Arranging Payments for the Price of Goods Bought in an International Essay

Arranging Payments for the Price of Goods Bought in an International Sale is by the enforce of a Documentary Credit - Essay Example1.1 comment and Description of Credit Documents a. Documentary Credits For external transactions, purchasers and sellers approach their banks, which will in turn undertake a written agreement for the buyer that promises to move over a certain currency value in favor of the seller on the condition that all the requirements known as terms and conditions ar met. deduction of goods delivered by the seller should be in the form of documents defined in the agreements. The buyers bank communicates and deals directly 24 Alejandro Jara and Patrick Low, et. al., World Trade physical composition 2011. World Trade Organization. p. 24. with the sellers bank. A credit line is assured by the banks prior to release of goods from the seller. Payments are actually made lone(prenominal) after documents are received by the buyers bank. Therefore documents such as Let ters of Credit are very important for international transactions. Documentary credits may be standard or special depending on what will meet the needs of the transacting partiesbuyer, seller, bank of the buyer, and bank of the seller. Standard objective credits can be either revocable (may be cancelled by the buyer), or irrevocableconfirmed (a second bank, in addition to the buyers bank, guarantees cave inment) or unconfirmed (payment guaranteed only by the issuing bank).17 Protection by documentary credits does not include an assurance that the goods are shipped according to understanding. Disagreements can result out of dissatisfaction. Complaints may arise. But the buyer and seller would have to settle the problem on their own. Banks base their decisions on full the documents and the terms and conditions therein. Those documents identify four parties, namely, applicant, beneficiary, issuing bank, and advising bank although in the business community, they are known as the buyer , seller, buyers bank and sellers bank.18 The International Chamber of Commerce had already prepared the Uniform Customs and 17 Edward G. Hinkelman, A Short Course in International Payments How to workout Letters of Credit, D/P and D/A, Prepayment, Credit, and Cyber Payments in International Transactions. California, USA, World Trade Press, 2003, p. 50. 18 Hinkelman, A Short Course in International Payments How to Use Letters of Credit, D/P and D/A, Prepayment, Credit, and Cyber Payments in International Transactions. p. 52. Practice (UCP) for Documentary Credits. The UCP recognizes that there are different types of documentary credits, namely, Standby Credits, Revolving Credits, Transferrable Credits, straight credits, revocable and irrevocable, confirmed and unconfirmed. And the definition of documentary credits according to UCP is any arrangement, however named or described, whereby a bank (the issuing bank) acting at the pass along and in accordance with the instructions of a customer (the applicant for the credit) (i) is to make payment to or to the order of a third party (the beneficiary) or is to pay or endure or negotiate bills of exchange (drafts) drawn by the beneficiary or (ii) authorises another bank to effect such payment, or to pay, accept or negotiate such bills of exchange against stipulated documents, provided that the terms and conditions of the credit are complied with (Art. 2).4 However, Dr. Zsuzsanna Toth identified documentary credi