{"id":831,"date":"2021-02-09T22:18:48","date_gmt":"2021-02-09T16:18:48","guid":{"rendered":"https:\/\/agribusinessedu.com\/?p=831"},"modified":"2021-02-09T22:18:48","modified_gmt":"2021-02-09T16:18:48","slug":"what-are-l-c-operating-processes-under-structured-customs-and-practices-and-documentary-credit-ucpdc","status":"publish","type":"post","link":"https:\/\/agribusinessedu.com\/what-are-l-c-operating-processes-under-structured-customs-and-practices-and-documentary-credit-ucpdc\/","title":{"rendered":"What are L\/C operating processes under structured customs and practices and documentary credit (UCPDC)?"},"content":{"rendered":"

What are L\/C operating processes under structured customs and practices and documentary credit (UCPDC)?<\/span><\/h3>\n

L\/C operating processes under structured customs and practices and documentary credit (UCPDC) in Agribusiness is usually an essential procedure. <\/span>Bangladesh’s export strategy is formulated by the Ministry of Commerce to provide the Ministry of Commerce with the Overall advice and export promotion rewards. The decision has been made to formulate this strategy is intended to span a three-year cycle to make the five plans contemporary and to provide the policy regime with consistency. The policy will, however, be valid until another export program has been revealed. The government can review this Policy once, if necessary, once in every year, and can determine as deemed necessary.<\/span><\/p>\n

The most significant document for the settlement of a foreign transaction is a letter of credit. It is essentially a promise provided by a bank, at the behest of its customer, to make payment to a third party, known as the beneficiary, for products delivered or services rendered in accordance with the conditions stated. Both aspects of the letter of credit should be carefully studied by the staff to prevent any controversy, uncertainty, and conflicts with customers and about correspondents.<\/span><\/p>\n

L\/C is referred to as the documentary letter of credit because the issuing bank’s undertaking is subject to the presentation of some stated documents.<\/span><\/p>\n

Meaning of the credit letter (LC):<\/span><\/h4>\n

The well-accepted and most widely used means of credit are letters of credit about payment. It is an undertaking for payment to the beneficiary by the issuing bank, upon presentation of certain stated documents and fulfillment of the terms and conditions referred to in the letter of credit.<\/span><\/p>\n

Letter of credit is a letter issued by a bank favoring the supplier of products at the instance of its client, in which the issuing bank undertakes to make a payment, as stated in the letter, upon submission of certain documents. Bank-issued letters of credit promote exchange between two parties, both at the national and international levels.<\/span><\/p>\n

As an intermediary between two trading parties located in two distant locations, commercial banks play an important role.<\/span><\/p>\n

Suppose, for instance, that the purchaser of such goods is in Dhaka, Bangladesh, and that the seller of the same goods is in the USA. The buyer and the seller do not know each other, and the seller would therefore request payment in advance for the goods to be delivered to the buyer. On the other hand, the buyer thinks that making advance payments to the overseas seller he does not know will not be wise for him.<\/span><\/p>\n

Under these conditions, unless there is an intermediary who can bridge the lack of confidence between the buyer and the seller, no exchange can take place. This intermediary will play the role of the commercial bank and encourage trust between the two parties. This can be achieved in favor of the seller by issuing an LC at the instance of the buyer.<\/span><\/p>\n

The issuing bank undertakes to pay the price of the shipment to the seller, provided that the seller submits, through the seller’s bank, the shipment and other title documents as stipulated in the LC. Often known as Documentary Credit, this kind of letter of credit. The buyer is regarded as the importer of goods when an LC is given on behalf of foreign trade and the seller is called the exporter of goods.<\/span><\/p>\n

Commercial banks worldwide issue credit letters and the modalities for issuing documentary credits are subject to the requirements of the International Chamber of Commerce’s Standard Customs and Practices for Documentary Credits (UCPDC) (ICC). UCPDC provisions are general in all countries, and LC business is handled by all commercial banks in compliance with UCPDC guidelines.<\/span><\/p>\n

It is important to keep in mind that commercial banks deal with documents and not the underlying goods under letters of credit. If the documents are solely in accordance with the terms of the LC, the issuing bank shall, irrespective of the condition of the goods, make a payment to the seller’s bank.<\/span><\/p>\n

There are several parties involved in an international LC transaction and they are scattered around various countries. They work within various legal frameworks and jurisdictions. The settlement, by normal legal channels, of any conflict resulting from the terms and conditions of the LC which pose difficulties.<\/span><\/p>\n

It was against this backdrop that, at the behest of the ICC, the codification and publication of a common set of rules applicable to all documentary credits, regardless of which bank provided them, was framed. From time to time, the text, known as the UCPDC, is updated. In order to ensure that documentary credit is protected by the UCPDC regulations, it is important to declare to the body of the LC that it is being given according to the UCPDC provisions.<\/span><\/p>\n

Operations of Documentary Letter of Credit<\/u><\/strong><\/span><\/h4>\n

In running the Documentary Letter of Credit, the following five main measures are involved:<\/span><\/p>\n