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Can Bill of Lading be surrendered on LC terms
In a letter of credit, whether an exporter can surrender bill of lading and arrange to send OBL surrender message to release container without insisting for Original bill of lading.
Normally under LC terms, original bill of lading with other documents are submitted with negotiating bank by the beneficiary of letter of credit. The beneficiary bank arrange to send such documents to LC opening bank in tern, LC opening bank delivers documents to buyer once after acceptance of documents from bank.
Here the question is, whether original bill of lading is required to be submitted in a letter of credit transactions. Let us discuss, how letter of credit works in an export import trade.
Letter of credit is an assurance given by the buyer’s bank to remit the amount to the seller through seller’s bank on maturity, as per the terms and conditions of document based on the contractual agreement between buyer and seller. Now in simple words, if LC opened on your name, you will receive amount through the buyer’s bank on the agreed time. All Letter of Credits for export import trade is handled under the guidelines of Uniform Customs and Pracice of Documentary Credit of International Chamber of Commerce (UCP 600). As per the agreed terms between buyer and seller, the period of credit is decided. Based on the same, the time to effect payment by opening bank (buyer’s bank) is determined. Different tenure periods of LC given below.
Once the shipment effected , the exporter prepares all required documents as per the terms and conditions of letter of credit. These documents will be submitted with exporter’s bank, along with the original LC. Bank verifies all documents and make sure, the documentation is in order as per LC conditions. The said documents will be sent to buyer’s bank and in turn to the buyer after necessary approval in documentation by seller’s bank. Once the buyer’s bank receives the documents, the export sales amount as per the said documents will be sent to exporter’s bank. This is the procedures under letter of credit at sight.
Some time, the foreign buyer may demand credit period to pay the amount of sales. Say for 30 days, 60 days, 90 days, 120 days etc. However as per government regulation, the total period of credit should not exceed more than 180 days.Normally the credit period is calculated from the date of shipment – the date of bill of lading or airway bill.
Now, let us come back to the question, ‘can original bill of lading be surrendered at port of loading’ under letter of credit terms.
The terms and conditions on letter of credit is decided mutually by buyer and seller. As explained above, if seller agrees credit period under letter of credit, normally the buyer remits amount of goods to seller only after taking delivery of goods at destination port. In such cases seller may agree to surrender bill of lading in certain circumstances mutually agreed between buyer and seller. If buyer and seller in a contract of sale agrees to surrender bill of lading at load port, the said clause is added in the term and conditions of letter of credit. If such condition on surrender of bill of lading mentioned in a letter of credit, surrender of bill lading can be done at load port.
Also read - Can Bill of Lading be surrendered at port of loading? Can Original Bill of lading be surrendered under DP terms of payment? Can Original Bill of lading be surrendered under LC at sight? Surrender of Bill of Lading – Some facts
Do you have different opinion. Please discuss below:
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