Q(1) About risk management but please focus on fiduciary risk and reputational risk and also

prohibited and permissible risk.

Fiduciary risk: Fiduciary risk can be caused by breach of contract by the Islamic bank. For example, the bank
may not be able to comply fully with the sharia requirements of various contracts. Inability to comply fully with Islamic
sharia either knowingly or unknowingly leads to a lack of confidence among the depositors and hence causes
withdrawal of deposits.Similarly, a lower rate of return than the market can also introduce fiduciary risk, when
depositors/investors interpret a low rate of return as breaching an investment contract or mismanagement of funds by
the bank (AAOIFI, 1999).

Reputational risk: Banks face essential reputational risk specifically during crisis times and the reputational
damage to banks takes several decades to repair. Reputation risk may be the most critical risk to handle compared
with other kinds of risks.

Prohibited risk: Must be avoided to ensure validity of contract.

When involves excessive risk (gharar jasim/fahish) and element of gambling

Risk in Existence (for example sale of an inexistent thing like crop or fruits on future basis);

Risk in Taking Possession (for example sale of a run-away camel or forcibly possessed commodity /
property);

Risk in Quantity (for example sale price or rent being unknown in a sale or lease contract);

Risk in Quality (for example type, quantity or specifications of the subject matter of contract being unknown);
and

Risk in Time of Payment (for example a deferred sale without fixing the period).

Permissible risk: Shariah Parameters to manage this type of risk

1.

The tools being adopted to manage the risks should not breach the principle of Al Ghunmu Bil Ghurm No
Risk, No Return and should aim at minimizing or lowering the risk;

2.

The tools should not involve excessive risk; and

3.

The tools themselves should be Shariah compliant so as to mitigate those risks which Shariah allows to
mitigate or avoid.

Q(2) Method of payment 4

METHODS OF PAYMENT IN INTERNATIONALTRADE

To succeed in todays global marketplace and win sales against International trade presents a spectrum of risk, which
causes uncertainty over the timing of payments Mrs. Charu Rastogi, Asst. Prof. between the exporter (seller) and importer
(foreign buyer).
For exporters, any sale is a gift until payment is received.
Therefore, exporters want to receive payment as soon as possible, preferably as soon as an order is placed or before the
goods are sent to the importer.
For importers, any payment is a donation until the goods are received.

Therefore, importers want to receive the goods as soon as possible but to delay payment as long as possible, preferably
until after the goods are resold to generate enough income to pay the exporter.

CASH IN ADVANCE / PREPAYMENTS

With cash-in-advance payment terms, the exporter can avoid credit risk because payment is received before the
ownership of the goods is transferred.
Wire transfers and credit cards are the most commonly used cash-in-advance options available to exporters.
However, requiring payment in advance is the least attractive option for the buyer, because it creates cash- flow
problems. Foreign buyers are also concerned that the goods may not be sent if payment is made in advance.
Thus, exporters who insist on this payment method as their sole manner of doing business may lose to competitors who
offer more attractive payment terms

LETTERS OF CREDIT

Letters of credit (LCs) are one of the most secure instruments available to international traders.
An LC is a commitment by a bank on behalf of the buyer Mrs. Charu Rastogi, Asst. Prof. that payment will be made to the
exporter, provided that the terms and conditions stated in the LC have been met, as verified through the presentation of all
required documents.
The buyer pays his or her bank to render this service.
An LC is useful when reliable credit information about a foreign buyer is difficult to obtain, but the exporter is satisfied with
the creditworthiness of the buyers foreign bank.
An LC also protects the buyer because no payment obligation arises until the goods have been shipped or delivered as
promised.

DOCUMENTARY COLLECTIONS/DRAFTS/BILLS OFEXCHANGE)

A documentary collection (D/C) is a transaction whereby the exporter entrusts the collection of a payment to the remitting
bank (exporters bank), which sends documents to a collecting bank (importers bank), along with instructions for
payment.
Funds are received from the importer and remitted to the exporter through the banks involved in the collection in
exchange for those documents.
D/Cs involve using a draft that requires the importer to pay the face amount either at sight (document against payment) or
on a specified date (document against acceptance).
The draft gives instructions that specify the documents required for the transfer of title to the goods. Although banks do
act as facilitators for their clients, D/Cs offer no verification process and limited recourse in the event of non-payment.
Drafts are generally less expensive than LCs.

OPEN ACCOUNT

An open account transaction is a sale where the goods are shipped and delivered before payment is due, which is usually
in 30 to 90 days.
Obviously, this option is the most advantageous option to the importer in terms of cash flow and cost, but it is
consequently the highest risk option for an exporter.
Because of intense competition in export markets, foreign buyers often press exporters for open account terms since the
extension of credit by the seller to the buyer is more common abroad. Therefore, exporters who are reluctant to extend
credit may lose a sale to their competitors.
However, the exporter can offer competitive open account terms while substantially mitigating the risk of non-payment by
using of one or more of the appropriate trade finance techniques, such as export credit insurance.

Q(3)Incoterms explanation about incoterms. 13 incoterms

INCOTERMS

The Incoterms (International Commercial Terms) rules are an internationally recognized standard and are used
worldwide in international and domestic contracts for the sale of goods.

First published in 1936, Incoterms rules provide internationally accepted definitions and rules of interpretation for most
common commercial terms.

They help traders avoid costly misunderstandings by clarifying the tasks, costs and risks involved in the delivery of goods
from sellers to buyers.

INCOTERMS
DAT
DAP*

EXW

Applicant/Importer
Beneficiary/Exporter

FCA
FAS
FOB

Transportation
to Dock

CFR
CIF
CPT
CIP

Dock of
Exportation

*Replaced

Import Duty

Dock of
Importation

Incoterms 2000 rules DAF, DES, DEQ and DDU

1) EXW Ex WORKS (named place of delivery)

The seller makes the goods available at its premises.

The seller is not responsible for loading the goods on the vehicle provided by the buyer and transporting it to a port or any
other destination (unless otherwise agreed).

The buyer bears all costs and risks related to collecting the goods and transporting them to the final destination.

This term places the maximum obligation on the buyer and minimum obligations on the seller.

2) FCA FREE CARRIER (named place of delivery)

The seller hands over the goods, cleared for export, into the disposal of the first carrier (named by the buyer) at the
named place.

The seller pays for carriage to the named point of delivery, and risk passes when the goods are handed over to the first
carrier.

The term carrier means any person by whom or in whose name a contract of carriage by riad, rail, air, sea, or a
combination of modes has been made.

3) CPT CARRIAGE PAID TO (named place of destination)

CPT means that the seller delivers the goods to the carrier or to the person nominated by the seller at an agreed place (if
any such place is agreed between the parties) and that the seller must contract for and pay the costs of carriage
necessary to bring the goods to the named place of destination.

Risk transfers to buyer upon handing goods over to the first carrier.

4) CIP CARRIAGE AND INSURANCE PAID TO (named place of destination)

CIP means that the seller delivers the goods to the carrier or to the person nominated by the seller at an agreed place (if
any such place is agreed between the parties) and that the seller must contract for and pay the costs of carriage
necessary to bring the goods to the named place of destination.

The containerized transport/multimodal equivalent of CIF. Seller pays for carriage and insurance to the named destination
point, but risk passes when the goods are handed over to the first carrier.

5) DAT DELIVERED AT TERMINAL (named terminal at port or place of destination)

DAT means that the seller delivers when the goods, unloaded from the arriving means of transport, are placed at the
disposal of the buyer at a named terminal at the named port or place of destination.

"Terminal" includes any place, whether covered or not, such as factory, warehouse, container yard or road, rail or air
cargo terminal.

The seller bears all risks involved in bringing the goods to and unloading goods at the terminal at the named port or place
of destination.

6) DAP DELIVERED AT PLACE (named place of destination)

DAP means that the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of
transport available for unloading at the named place of destination.

The seller bears all risks involved in bringing the goods to the named place.

7) DDP DELIVERED DUTY PAID (named place of destination)

DDP means that the seller delivers the goods when they are placed at the disposal of the buyer, cleared for import on the
delivering means of transport ready for unloading at the named place of destination. Opposite of EXW.

The seller bears all the costs and risks involved in bringing the goods to the place of destination and has an obligation to
clear the goods not only for export but also for import, to pay any duty for both export and import and to carry out all
customs formalities.

Represents the maximum obligation for the seller.

8) FAS Free Alongside Ship (named port of shipment)

The seller must place the goods alongside the ship at the named port. The seller must clear the goods for export.

The risk of loss of or damage to the goods passes when the goods are alongside the ship, and the buyer pays all costs
from that moment onwards.

FAS requires the seller to clear the goods for export, where applicable, and pay the cost of loading the goods.

However, the seller has no obligation to clear the goods for import, pay any import duty or carry out any import customs
formalities.

9) FOB FREE ON BOARD (named port of shipment)

The seller must load the goods on board the vessel nominated by the buyer.

Cost and risk are divided when the goods are actually on board of the vessel (this rule is new!).

The seller pays the cost of loading the goods.

The seller must clear the goods for export.

The buyer must instruct the seller the details of the vessel and the port where the goods are to be loaded, and there is no
reference to, or provision for, the use of a carrier or forwarder.

 10) CFR COST & FREIGHT (named port of destination)

CFR means that the seller delivers the goods on board the vessel or procures the goods already so delivered.

The seller must contract for and pay the costs and freight necessary to delivering the goods to the named port of
destination.

The risk of loss of or damage to the goods passes when the goods are on board the vessel.

Insurance/Takaful is the buyers responsibility as well as stevedore charges at the named port of destination.

11) CIF COST, INSURANCE AND FREIGHT (named port of destination)

Exactly the same as CFR except that the seller must in addition procure and pay for the insurance.

Maritime transport only.

12) DAF Delivered At Frontier (named place of delivery)

This term can be used when the goods are transported by rail and road.

The seller pays for transportation to the named place of delivery at the frontier.

The buyer arranges for customs clearance and pays for transportation from the frontier to his factory.

The passing of risk occurs at the frontier.

13) DES Delivered Ex Ship (named port of delivery)

Where goods are delivered ex ship, the passing of risk does not occur until the ship has arrived at the named port of
destination and the goods made available for unloading to the buyer.

The seller pays the same freight and insurance costs as he would under a CIF arrangement.

Unlike CFR and CIF terms, the seller has agreed to bear not just cost, but also Risk and Title up to the arrival of the
vessel at the named port.

Costs for unloading the goods and any duties, taxes, etc are for the Buyer.

14) DEQ Delivered Ex Quay (named port of delivery)

This is similar to DES, but the passing of risk does not occur until the goods have been unloaded at the port of
destination.

15) DDU Delivered Duty Unpaid (named place of destination)

This term means that the seller delivers the goods to the buyer to the named place of destination in the contract of sale.

The goods are not cleared for import or unloaded from any form of transport at the place of destination.

The buyer is responsible for the costs and risks for the unloading, duty and any subsequent delivery beyond the place of
destination. However, if the buyer wishes the seller to bear these costs it needs to be explicitly agreed upon in the
contract of sale.

4)Ucp600 explanation

UCP 600 came into effect on July 1, 2007. It contains significant changes, including:

A reduction in the number of articles from 49 to 39

Under UCP 600 all LC are irrevocable.

UCP600 is now widely accepted throughout the world, and letters of credit are generally subject to these standards and
procedures.

New articles on 'Definitions' and 'Interpretations' to provide more clarity and precision in the rules

The replacement of the phrase 'reasonable time' for acceptance or refusal of documents by a firm period of five banking
days

New provisions which allow for the discounting of deferred payment credits

A definitive description of negotiation as 'purchase' of drafts of documents.

The new UCP 600 also contains within the text the 12 Articles of the eUCP, ICC's supplement to the UCP governing
presentation of documents in electronic or part-electronic form.

5) What is real issue in bay al dayn.

Bay al-dayn
The main issue here is, whether is is permissible to sell a confirmed debt which is backed by a non ribawi
goods at discounted price?
Mainstream Islamic scholars have put a plug on the possibility of earning profit by confirming that any sale of debt (Bayal-dayn) or transfer of debt (Hawalat-al-dayn) must be at face value. This means in the above question, when the bank buys the
instrument of debt (shahada-al-dayn) from the original buyer, it is not entitled to any discount. Doors of riba are closed shut by
disallowing any difference between what it pays (purchase price of the instrument) and what it receives on maturity (its maturity
value). Notwithstanding the clear verdict against such transaction, some Islamic banks have been offering Islamic bill discounting
products. They essentially treat debt as any other physical asset that can be traded at a negotiated price.
In fact, the prohibition of Bay-al-dayn is a logical consequence of the prohibition of "riba" or interest. A "debt" receivable in
monetary terms corresponds to money, and every transaction where money is exchanged from the same denomination of money,
the price must be at par value. Any increase or decrease from one side is tantamount to "riba" and can never be allowed in Shariah.
With regards to Shariah issue on gharar (uncertainty) in this kind of sale, I do not think that it is not a major issue in the
arguments. It is because in the present day, sale of debts by banks, we are not talking off a debt by an unknown (majhul) person
with an unknown credit standing. The debt intended to be sold are generated by financing provided through the sale-based modes
to governments and well-known corporations and firms having a high credit rating. It is rather asset-based and well-secured. Its
payment is hence almost certain. Therefore, there is no question of any gharar (uncertainty). The past ruling of the Islamic jurist
given in entirely different circumstances, does not, therefore seem to fit the changed realities of modern times.
The Islamic Fiqh Academy of Jeddah which is the largest representative body of the Shariah scholars and is represented
by all the Muslim countries, in its 16th convention at Mekka on 5-10th January 2002 has re-discussed the issue and stated that sale
of debt is prohibited including the following:a) Sale of debts to debtors with a deferred payment plan exceeding debt amount as this can be considered as Riba al-Fadl and
Riba an-Nasiah. (Jadwalah ad-Dayn)
b) Sale of debts to a third party with a deferred payment plan whether the debt is paid with the same type of kind or not; as this can
be considered as sale of debt with debt (bai al-kali bi al-Kali which is clearly prohibited by Prophet Muhammad)
According to the academy, commercial papers such as cheques, promissory notes and bill of exchange cannot be sold at
a discount as there is element of Riba.
It is not allowed to deal, issue, distribute or trade with Riba based Bonds because the element of Riba is present.

It is not allowed to deal with debt notes in the secondary market as it involves discounts and sale of debts to third parties which has
Riba elements.
The Islamic Fiqh Academy of Jeddah which is the largest representative body of the Shariah scholars and is represented
by all the Muslim countries, in its 16th convention at Mekka on 5-10th January 2002 has re-discussed the issue and stated that sale
of debt is prohibited including the following:a) Sale of debts to debtors with a deferred payment plan exceeding debt amount as this can be considered as Riba al-Fadl and
Riba an-Nasiah. (Jadwalah ad-Dayn)
b) Sale of debts to a third party with a deferred payment plan whether the debt is paid with the same type of kind or not; as this can
be considered as sale of debt with debt (bai al-kali bi al-Kali which is clearly prohibited by Prophet Muhammad)
According to the academy, commercial papers such as cheques, promissory notes and bill of exchange cannot be sold at
a discount as there is element of Riba.
It is not allowed to deal, issue, distribute or trade with Riba based Bonds because the element of Riba is present.
It is not allowed to deal with debt notes in the secondary market as it involves discounts and sale of debts to third parties which has
Riba elements.

6)What is command syariah contract that we use. Murabahah tawaruq wakalah kafalah .
Murabahah
Tawarruq
Wakalah

Wakalah refers to a contract in which a party (muwakkil) authorizes another party as his agent (wakil) to perform a particular
task, in matters that may be delegated, either voluntarily or with imposition of a fee.

Literally - Agency, representation, proxy, mandate, authorization, delegation, empowerment etc.

Technically - The appointment of someone to take over the appointers affairs on his/her behalf for the purpose of
accomplishment of certain tasks

PILLARS OF AL-WAKALAH

Wakil - The authorized agent, representative, proxy, trustee

Muwakkil - Authorizer, mandatory, client, principal

Muwakkal Bih - Things or subject matter that is being entrusted for, or the business deals involved

Sighah - Ijab (Offer) - Qabul (Acceptance)

FLOWS OF AL-WAKALAH
DEFINITION

Ijab (Offer)

EVIDENCES

PILLARS

TYPES

Muwakkil.
(Authorizer, mandatory,
client, principal)

Muwakkal Bih
(Things or
subject matter)

Wakil
(authorized agent,
representative, proxy)

CONDITIONS

APPLICATION
Qabul (Acceptance)

TYPES OF AL-WAKALAH
1) Wakalah Mutlaqah

Unlimited Agency/ Unrestricted Wakalah

A Wakalah contract that is not restricted to any conditions except for those that are permitted in Islam
Not confined to certain circumstances or time limit.

2) Wakalah Muqayyadah

Limited Agency/ Restricted Wakalah

A Wakalah contract that is restricted or confined with certain conditions that are legitimized by Islam
Bounded by special circumstances or time limit

Kafalah

7) What is your understanding unconfirmed LC. What?

-Untrusting a bank.
Unconfirmed Letter of Credit
Definition:

A letter of credit which has not been guaranteed or confirmed by any bank other than the bank that opened it. The advising bank
merely informs the beneficiary of the letter of credit terms and conditions.

Unconfirmed credit (the irrevocable credit not confirmed by the advising bank)
In an unconfirmed credit, the buyer's bank issuing the credit is the only party responsible for payment to the seller. The seller's
advising bank pays only after receiving payment from the issuing bank. The seller's advising bank merely acts on behalf of the
issuing bank and, therefore, incurs no risk.
Irrevocable unconfirmed letter of credit: Bears payment undertaking of a single bank, the Issuing Bank. This type of letter of credit shields against buyer
risk. It is also used when a letter of credit is a requirement of an exchange regime or import control regime in a country.
Irrevocable confirmed letter of credit: Bears the further payment undertaking of another bank, usually the advising bank, called the Confirming Bank
here since it adds its confirmation to the letter of credit. In addition to buyer risk, this type also protects against country risk. This may also be used if
the issuing bank is of unknown or doubtful standing to the seller.

Unconfirmed LC

A letter of credit forwarded by the Advising bank directly to the exporter without adding its own undertaking to make payment or accept
responsibility for payment in the future.

8) Calculation -smua product ad calculation. Not give it formula

-LC
-Import "cost +profit"
-Bay al dayn "discounting"
-Calculation and definition every single product.

9) Research about (function/ explanation)

-matrade.
Main Activities

To promote, assist and develop Malaysia's external trade with particular emphasis on the export of manufactured and semi-manufactured
products and on a selective basis, imports

To formulate and implement a national export marketing strategy to promote the export of manufactured and semi-manufactured products
To undertake commercial intelligence and market research and create a comprehensive database of information for the improvement and
development of trade

To organise training programmes to improve the international marketing skills of the Malaysian exporters
To enhance and protect Malaysia's international trade interests abroad
To represent Malaysia in any international forum in respect of any matter relating to trade
To advise government on matters affecting or in any way connected with trade and to act as the agent of the Government or for any person,
body or organisation on such matters

-Exim bank.

ROLE OF EXIM BANK

1.Financing of exports and imports of goods and services in INDIA and also in third countries.
2.Financing of Ex&IM machinery and equipment on lease basis.
3.Financing of joint ventures in foreign countries
4.Providing loans to Indian parties to enable them to contribute to the share capital of joint venture of foreign countries
5.Undertake limited merchant banking such as -underwriting of stock shares bonds or debentures of companies engaged in exports
and imports

-ITFC
Functions: To fulfil its purpose, the entity will undertake the following functions:

Assist, alone or in cooperation with other providers of funds, in the financing of trade, utilizing such financial instruments and mechanisms
as the entity deems appropriate in each instance.

Promote and encourage intra-trade among member countries.

Facilitate access of member countries and enterprises, whether public or private, to private and public capital, domestic and foreign,
including access to capital markets.

Stimulate the development of investment opportunities conducive to the flow of private and public capital, domestic and foreign, into
investments in the member countries to enable them enhance their export capabilities.

Develop and diversify financial instruments and products for trade financing.

Provide technical assistance and training to banks and private and public institutions involved in trade finance and promotion in member
countries.

Carry out any other activity or function that may be relevant or conducive to the attainment of its purpose.

-swift

10) What is meaning of letter of guarantees-bank guarantee

A letter of guarantee or Bank Guarantee (BG) is a contract made between one party and another whereby the first party
agrees to discharge the liability of a third party in case of a default by the third party.

The letter of guarantee constitutes an undertaking to pay an agreed sum if the customer fails or defaults in fulfilling his
obligations under the terms of the guarantee.

The guarantee is a contingent liability of the guarantor.

Characteristics:
a)

There are three parties in a guarantee:

Guarantor or Obligator

Debtor and Beneficiary

Creditor

b)

The bank undertakes to pay on demand the sum specified in the guarantee

c)

It has a defined term and claim period

d)

It can be issued locally or internationally

Letter of Guarantee-i or Bank Guarantee-i

Bank Guarantee-i is an irrevocable obligation in the form
of written undertaking of a Bank to pay an agreed sum,
in case of default by a third party in fulfilling their
obligations under the terms of the Bank Guarantee-i,
under the concept of Kafalah.
Kafalah is a guarantee or obligation undertaken by the
guarantor to fulfill the obligations of another party
towards a third person.
Bank Guarantee Formula:

Letter of Guarantee: Example

Letter of Guarantee value: RM 1 million
Banks commission :
1% p.a.
Period of guarantee :
90 days
Bank Guarantee-i (BG-i):
1,000,000 x 1 x 90
36500
= RM 2,465.75
BG-i Documents:
Indemnity Form
Bank Guarantee

11) What is the type of LC

Back-to-Back LC

A back-to-back DC occurs when a trader uses an already existing, non-transferable DC, issued in his favor, as collateral to obtain a new
DC from another bank in favor of the actual supplier of the goods.

Under back-to-back deals two separate DCs are involved, that is an inward (export) DC is issued by the buyer in favor of the trader and, an
outward (import) DC opened by the trader in favor of the supplier.

An alternative to the transferrable letter of credit.

A back-to-back DC occurs when a trader uses an already existing, non-transferable DC, issued in his favor, as collateral to obtain a new
DC from another bank in favor of the actual supplier of the goods.

Under back-to-back deals two separate DCs are involved, that is an inward (export) DC is issued by the buyer in favor of the trader and, an
outward (import) DC opened by the trader in favor of the supplier.

Confirmed LC

A second guarantee, in addition to a letter of credit, that commits to payment of the letter of credit.

A confirmed letter of credit is typically used when the issuing bank of the letter of credit may have questionable creditworthiness
and the seller seeks to get a second guarantee to assure payment.

Additional charges applicable.

Unconfirmed LC

A letter of credit forwarded by the Advising bank directly to the exporter without adding its own undertaking to make payment or
accept responsibility for payment in the future.

Irrevocable LC

An irrevocable letter of credit cannot be amended or cancelled without the consent of the issuing bank, the confirming bank, if any,
and the beneficiary.

The payment is guaranteed by the bank if the credit terms and conditions are fully met by the beneficiary.

Under UCP 600 all LC are irrevocable.

Revolving LC

When a letter of credit (L/C) is specifically designated "revolving letter of credit", the amount involved when utilized is reinstated,
that is, the amount becomes available again without issuing another L/C and usually under the same terms and conditions.

Used for regular shipments of the same goods.

Avoids the need for unnecessary repetition of opening or amending letters of credit.

Can revolve in relation to time or value:

If the credit is time revolving once utilized it is re-instated for further regular shipments until the credit is fully drawn.

If the credit revolved in relation to value, once utilized and paid, the value can be reinstated for further drawing.

Transferable LC

A transferable DC is a credit under which the primary beneficiary can request the bank, specifically authorized in the credit as a
transferring bank, to make the DC available in whole or in part, to one or more second beneficiary (3rd parties).

In doing so, the beneficiary transfers his right to perform under the DC to a third party the so-called second beneficiary.

A middleman (1st seller), who is not the producer of the merchandise usually requests this form of credit. His role is to act as an
agent for the buyer or original seller (exporter or 2nd seller), or both.

The first beneficiary is usually a middleman / broker (1st seller) who does not supply the goods and wishes to transfer part or all of
his rights and obligations to a second beneficiary (exporter or 2nd seller). The middleman does not have to open a separate DC.

Standby LC

The stand-by credit is a DC whereby the issuing bank undertakes to reimburse a beneficiary in the event of default by the
applicant in the performance of an obligation.

While the function of the normal commercial DC is to assure payment for performance on the part of the beneficiary, the stand-by
credit differs in that it protects the beneficiary in the case of default.

It has the inherent qualities of a payment guarantee, but the wording conforms to that of other DCs.

The beneficiary triggers the credit by submitting documents claiming non-performance in terms of an obligation on the part of the
applicant.

Wikipedia

Import/export The same credit can be termed an import or export LC[4] depending on whose perspective is considered. For the
importer it is termed an Import LC and for the exporter of goods, an Export LC.

Revocable The buyer and the bank that established the LC are able to manipulate the LC or make corrections without informing or
getting permissions from the seller. According to UCP 600, all LCs are irrevocable, hence this type of LC is obsolete.

Irrevocable Any changes (amendment) or cancellation of the LC (except it is expired) is done by the applicant through the issuing
bank. It must be authenticated and approved by the beneficiary.

Confirmed An LC is said to be confirmed when a second bank adds its confirmation (or guarantee) to honor a complying
presentation at the request or authorization of the issuing bank.

Unconfirmed This type does not acquire the other bank's confirmation.

Transferrable The exporter has the right to make the credit available to one or more subsequent beneficiaries. Credits are made
transferable when the original beneficiary is a middleman and does not supply the merchandise, but procures goods from suppliers and
arranges them to be sent to the buyer and does not want the buyer and supplier know each other.
The middleman is entitled to substitute his own invoice for the supplier's and acquire the difference as profit.
A letter of credit can be transferred to the second beneficiary at the request of the first beneficiary only if it expressly states that
the letter of credit is "transferable". A bank is not obligated to transfer a credit.
A transferable letter of credit can be transferred to more than one alternate beneficiary as long as it allows partial shipments.
The terms and conditions of the original credit must be replicated exactly in the transferred credit. However, to keep the workability
of the transferable letter of credit, some figures can be reduced or curtailed.

Amount
Unit price of the merchandise (if stated)
Expiry date
Presentation period

Latest shipment date or given period for shipment.

The first beneficiary may demand from the transferring bank to substitute for the applicant. However, if a document other than the
invoice must be issued in a way to show the applicant's name, in such a case that requirement must indicate that in the
transferred credit it will be free.
Transferred credit cannot be transferred again to a third beneficiary at the request of the second beneficiary.

Untransferable A credit that the seller cannot assign all or part of to another party. In international commerce, all credits are
untransferable.

Deferred / Usance A credit that is not paid/assigned immediately after presentation, but after an indicated period that is
accepted by both buyer and seller. Typically, seller allows buyer to pay the required money after taking the related goods and
selling them. Maturity day.

At Sight A credit that the announcer bank immediately pays after inspecting the carriage documents from the seller.

Red Clause Before sending the products, seller can take the pre-paid part of the money from the bank. The first part of the
credit is to attract the attention of the accepting bank. The first time the credit is established by the assigner bank, is to gain the
attention of the offered bank. The terms and conditions were typically written in red ink, thus the name.

Back to Back A pair of LCs in which one is to the benefit of a seller who is not able to provide the corresponding goods for
unspecified reasons. In that event, a second credit is opened for another seller to provide the desired goods. Back-to-back is
issued to facilitate intermediary trade. Intermediate companies such as trading houses are sometimes required to open LCs for a
supplier and receive Export LCs from buyer.

fatanah
1)confirm lc 2)transferable lc 3)back to back lc 4)red clause lc 5)revolving lc 6)standby lc

12) And what is characteristics of Lc

-revocable/Irrevocable
-confirmation
-negotiating
-transferrable