i hear many bank types in my LC department, please guide me what are those bank, for example issuing bank has another names, for instance, applicant bank.
Now I want to know what are these banks
Collecting bank - paying bank., are these names only use for Lcs?
thanks
type of banks
Warlord,
it is a good idea to read the UCP 600 (or if you want the UCP 500 which you will find above under the articles tab) to familiarize yourself with the various functions a bank can exercise in an LC transaction.
Issuing bank: issues lc upon application from the Applicant,
Confirming bank: undertakes a separate payment obligation independent of issuing bank to honor docs upon proper presentation,
Advising bank=mailman: tells the beneficiary that an LC has been openedn to his benefit,
Accepting bank: accepts drafts from the beneficiary, negotiating bank: negotiates drafts from the beneficiary...
Types of banks
Nominated bank : means the bank with which the credit is available or any bank in the case of a acredit avaialble with any bank
Negotiating bank : means negotiates drafts from beneficiary or purchase of documents, by advancing or agreeing to the advance funds to the beneficiary on or before the banking day on which reimbusement is due to the nominated bank.
Still not answer part of question
Thanks you,
But still what is the collectimg bank?
Collecting and paying banks
These are titles used in documentary collections.
Collecting bank - the Sellers (drawers) bank that sends the documents covering the shipment to the:
Paying bank - the bank that is acting for the Buyer (drawee) and effects the payment to the Collecting bank for account of the Seller.
Not exactly peter
Hi peter,
I would like to contradict you on the definition of collecting bank and paying bank in a collection.
Collecting bank - its any bank other than the remitting bank(the bank to which the principar/drawer entrusted the collection) involved in the process of a collection --- ref article 2 ,URC 525. So it's the drawee's(buyer's) bank and not the drawer's bank.
Paying bank- No definition as such has been defined for a paying bank with respect to a collection. It is any bank which has the obligation to pay to any party/bank. As you said this can be more appropriate to be used with a collecting bank.
Hence collecting bank/paying bank are mostly one and the same!
Thanks + Conclusion
Thanks all for the explanations.
Even our Department are only using the names such as Drawer's Bank and Drawee's Bank, so I conclude the following
1) Collecting Bank is Drawee Bank.
2) Paying Bank could be called also remitting bank, which is the party responsible to pay, which is also the Drawee's Bank.
Really Marvelous information, I will keep in touch.
Regards
For Sharing
When I'm talking to people who are just getting started in inter- national trade, I’ll sometime see their eyes glaze over and then realize, I’ve just used a “buzzword” and they have no idea what I’m talking about. I thought it might be helpful if I explained some of these buzzwords :-
Acceptance: An acceptance is a time draft that the drawee has either stamped or written the word “accepted” across the face of the draft and then signs the acceptance notation. If a bank is the drawee (the party that the draft is drawn on), a Banker’s Acceptance is created. If the drawee is an individual or company, it is referred to as a Trade Acceptance.
Account Party: The party that applies for a letter of credit. The account party is also referred to as the accountee, the buyer, the importer, or the applicant.
Advised Credit: A letter of credit that has been authenticated by the advising bank, insuring that the issuing bank did indeed issue the letter of credit. The advising bank does not take on any responsibility to effect payment as they would if they had confirmed the letter of credit. However, they will most likely assist in facilitating payment.
Amendment: The account party may contact the issuing bank in writing requesting that a term or condition in the original letter of credit be changed or deleted, or that a new term or condition be added to the letter of credit. According to the Uniform Customs and Practices (UCP) 500, amendments must be accepted or rejected in their entirety. In other words, if the amendment contains more than one change, and you like one change but not the other, you have to either accept or reject the entire amendment.
Assignment of Proceeds: The beneficiary of a letter of credit may instruct the negotiating bank, in writing, to pay all or a portion of the proceeds due them to a third party. The request to assign the proceeds should be accompanied by the original letter of credit and the fee that the negotiating bank may charge for this service.
Beneficiary: The party that the letter of credit is issued in favor of. The beneficiary may also be referred to as the seller, exporter, the supplier or the vendor.
Bill of Lading: A document issued by the carrier, or their agent, that has been contracted to move the goods from one location to another. The bill of lading is the title document, a receipt for the merchandise and also a contract for delivery.
Carnets: A Customs document that permits the party holding the carnet to carry or send merchandise temporarily into certain countries without paying duties or posting bonds. Used frequently for trade shows.
Confirmation: When the advising bank guarantees the obligation of the issuing bank, providing an extra layer of protection. Used most often when the credit worthiness of the issuing bank is in question, or the political or economic conditions of the issuing bank’s country are considered risky.
Consignee: The party appearing on a bill of lading to which the carrier has been instructed to deliver the goods.
Customs House Broker: A service company that handles all areas of import shipments.
Drawback: The ability to be reimbursed for some or all of the duties paid on imported merchandise at the time of re-exportation.
Documentary Collection: A payment instrument, not involving a letter of credit, where the seller ships merchandise to the buyer, routing the shipping documents through their bank to the buyer’s bank. The buyer’s bank is instructed to only release documents to the buyer against payment if a sight draft is being used—Documents Against Payment (D/P)—or against an accepted draft if a time draft is being used—Documents Against Acceptance (D/A). The seller looks to the buyer for payment.
Documentary Letter of Credit: A letter addressed to a beneficiary by the issuing bank promising to effect payment to the beneficiary provided they present the required documents in compliance with the terms of the letter of credit.
Draft (Bill of Exchange): A formal demand for payment from the drawer to the drawee stipulating the amount and currency to be paid at a specified time to the order of a named party, also referred to as the payee. A sight draft is for immediate payment; a time draft allows for a financing period, usually not more than 180 days.
Drawee: The person, company or bank that the draft is drawn on by the seller. The formal demand for payment is made to the drawee.
Drawer: The seller who issues the draft demanding payment.
Expiration Date: The final date documents can be presented to the bank for payment. If this date falls on a weekend or holiday, the expiration date is extended to the next banking day.
Free Trade Zone: An area where goods can enter the country duty free. The goods can be stored, used or sold while in the zone without incurring duties. Duties are only paid when the goods leave the Free Trade Zone.
Freight Forwarder: A service company that handles all areas of export shipments. Years ago I heard them referred to as a travel agent for goods/merchandise.
Incoterms: Updated and maintained by the International Chamber of Commerce, Incoterms define where the costs and responsibilities of shipping goods either begin or end for the seller and buyer.
Irrevocable: According to the UCP600, an irrevocable letter of credit is one that cannot be amended or cancelled without the agreement of all parties.
Issuing Bank: The bank requested by the applicant to issue a letter of credit. When the issuing bank agrees to issue the letter of credit, they substitute their credit standing for that of the applicant.
Partial Shipments: Under letters of credit, unless otherwise prohibited, multiple shipments may be made. After each shipment, documents should be presented to the bank for payment.
Proforma Invoice: An invoice sent by the seller to the buyer in advance of a shipment. The proforma gives detailed information regarding weights and values of the shipment that is to be made.
Revocable: A revocable letter of credit can be modified or cancelled without the beneficiary’s consent unless negotiation has already taken place.
Tenor: Indicates on a draft when payment is to be made. “At Sight” means payment is due once documents are presented to the paying bank or drawee. “30 Days Sight” means that payment is due a fixed number of days after acceptance. Usually the time frame does not exceed 180 days. “30 Days after date” means payment is due 30 days after the date of the draft. The date of the draft is typically the same date as the bill of lading date and usually doesn’t exceed 180 days.
Unclean Bill of Lading: A transport document that bears a clause indicating a defective condition of either the goods or the packaging.
If I missed a buzzword that you think should be added to the list, please to add with your word and definition. Part of the reason that the list is this long is that I kept on thinking of additional words to add.