Task 1. Read the text

A letter of credit is a promise made by the buyer’s bank (the opening or issuing bank) to send a certain sum of money to the seller’s bank (the advising bank), to be credited to the seller, known as the beneficiary, provided he fulfils his part of the sales contract. It is also known as a documentary credit.

The most popular term of payment in cash is by letter of credit (L/C). A letter of credit is a letter from one bank to another bank, by which a third party, usually customer is able to obtain money. There are some types of documentary letters of credit.

  A revocable letter of credit can be cancelled or changed without the seller’s agreement. As this doesn’t offer the seller much control over payment, this type of letter of credit is rarely used.

An irrevocable letter of credit can be cancelled or changed, but only with the agreement of all parties.

  A confirmed letter of credit is always irrevocable. If the seller feels that the risk of not receiving payment is still too high, for example because the buyer’s country’s economy is unstable, he can arrange for a bank in his own country to confirm the letter of credit (this bank is then known as the advising bank).If the advising bank agrees, the credit becomes a confirmed credit. Thus, a confirmed irrevocable letter of credit guarantees the payment for goods being exported.

 All letters of credit can be valid within a stipulated period of time. A letter of credit is safe in business transactions as it provides for the payment to be effected only against shipping documents: Invoice, original Certificate of Quality, Certificate of Origin, Insurance Policy. 

   

Opening / issuing bank                                 банк-эмитент

advising bank                                          банк, производящий выплату по     

                                                           аккредитиву

beneficiary                                              бенефициар, получатель по аккредитиву

                                    Types of letter of credit

revocable                                                  отзывной

irrevocable                                              безотзывный

confirmed                                               подтверждённый (аккредитив)

unstable                                                   неустойчивый, нестабильный

documentary credit                              документальный аккредитив

 

Task 2. Изучите данную схему.Have a look at the figure showing how payments by a letter of credit (L/C) are made:                                                                

(1)   Contract

 

Exporter

(5) Goods shipped

lmporter

 

(7) Payment                                                                    

   made if         ₍₄)   L/C forwarded

  documents                                                                                              (9)       

  in order                                                                                          Documents

                                                       (2) Application          forwarded and

                                                                         to establish L/C      applicant account

                                                                                                                   debited

(6) Documents

      presented

 

                              (3) L/C issued                        

 

Exporter's bank

(8) Documents forwarded and reimbursement claimed

Importer’s bank

 

Запишите каждый шаг от 1 до 9 по образцу.

Write what is done at every stage, from stage 1 to stage 9, like this:

                                                                                              

First the contract is made by an exporter and importer.

 

Then an application to establish a letter of credit is made.

Then………………………………………………………………