CM4

• Letters of Credit

  • Shall be negotiated in accordance with the terms and conditions set forth in the L/C
  • Shall be governed by the Uniform Customs and Practices on Documentary Credits
• Negotiation Procedures for Exporters

  Exporters shall negotiate their bill of exchange/account with the AAB or OBU along with the bill of lading (B/L)/airway bill (AWB) and other required documents
• Letter of Credit (L/C) opening

  1. All L/Cs must be opened on or before the date of shipment

  2. Only one L/C should be opened for each import transaction
• Documents Against Payment 


  1. AABS advises the importer of the receipt of the complete original shipping documents and releases them upon receipt of payment

  2. AABS remits payment to the supplier through the correspondent bank abroad
• Commodity exports are allowed without restriction except for certain regulated or prohibited commodities
• Regulated Commodities


  • Commodities the exportation of which requires clearances/permits from appropriate government agencies
• Direct Remittance

  AABS and AAB-forex corps may service applications for direct remittance of import payments within 29 calendar days after B/L or AWB shipment date
• Modes and Currency of Payment for Exports


  Payments may be made under modes like Letter of Credit (L/C), Documents Against Payment (D/P), Documents Against Acceptance (D/A), Open Account (O/A) arrangement
• Amendments of L/Cs need not be referred to the BSP for prior approval
• Documents Against Acceptance and Open Account Arrangement


  1. Under D/A arrangement, original shipping documents are released to the importer upon the importer's acceptance of the seller's bill of exchange

  2. Under O/A arrangement, documents are released by the seller directly to the importer upon the importer's promise to pay at some future date
• The BSP encourages commodity exports which generate foreign exchange earnings for the country
• Freely Exportable Commodities


  • Commodities the exportation of which is neither regulated nor prohibited
• The BSP shall not be asked to intervene in the clearing of balances from payments for exports to ASEAN countries
• Export Declaration


  All export shipments shall be covered by an Export Declaration using the prescribed form
• UCP 600 aims to standardize international trade, reduce risks, and govern trade
• Export negotiation procedures

  Negotiate bill of exchange/account with AAB or OBU along with bill of lading (B/L)/airway bill (AWB), signed commercial invoice, and other required documents
• Back-to-back LCs involve two LCs to conceal the ultimate seller's identity from the ultimate buyer
• UCP 600 is a set of rules agreed by the International Chamber of Commerce for finance institutions issuing Letters of Credit to help finance trade
• Letters of credit are a common method of payment in international trade
• UCP 600 rules are voluntarily incorporated into contracts and must be specifically outlined in trade finance contracts to apply
• Types of Letters of Credit

  • Documentary
  • Standby
  • Irrevocable/revocable
  • Transferable
  • Back-to-back
  • Revolving
  • Sight Credit or Usance Credit
• Irrevocable LC offers more security as it cannot be changed or cancelled without agreement from all parties
• International Standard Banking Practice for the Examination of Documents under Documentary Credits) assists in understanding document compliance with Letters of Credit terms
• Currencies

  • United States (USD) Dollar
  • Japan (JPY) Yen
  • United Kingdom (GBP) Pound
  • Hong Kong (HKD) Dollar
  • Switzerland (CHR) Franc
  • Canada (CAD) Dollar
  • Singapore (SGD) Dollar
  • Australian (AUD) Dollar
  • Saudi Arabia (SAR) Riyal
  • Brunei (BND) Dollar
  • Kuwait (KWD) Dinar
  • Indonesia (IDR) Rupiah
  • Thailand (THB) Baht
  • United Arab Emirates (AED) Dirham
  • European Union (EUR) Euro
  • South Korea (KRW) Won
  • China (CNY) Yuan
• Transferable LC allows the bank to transfer the sum specified to another party at the request of the original beneficiary
• UCP 600 replaced UCP 500

  1st July 2007
• Standby LC operates more like a demand guarantee and is triggered by nonperformance
• Revolving LC can cover multiple shipments and can be renewed for amount or time, useful for regular shipments from the same seller
• Letter of Credit offer security of payment and receipt of goods in international trade
• UCP 600 was created by industry experts and mandated by the Banking Commission
• UCP 600 allows flexibility for international parties involved
• Credit renewal


  Renewed either as to the amount or as to the time it is available, often used for regular shipments from the same seller over a period of time
• Types of L/Cs

  • Confirmed L/C
  • Silent Confirmed L/C
• Sight Credit


  LCs paid "at sight" of compliant documents by the bank
• Silent Confirmed L/C


  Advising bank adds its confirmation to the Provisional Goods Declaration
• If the Bureau accepts a provisional goods declaration, the duty treatment of the goods shall not be different from that of goods with complete declaration
• Goods Declaration and Period of Filing


  Format conforming with international standards, limited data required for assessment and collection of duties and taxes, electronic lodgment required, supporting documents necessary for customs control, translation not required except when necessary, must be lodged within (15) days from the date of discharge of the last package from the vessel or aircraft, period may be extended on valid grounds, amendment permitted under certain conditions
• Confirmed L/C


  Confirmation usually requested if the seller is concerned about the creditworthiness of the issuing bank and/or the buyer's country risk
• Types of LCs

  • Sight Credit
  • Usance Credit
• Provisional Goods Declaration


  Allows lodging of incomplete goods declaration with an undertaking to complete the information or submit supporting documents within a specified period