of UCP
600 rejects this and states that if the amendment has such a
condition, it will not be considered.
7.6.3. ISSUING BANK (NGÂN HÀNG PHÁT HÀNH L/C)
- Responsibilities of issuing bank are stipulated in Article 7

of UCP 600.
- Receive and evaluate documents of L/C application.
- If accepting L/C application, fulfill the obligation to issue
L/C, which means undertaking to irrevocable honour to
beneficiary within the validity of L/C.
- Amend L/C as requested by the applicant.
- Receive and examine documents whether they comply
with the L/C requirements (see Article 14 of UCP 600).
+ Complying: honour or reimbursement.
+ Non-complying: handling the documents (see Article 16
of UCP 600).
- Deliver documents to the applicant (importer).
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* Examination of document compliance (Article 14 UCP600):

+ To examine the compliance of documents with L/C, issuing
bank relies on the document examination standards regulated in
Article 14 of UCP 600 and ISPB 745. This helps to limit
disagreements in document examination among banks worldwide.
+ Period for document examination: Under Article 14b of
UCP600, issuing bank, nominated bank, confirming bank has
five banking days following the date of presentation in order to
examine and notify presenter whether documents are complying
or not. If banks fails to notify or notifies after this time period,
banks must accept to make unconditional payment, even if
documents are discrepant.

* Principles of document examination (Article 14 UCP600):
+ Ensure consistency.
+ Except for commercial invoice, which must describe
goods in detail as in L/C, other documents may have a
general description as long as they do not conflict with the
description of goods in L/C.
+ Except for transport documents, insurance documents, and
commercial invoices, if L/C requires the presentation of
documents without specifying the document issuer or content,
banks will accept documents as presented as long as the
document content meets the function of document.
+ If a condition in L/C does not specify a document that is
compatible with that condition, banks considers that condition
to be non-existent, and will not take it into consideration.
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* Handling complying documents:

+ For an L/C available with issuing bank, issuing bank will
honour to presenting bank.
+ For an L/C available with nominated bank, nominated bank
has already honoured/ discounted beneficiary before forwarding
documents to issuing bank, issuing bank will reimburse the
amount to nominated bank. The reimbursement principle
complies with URR 725 if it is done through reimbursing bank.
* Handling non-complying documents: Notify importer to get their
opinion on whether to waive discrepancies and accept payment
(all must be done within 5 working days after the date of
receiving documents). If importer hesitates, to be safe, within
this period, issuing bank must immediately advise presenting
bank on the discrepancies and refuse payment so that
presenting bank can notify exporter for resolution.
7.6.4. ADVISING BANK (NGÂN HÀNG THÔNG BÁO L/C)
- Responsibilities of advising bank are stipulated in Article 9 of

UCP 600.
- Right to refuse to advise L/C when it is nominated and must
immediately notify the refusal to the bank sending L/C to it.
- Right to use the service of another bank to advise L/C.
- Obligation to examine the authenticity of L/C.
- Advising bank that accepts to advise L/C must also accepts
to advise L/C amendments (if any).
- Advising bank must send the received verbatim L/C to
beneficiary and is not responsible for examining L/C content.
- No responsibility for honour or negotiation.
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7.6.5. CONFIRMING BANK (NGÂN HÀNG XÁC NHẬN L/C)
- Responsibilities of confirming bank are stipulated in Article 8

of UCP 600.
- Right to refuse to confirm L/C and must advise issuing bank
immediately of the refusal.
- Obligation to fulfill an undertaking to irrevocable honour for
beneficiary within the L/C validity time when confirming L/C.
- Right to confirm or not to confirm one or several amendments
in all L/C amendments (if any).
- Receive and examine documents for compliance with L/C.
+ Complying: honour, negotiate without recourse for
beneficiary or reimburse nominated bank, then forward
documents to issuing bank.
+ Non-complying: handle the documents.
7.6.5. CONFIRMING BANK (NGÂN HÀNG XÁC NHẬN L/C)

* Complying documents: confirming bank is responsible the
same as issuing bank, therefore it is obligated to receive the
documents, honour or negotiate (without recourse) documents
for beneficiary (exporter), or reimburse nominated bank if this
bank is different from confirming bank. Then, confirming bank
sends documents to issuing bank to claim payment. Risk for
confirming bank is that issuing bank finds discrepancies in
documents and refuses to pay. This is reason that confirming
bank requires strictly to issuing bank, such as deposit, being free
to deduct Nostro account… to prevent risk of issuing bank’s non-
payment.
* Non-complying documents: - Advise beneficiary on correcting
discrepancies. Beneficiary corrects to make the complying
documents and presents them to confirming bank for payment.
- If discrepancies cannot be corrected, confirming bank advises
beneficiary on negotiating with importer to accept documents.
Confirming bank sends documents to issuing bank for collection.
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7.6.6. NOMINATED BANK (NGÂN HÀNG ĐƯỢC CHỈ ĐỊNH)
- Responsibilities of nominated bank are stipulated in Article 12

of UCP 600.
- Not obliged to perform nominated responsibilities unless this
bank notifies the obvious consent to beneficiary.
- Receipt, examination and dispatch of documents by
nominated bank do not imply any responsibility for honour or
negotiation.
- If agreeing the nomination, nominated bank will receive and
examine whether documents comply with L/C regulations or not.
+ Complying: honour, negotiate with or without recourse,
then transfer documents to confirming bank or issuing bank,
and claim for reimbursement under the provisions of URR 725.
+ Non-complying: handle documents.
** Nominated bank determines complying documents:

+ Undertake to perform nominated responsibilities, such as
payment, acceptance, deferred payment, or negotiation
(discount) for beneficiary.
+ Forwarding documents to issuing bank/ confirming bank (if
any confirming bank and different from nominated bank) for
honour under instructions to nominated bank at Field 78 of L/C.
+ If payment can be made directly, issuing bank/ confirming
bank will make direct payment to nominated bank.
+ If payment is to be made through reimbursing bank,
nominated bank will send the request for payment under
instructions at field 78 and URR rules. There are two ways to
demand payment: by telegraph or by mail.
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++ L/C TTR acceptable – TTR: Telegraphic Transfer
Reimbursement (L/C cho phép đòi tiền bằng điện):
- Field 78 states: "Upon receipt of the tested telex/swift
messages...“.
- Nominated bank sends documents to issuing bank,
simultaneously making a reimbursement claim message sent to
reimbursing bank. Reimbursement claim message arrives first,
and nominated bank receives reimbursement from reimbursing
bank while issuing bank has not yet received documents.
- This creates the disadvantage for issuing bank because if
discrepancies are discovered upon receipt of documents,
payment will not be made. Thus, issuing bank must request
reimbursement from nominated bank while nominated bank has
already paid exporter, and received reimbursement from
reimbursing bank, so not wanting to return reimbursement, and
this may lead to disputes.
- Thus, in practice, issuing banks rarely use L/C TTR acceptable.
++ L/C TTR not allowed (L/C không cho phép đòi tiền bằng
điện/ L/C đòi tiền bằng thư):
- Field 78 states: "Upon receipt of the documents...“.
- Nominated bank sends a cover letter together with documents
to issuing bank for examination. If documents are comlying,
issuing bank will send an authorisation to reimburse to
reimbursing bank for payment to nominated bank.
- This method is much safer for issuing bank because they will
only make payment to nominated bank when they know that
documents is complying.
- Therefore, L/C TTR not allowed is widely used in practice.
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++ Issuing bank determines that documents are complying: they
will reimburse nominated bank.
++ Issuing bank determines non-complying documents, but
nominated bank recognizes complying documents: nominated
bank on behalf of beneficiary will dispute with issuing bank so
that they recognize the compliane of documents. If issuing bank
still refuses to accept documents, nominated bank can advise
beneficiary on taking legal action to demand payment. If issuing
bank is correct in identifying discrepancies, the risk will fall on
nominated bank. This is the reason that in practice, nominated
bank only chooses the responsibility of “discount/ negotiation
with recourse" to ensure safety.
** Nominated bank determines non-complying documents and
cannot be corrected: they must notify beneficiary within 5
banking days following the date of presentation, advise
beneficiary on negotiating with applicant (importer) to accept
the discrepant documents, and send documents to issuing bank
for collection by using two mentioned ways.
7.7. APPLICATION OF DOCUMENTARY CREDIT

* Commercial banks divide the documentary credit method
into two operations:
- Import documentary credit operation (Nghiệp vụ tín
dụng chứng từ hàng nhập): is carried out when the
bank's customer is applicant (importer). The bank plays
the role of issuing bank (ngân hàng phát hành).
- Export documentary credit operation (Nghiệp vụ tín
dụng chứng từ hàng xuất): is carried out when the
bank's customer is beneficiary (exporter). The bank plays
the role of advising/ confirming/ nominated bank (ngân
hàng thông báo / xác nhận / được chỉ định).
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7.7.1. IMPORT DOCUMENTARY CREDIT OPERATION

Customer
. Customer with first transaction
Issuing bank . Customer who has transacted
. Customer with financing needs
Check documents
. Proposal to approve L/C opening
. Collect deposit and charges
. Draft the L/C message
Process documents . Deliver the original L/C to customer
. L/C amendment
. L/C cancellation
Solve problem
. Handling of claim message
. Handling of advising discrepancies
Receive & check doc. . Non-complying documents

. Complying documents
. Honouring L/C
File documents . Delivering documents to customer
7.7.2. EXPORT DOCUMENTARY CREDIT OPERATION
Issuing bank
Ad./ Co./ No. Bank . Check and advise L/C to customer

. Receive, check documents and fulfill
nominated responsibilities (if agree)
Check documents
. Make a note of sending documents
. Make a cover letter/ claim message
Claim honour
(if any)
Monitor honour . Reject to honour the documents

. Accept to honour the documents
File documents
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7.8. SPECIAL TYPES OF LETTER OF CREDIT

1. TRANSFERABLE L/C (L/C CHUYỂN NHƯỢNG):
- The type of irrevocable L/C in which issuing bank allows the
first beneficiary to transfer all or part of L/C value to one or
more second beneficiaries.
- To be considered a transferable L/C, the phrase
"Transferable" must be indicated in field 40A of L/C.
- The term "transferable" means the transfer of rights and
obligations to perform L/C by the first beneficiary (not the
transfer of the amount received from L/C to others).
- L/C is only transferred once to one or more second
beneficiaries.
- UCP 600 exclusively uses Article 38 to make regulation on
Transferable L/C, as this type of L/C is very complex to
implement.
* Transferable L/C is used when:

- The first beneficiary is the exporter that does not
have enough goods to supply to the importer.
- The first beneficiary is the sales agent or product
distributor for the manufacturer.
- The first beneficiary is the broker (intermediary) that
connects exporter and importer through the
transaction of transferable L/C to make a profit from
the price difference or commission.
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* Conditions for performing transferable L/C:
- Participants must agree to carry out the transferable L/C:
+ Issuing bank agrees to issue the transferable L/C and
clearly indicates the word "transferable" on L/C.
+ Importer (applicant) accepts to open the transferable L/C,
agreeing to allow other suppliers to participate in selling goods
to them.
+ Supplier (second beneficiary) accepts the transferred L/C,
agreeing to deliver goods directly to importer as stipulated in
the transferred L/C.
- The sales contract between supplier/ exporter (second
beneficiary) and intermediary (first beneficiary) and the sales
contract between intermediary (first beneficiary) and importer
must correspond each other in terms of commodity
characteristics and other conditions.

* Participants in a transferable L/C:
- Applicant (Người yêu cầu): is the importer who makes the
application for opening the transferable L/C.
- First Beneficiary (Người thụ hưởng 1): is the intermediary.
- Second Beneficiary (Người thụ hưởng 2): is the supplier(s)
of goods, who may be one or more second beneficiaries.
- Issuing Bank (Ngân hàng phát hành) the transferable L/C.
- Transferring Bank (Ngân hàng chuyển nhượng): is the
nominated bank to advise the transferable L/C to the first
beneficiary and transfer this L/C to the second beneficiary as
requested by the first beneficiary. This bank is also nominated
to negotiate documents.
- Advising Bank (Ngân hàng thông báo): the bank advises
the second beneficiary of the transferred L/C, usually the bank
serving the second beneficiary.
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* Process of performing a transferable L/C:
a. Transferable L/C opening:
Con. Con.
IMPORTER 1 INTERMEDIARY 2 EXPORTER
(Applicant) (First Ben.) (Second Ben.)
1 3 4 6
ISSUING Trans. Bank ADVISING

Advising Bank
BANK 5 BANK
2 (Original L/C)
Transferable L/C Transferred L/C

* TRANSFERRED L/C (BẢN CHUYỂN NHƯỢNG L/C hay L/C
ĐƯỢC CHUYỂN NHƯỢNG):
- The transferred L/C has the same content as the original L/C
(transferable L/C), except for some terms that may change:
+ L/C value, unit price: decrease (intermediary takes price
difference) or remain unchanged (intermediary takes
commission).
+ L/C expiry date, period for document presentation,
shipment period: decrease in time. The L/C expiry date must
be reduced so that when exporter presents documents to
intermediary, intermediary has enough time to replace and
complete documents to match the original L/C and present them
to issuing bank within the validity period of original L/C.
According to the formula for determining the L/C expiry date,
when the L/C expiry date is reduced, the period for document
presentation and shipment period must also be reduced.
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* TRANSFERRED L/C (BẢN CHUYỂN NHƯỢNG L/C):
- On the transferred L/C, the intermediary may stipulate that all
documents show the name of importer to avoid redoing these
documents. However, invoice and B/E fall into two cases :
+ Intermediary takes commission: remain unchanged. In this
case, intermediary presents the received full set of documents
to issuing bank.
+ Intermediary takes price difference: invoice and B/E must
be changed because their value differs from original L/C. In
this case, intermediary must replace these two documents
before presenting them to issuing bank.
- When any terms need to be changed, intermediary must
clearly indicate the term to be changed on the application for
L/C transfer sent to transferring bank.

* TRANSFERRED L/C (BẢN CHUYỂN NHƯỢNG L/C):
- Although it is called Transferred L/C, it is not an L/C but only
the modified version of original L/C in some terms. It does not
have its own number and still uses the original L/C’s number.
Therefore, it is often called in Vietnamese “Bản chuyển nhượng
L/C” to emphasize that it is not an L/C and the word “made (lập)”
is replaced for the word “issued (phát hành)” or “opened (mở)”.
In transferable L/C, there is the only one original L/C.
- Transferring bank does not have the same responsibilities as
issuing bank and is only a nominated bank, having the right to
refuse the task of L/C transfer. It does not have the obligation to
pay exporter when documents are complying, but only forwards
documents to issuing bank. The intermediary does not need to
deposit when transferring L/C, and L/C transfer charges is
cheaper than L/C issuance charges. This is the reason that
intermediary does not use two separate L/Cs but uses the
transferable L/C although it may reveal information, making
exporter and importer know each other.
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* Process of performing a transferable L/C:
b. Document presentation and honour for transferable L/C:
7
IMPORTER INTERMEDIARY EXPORTER
(Applicant) (First Ben.) (Second Ben.)
14
19 18 15 10 8 17
11
12 9
ISSUING Trans. Bank ADVISING
Advising Bank
BANK (Original L/C) BANK
13 16

2. BACK TO BACK L/C (L/C GIÁP LƯNG):
- The type of irrevocable L/C that is opened on the basis of
another L/C as a guarantee.
- L/C is opened first, which is used as collateral, is called
Master L/C/ Backing L/C (L/C chủ / L/C gốc).
- L/C is opened later based on the guarantee of Master L/C,
which is called Back to Back L/C (L/C giáp lưng).
- Although they are named as above, both L/Cs do not bear
these titles. Both L/Cs are like any other irrevocable L/C. Both
L/Cs are completely independent of each other.
- The term "back to back" is understood in the context of an
commercial transaction using two separate L/Cs, with one L/C
opened based on the guarantee of a L/C opened previously.
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* Back-to-back L/C is used when: trading goods through
intermediary, similar to transferable L/C but:
- Original L/C (Master L/C) is non-transferable as importer
does not accept.
- Exporter does not agree to use the transferable L/C as
they do not know who importer is, so they are afraid of
payment risk.
- When the terms of two contracts between intermediary
and importer, between intermediary and exporter are
different.
- When intermediary wants to hide information about
importer from exporter and vice versa.

* Process of performing a back-to-back L/C:
a. Back-to-back L/C opening:
Con. INTERMEDIARY Con.

IMPORTER 1 2
(-Ben of Or. L/C EXPORTER
(Aplicant of
-App of BTB L/C) (Ben of BTB LC)
Original L/C)
1 3 4 6
Iss. Bank -Ad. B of Or. LC Ad. Bank of

Ori. L/C -Is. B of BTB LC
5 BTB L/C
2
Master L/C Back to back L/C
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* Process of performing a back-to-back L/C:
b. Document presentation and honour for back-to-back L/C :
7
IMPORTER INTERMEDIARY
7 7 EXPORTER
(Aplicant of (-Ben of Or. L/C
-App of BTB L/C) (Ben of BTB LC)
Original L/C)
18 17 16 13 12 8 11
14 9
Iss. Bank Ad. B of Or. LC Ad. Bank of
Ori. L/C -Is. B of BTB LC BTB L/C
15 10

3. RECIPROCAL L/C (L/C ĐỐI ỨNG):
- The type of irrevocable L/C that is only valid when the
beneficiary of this L/C requests to open another L/C for the
applicant of this L/C to benefit (the applicant of this L/C is the
beneficiary of this others L/C, and vice versa).
- The reciprocal content is a special term expressed in field
47A “Additional Conditions" of L/C.
- The reciprocal L/C violates the independence of L/C because
reciprocal clause makes both L/Cs dependent on each other.
- It is used when:
+ Both parties are buyers and sellers of each other (barter
trade – mua bán hàng đổi hàng).
+ Goods processing contracts (Hợp đồng gia công hàng
hóa): company A supplies raw materials to company B, and
company B sells finished products (thành phẩm) back to
company A.
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3. 3. RECIPROCAL L/C (L/C ĐỐI ỨNG):
* Special term in field 47A of two L/Cs is expressed as follows:
- L/C opened first shall state: “This L/C is only valid when the
beneficiary has opened a reciprocal L/C for the applicant of this
L/C to benefit”.
- L/C opened later must state: “This L/C is reciprocal to L/C
No.... dated... issued by.. ".
+ Barter trade: A sells fertilizer to B and B sells rice to A.
When B produces rice and is afraid of not finding buyers, they
make a condition that they will only buy fertilizer from A if A
buys rice from B. Therefore, to ensure that A buys their rice
after they have purchased fertilizer from A, B requests that L/C
they open for A will only be valid after the reciprocal L/C for B
is opened by A.
+ Goods prcess: For example, A sells cotton fiber to B, and B
sells textile fabric back to A.

4. REVOLVING L/C (L/C TUẦN HOÀN):
- The type of irrevocable L/C that after its value has been used
up or it has been expired, issuing bank allows its original value
to be restored and used in a revolving form for a certain period
without amending L/C. .
- The revolving content is shown in field 47A "Additional
Conditions" of L/C: "This L/C is revolved... times, with the total
amount of...“.
- It is used when importer:
+ Has strong financial capacity and credibility with issuing
bank.
+ Signs regular, periodic, large-quantity purchase contracts
with the long contract period.
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Ex: A company signs a one-year contract to purchase PE plastic
for total value of USD 3,000,000, with deliveries every two
months for USD 500,000. If company opens an L/C for the full
contract value, assuming a 10% deposit level equivalent to USD
300,000, it will create capital difficulties for customer. Issuing six
separate L/Cs for each delivery every two months would be
costly and time-consuming to handle documentation. The best
solution is to open a revolving L/C with the value of USD
500,000, two-month term, and once the value has been used up
within two months, L/C is restored to its original value. This
process is revolved six times within the twelve-month contract
period, and the revolving L/C expires.
In this case, field 47A "Additional Conditions" will indicate: "This
L/C is revolved six times, with the total amount of USD
3,000,000“, and the value of L/C is USD 500,000.

- Revolving L/C must show the maximum amount or the final
expiry date. It should also indicate whether the balance of
previous payment period can be added to the value of next
period. If allowed, this L/C is called the cumulative revolving L/C
(L/C tuần hoàn tích lũy), and if not allowed, it is called the non-
cumulative revolving L/C (L/C tuần hoàn không tích lũy).
- There are three ways of revolving:
+ Automatically Revolving (Tuần hoàn tự động): L/C
automatically restores its value without advice of issuing bank.
+ Not Automatically Revolving (Tuần hoàn không tự động
/ Tuần hoàn hạn chế): L/C only restores its value when issuing
bank advises exporter.
+ Semi Automatically Revolving (Tuần hoàn bán tự động):
after a specified period, if there is no opinion /notification from
issuing bank, L/C automatically restores its value.
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5. RED CLAUSE L/C (L/C ĐIỀU KHOẢN ĐỎ) :
- The type of irrevocable L/C with a special clause in which
issuing bank allows nominated bank to advance/ prepay a
certain amount to beneficiary before this person presents
documents. .
- "Red Clause“ (“Điều khoản đỏ”) is also called "Advance
Clause" (“Điều khoản ứng trước”) or "Special Clause“ (“Điều
khoản đặc biệt”), and shown in field 47A.
- Issuing bank of Red Clause L/C often requires importer to
deposit the advanced/ prepaid amount. Therefore, the advance
payment in Red Clause L/C is really importer's commercial credit
for exporter.
- In order to receive an advance payment, exporter must agree
with importer in foreign trade contract, and when L/C is opened,
exporter goes to nominated bank to make an application for an
advance payment and an undertaking to deliver goods.

6. STANDBY L/C (L/C DỰ PHÒNG):
* The type of irrevocable L/C in which issuing bank
undertakes to beneficiary: .
- Pay the amount that applicant in standby L/C has
borrowed or advanced.
- Pay a debt of the applicant in standby L/C.
- Compensate for damages caused by the applicant in
standby L/C failing to fulfill obligations.
* Standby L/C is considered as an instrument to ensure the
exporter’s performance of contract as it is opened to
guarantee compensation for damages to importer when
exporter fails to fulfill contractual obligations.
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6. STANDBY L/C (L/C DỰ PHÒNG):
* Participants in a standby L/C usually have roles that are
opposite to those in a commercial L/C, specifically: .
- Applicant (Người yêu cầu): is exporter.
- Beneficiary (Người thụ hưởng) : is importer.
- Issuing Bank (Ngân hàng phát hành): is the bank serving
exporter and undertakes to pay importer if importer
presents documents that comply with the requirements of
standby L/C.
- Presented documents: aim to confirm exporter's failure to
fulfill contractual obligations, including: B/E, certificate of
defective goods, certificate of non-delivery of goods,…
7.9. NOTES ON THE DOCUMENTARY CREDIT METHOD
1. FOR THE EXPORTER:

a. Advantages: .
- Reduce payment risks: Exporter gets the undertaking to
honour from issuing bank based only on documents and
without any relation to goods. This is a significant advantage
for exporter.
- Help exporter approach and use many convenient and
diverse payment-related services from different commercial
banks, such as L/C advising, L/C confirmation, payment,
acceptance, document negotiation, advisory services such
as advice on L/C content, advice on document completion …
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1. FOR THE EXPORTER:

b. Disadvantages: .
- Importer does not open L/C although the contract
indicates payment by documentary credit.
- Exporter receives counterfeit L/C and is deceived.
- Exporter is unable to meet the requirements of L/C.
- Documents prepared and presented by the exporter
are discrepant and payment is refused.
- Face the risk of payment from issuing bank.
2. FOR THE IMPORTER:

a. Advantages: .
- Receive the financing of issuing bank which includes:
+ Financing by undertaking to honour conditionally to the
exporter on behalf of importer (issuing bank lend the
"creditworthiness“ to importer).
+ Financing by acceptance of the importer’s deposit less
than 100% of L/C value (issuing bank guarantees the
remaining amount).
- Help importer easily approach many related convenient
services of issuing bank such as: guarantee service for taking
delivery of goods, priority in foreign currency trading, advisory
services such as advice on L/C content, advice on preparation
of complying documents…
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2. FOR THE IMPORTER:

b. Disadvantages: .
- Exporter may not deliver goods or deliver the wrong goods
(resulting in discrepant documents), even though importer has
opened L/C. Although no money is lost, importer still suffers
losses from the payment of L/C opening charge and missed
business plans.
- Goods received by importer may not match the contract and
L/C, even though the presented documents are complying and
importer has already made payment. The reason may be the
exporter's intentional fraud (preparing counterfeit documents) or
sketchy document requirements in the L/C.
- Importer may not detect the incorrect documents, thus failing
to do Customs clearance for receiving goods that do not match
contract and L/C.
3. FOR BANKS:
a. Advantages: .
- Documentary credit is a modern banking service that brings a
significant income to banks.
- Through the documentary credit method, banks have many
opportunities to develop other banking services such as
advisory services, commercial financing services, forex trading
services... By providing many kinds of services, it will
contribute to the good implementation of customer policies, so
enhancing the reputation and brand of banks.
- Documentary credit is the international payment method that
requires linking many foreign banks in implementation
process. Therefore, if this method develops, it will help expand
international banking activities.
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3. FOR BANKS:
b. Disadvantages:
- Payment risk from importer: this is the biggest risk of
issuing bank. Even though importer is unable to pay,
issuing bank still has to pay exporter.
- Operational risks arise throughout the entire process
of documentary credit implementation, including:
drafting, issuance, advice, confirmation of L/C;
document examination; payment, acceptance,
document negotiation; and reimbursement…
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QUESTION 5 – CHAPTER 7 – TEXTBOOK

* Article 35 UCP600: Fundamentally, banks are not responsible
for delays or losses in delivery of documents if they comply with
L/C requirements. However, if nominated bank decides that the
presentation is complying and forwards documents to issuing
bank/ confirming bank, then issuing bank/ confirming bank must
pay to nominated bank, even if documents are lost in transit
between banks.
++ Negotiable L/C (L/C available with nominated bank):
+ If nominated bank performs responsibility and determines that
documents are complying, it will pay exporter and send documents
to issuing bank for payment. Therefore, if documents are lost,
issuing bank is obliged to pay nominated bank.
+ If nominated bank refuses to perform responsibility, it acts as
presenting bank, and since compliance of documents has not
been determined, issuing bank will not pay if documents are lost.
++ Non-negotiable L/C (L/C available with issuing bank):
The compliance of documents is only determined at the issuing
bank since there is no nominated bank. Therefore, issuing bank
will not make payment if documents are lost.
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CASE STUDY 7.4 – CHAPTER 7 – TEXTBOOK

* Solution and responsibility of ABCBank:
++ Discount with recourse: demand payment from exporter and
assist exporter in resolving as follows:
+ ABCBank requests Combank (issuing bank) to urgently return
documents to correct B/L as "Freight Prepaid" as required by L/C.
+ At the same time, on behalf of exporter, ABCBank disputes
other discrepancies with issuing bank so that issuing bank
acknowledges the compliance of documents.
- If documents are corrected and sent within presentation period
of L/C, it means that documents are complying and will be paid. If
issuing bank still insists that discrepancies are correct and does
not pay, ABCBank will advise exporter on suing issuing bank.
- If documents are not corrected and sent within the presentation
period of L/C, documents will be discrepant. ABCBank needs to
advise exporter on negotiating with importer to accept documents.
++ Discount without recourse: ABCBank cannot demand
payment from exporter. Solution is same as above, but if issuing
bank does not pay, risk of losing money is borne by ABCBank.
L/C CASE STUDY 1

** Some contents of an L/C are extracted as follows:
SENDER: BLUEBANK, VIETNAM
RECEIVER: GREENBANK, SINGAPORE
40A: FORM OF DOCUMENTARY CREDIT : IRREVOCABLE
31C: DATE OF ISSUE : 150824
41D: AVAILABLE WITH …BY… : ADVISING BANK BY
NEGOTIATION
Question 1. Based on the undertaking of honour, what type of L/C is
this? What field in the L/C indicates this?
Question 2. What is the name of nominated bank with negotiating
responsibility?
Question 3. In which country is the place of expiry of this L/C? Why?
Question 4. Exporter prepares documents and presents them to
negotiating bank for discounting, but negotiating bank refuses and
informs that it will not perform the negotiating responsibility for
exporter. Basing on UCP 600, explain whether the action of
negotiating bank is acceptable or not.
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L/C CASE STUDY 2

** Some contents of an L/C are extracted as follows:
SENDER : BLUEBANK, THAILAND
RECEIVER : GREENBANK, VIETNAM
40A : FORM OF DOCUMENTARY CREDIT : IRREVOCABLE
31C : DATE OF ISSUE : 140715
40E : APPLICABLE RULES : UCP LATEST VERSION
31D : DATE AND PLACE OF EXPIRY : 140918……………
50 : APPLICANT : SILVER CORPORATION, BANGKOK, THAILAND
59 : BENEFICIARY : GOLD COMPANY, HOCHIMINH CITY, VIETNAM
32B : CURRENCY CODE, AMOUNT : USD 400,000.00
41D: AVAILABLE WITH…BY…: YELLOWBANK BY NEGOTIATION
49 : CONFIRMATION INSTRUCTIONS : WITHOUT
57 : “ADVISE THROUGH” BANK : REDBANK, VIETNAM
Question 1. Indicate the name of beneficiary, applicant, relevant banks
including issuing bank, advising banks, nominated bank under this L/C.
L/C CASE STUDY 2

Question 2. Which version of UCP is applied to this L/C? Explain..
Question 3. In field 31D, which country's name should be filled in the blank
indicating the expiry place of L/C? Why?
Question 4. Is this L/C confirmed? Explain. If issuing bank has previously
agreed with confirming bank and L/C is sure to be confirmed, how will L/C be
showed?
Question 5. Nominated bank refused to perform its obligations, only forwarded
documents to issuing bank. Documents was presented to issuing bank on
September 15th, 2014. After examining documents and finding them to be
discrepant, on September 17th, 2014, issuing bank informed importer to get the
importer's opinion of handling the situation. After reviewing documents,
importer notified issuing bank on September 24th, 2014 that payment for this
discrepant documents was rejected. On September 25th, 2014, issuing bank sent
a message of refusing to pay and listing all discrepancies to presenting bank. It
is known that September 20th and 21st, 2014 were bank's holidays.
a. In your opinion, is issuing bank exempted from the obligation to pay due to
the discrepant documents? Please apply UCP 600 to explain.
b. What lesson can issuing bank draw from this situation?
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EXERCISE 7.1: Read the two L/C samples: one in the slides
(Vietnamese import L/C) and one in the samples of documents
(Vietnamese export L/C). Then, please answer :
1. Understand the content of each field of L/C.
2. Indicate the names of participants (beneficiary, applicant,
issuing bank, confirming bank if any, first advising bank, second
advising bank, negotiating bank…).
3. Describe the relationship between fields 31C, 31D, 44, 48.
4. Translate and explain requirements of documents in field 46A.
5. Is L/C payable at sight or after shipment? Make a draft (B/E)
according to the standard draft learnt in chapter 3. (Note field
42D – Drawee).
6. What is the regulation on paying charges?
7. Is the Incoterm accurately shown?
8. What is the legal document applied to this L/C? Where is it
shown in L/C?
73

Chapter 7 - Method of Doc. Credit

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Chapter 7 - Method of Doc. Credit

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5/26/2023

METHOD OF DOCUMENTARY CREDIT

METHOD OF DOCUMENTARY CREDIT

7.1. LEGAL FRAMEWORK

7.1. LEGAL FRAMEWORK

7.1. LEGAL FRAMEWORK

7.1. LEGAL FRAMEWORK

7.2. DEFINITION OF DOCUMENTARY CREDIT METHOD

* English and Vietnamese terms: “Documentary

7.2. DEFINITION OF DOCUMENTARY CREDIT METHOD

* Thuật ngữ tiếng Anh và tiếng Việt: “Documentary

7.2. DEFINITION OF DOCUMENTARY CREDIT METHOD

7.2. DEFINITION OF DOCUMENTARY CREDIT METHOD

7.2. DEFINITION OF DOCUMENTARY CREDIT METHOD

** Disadvantages of the documentary credit

There is no connection between the delivery of

7.2. DEFINITION OF DOCUMENTARY CREDIT METHOD

* In the definition of documentary credit, “honour”

7.2. DEFINITION OF DOCUMENTARY CREDIT METHOD

* Trong đó, “thanh toán” (theo điều 2 UCP 600)

7.2. DEFINITION OF DOCUMENTARY CREDIT METHOD

* In summary, the payment method of

7.2. DEFINITION OF DOCUMENTARY CREDIT METHOD

* Tóm lại, phương thức thanh toán “Tín dụng

7.4. PROCESS OF DOCUMENTARY CREDIT

Advising bank 7. Documents Issuing Bank

6. Present documents 2. Request for 11.Honour/Refuse

Beneficiary / 5. Shipment Applicant /

7.4.1. L/C (IS) AVAILABLE WITH ISSUING BANK

7.4. PROCESS OF DOCUMENTARY CREDIT

Nominated bank 8. Present docs. Issuing Bank

6. Present documents 2. Request for 11.Honour/ Refuse

Beneficiary / 5. Shipment Applicant /

7.4.2. L/C (IS) AVAILABLE WITH NOMINATED BANK

7.4. PROCESS OF DOCUMENTARY CREDIT

7.5. LETTER OF CREDIT

7.5. LETTER OF CREDIT

7.5. LETTER OF CREDIT

7.5. LETTER OF CREDIT

* SWIFT message types used in the method of DC :

7.5. LETTER OF CREDIT

7.5. LETTER OF CREDIT

7.5. LETTER OF CREDIT

7.5. LETTER OF CREDIT

7.5. LETTER OF CREDIT

7.5. LETTER OF CREDIT

7.5. LETTER OF CREDIT

7.5. LETTER OF CREDIT

7.5. LETTER OF CREDIT

7.5. LETTER OF CREDIT

7.5. LETTER OF CREDIT

7.5. LETTER OF CREDIT

7.5. LETTER OF CREDIT

7.5. LETTER OF CREDIT

7.5. LETTER OF CREDIT

7.5. LETTER OF CREDIT

7.5. LETTER OF CREDIT

7.5. LETTER OF CREDIT

7.5. LETTER OF CREDIT

7.5. LETTER OF CREDIT

7.5. LETTER OF CREDIT

7.5. LETTER OF CREDIT

7.5. LETTER OF CREDIT