ROUGH DRAFT OF INTRTNATONAL TRADE LAW

TOPIC: Letter of Credit an effective mode of transaction

Submitted to: P.P.ROY
Submitted by: Ankit Anand
Roll: 917
6th semester
INTRODUCTION
Every business transaction consist of at least two parties that are the importer and exporter. In
addition, some of the transactions involve not only the buyer and seller, but also the banks of
the parties, government customs agencies and freight forwarders as well. Profiting from the
transaction and being exposed to the smallest risk are the common concern of both parties.
However, in all transactions buyers and sellers exposed to the risk somehow. Domestic
transactions are stable, transparent, secure or reliable as compared to international
transactions that are risky because of changing dynamics at the time of sale and expected
time of payment. Therefore, the seller always prefer to be paid at delivery or prior to it. The
seller has made investment in the time of manufacturing the product and does not prefer
bearing the cost of transportation as well. On the other hand, the buyer aware of the fact that
it can take one or two months before goods had arrived. Goods will be ready for export,
trucked or sent by rail to the port, export cleared, shipped to the final port, warehoused
awaiting customs clearance, inspected, customs cleared, sent overland to the final destination,
and finally became inventory at warehouse of buyer Therefore, both buyer and seller prefer
that other party finance the transaction and pay for the cost. Domestic payments primarily use
credit cards and checks. International payments primarily use Commercial Letters of Credit
and Documentary Collections or open account. The letter of credit is a specified
documentation particularly required to enjoy the facility of credit for an international business
transaction. These documents are tendered by the seller to the advising bank. These
documents must agree strictly in accordance with the fundamental principle of strict
compliance of the terms of the transaction. If the doctrine of strict compliance is fully
observed then no issue arises. According the provisions of the UCP 600, the banks are only
obliged to make payments on LCs if the documents presented completely comply with the
terms and conditions of the credit.

If the strict compliance standard is not observed in the credit documents strictly, the banks
need not to pay to the beneficiary on these afflicted documents (UCP 600).

AIMS AND OBJECTIVE

The main aim objective of the researcher is to know what is letter of credit. How much it is
important in International trade. And also its advantage and disadvantage to exporter and
importer.

RESEARCH METHODOLOGY
The researcher has adopted the doctrinal method of research for the project.

SOURCE OF DATA
The following sources of data have been used in the project are:
1 .Books
2. Websites
3. Articles

HYPOTHESIS
Researcher hypotheses that the letter of credit is always advantageous to both importer and
exporter.

CHAPTERISATION
1.
2.
3.
4.

Introduction
What is letter of credit
Its advantage and disadvantage
Other mode of transaction
5. Conlusion