REAL STATES AND

SOLUTIONS TO
PRACTICING
LETTER OF CREDIT IN
VIETNAM
Nguyen Van Ha - 1311110189

Vu Mai Trang - 1411110628

Vu Thi Ha
Trang - 1411110651

Phung
Quang Huy 1411110291
DO YOU KNOW?
11-15% of international trade
utilizes L/C, over a trillion dollars
(US) each year

All foreign businesses dealing with

Vietnam have a tendency to use
confirmed, irrevocable L/Cs as a
payment method

US$8 billion is the loss of Vietnamese

 INTRODU
CTION
Section 1: Theoretical

Section 2: Real state.

Section 3: Potential risks to each

party.

Section 4: Case study

Section 5: Solutions
 SECTION 1:
THEORETICAL BASIS
LETTER OF
CREDIT THIRD
Issued by BANKS PARTY
& FINANCIAL INSTITUTIONS

APPLICANT
ISSUING
bank ADVISING bank

UCP
Uniform Customs &
Practice for
Documentary Credits
BENEFICIARY
 TYPES &
FEATURES
REVOCABLE LC
CAN BE CHANGED @ ANY TIME

IRREVOCABLE LC
CANT BE CHANGED & CANCELLED, EXCEPT
FOR SOME CASES
 TYPES &
FEATURES
CONFIRMED LC
A SECOND BANK AGREES TO PAY ON DEMAND
OF THE ISSUING BANK HIGHLY SECURE FOR
PAYMENT

UNCONFIRMED LC
IN CONTRAST WITH CONFIRMED LC,
GUARANTEED ONLY BY THE ISSUING BANK.
 TYPES &
FEATURES

TRANSFERABLE LC
THE BENEFICIARY IS SIMPLY AN INTERMEDIARY.
THE PAYMENT SHALL BE TRANSFERRED ALL OR
PARTLY.

UN-TRANFERABLE LC
TRANSFERENCE OF THE LC IS NOT ALLOWED
 TYPES &
FEATURES
AT SIGHT
PAYABLE ASA THE DOCUMENTATION HAS BEEN
PRESENTED & VERIFIED

DEFERRED (USANCE LC)

IN CONTRAST WITH AT SIGHT, THE PAYMENT
MAY BE PUT OFF FOR A CERTAIN PERIOD OF
TIME
 TYPES &
FEATURES
RED CLAUSE LC
ALLOW PARTIAL PAYMENT BEFORE SHIPPING.
RARELY OFFERED BY THE ISSUING BANK.

BACK-TO-BACK LC
USED IN A TRADE INVOLVING AN INTERMEDIARY.
MADE UP OF 2 LC:
+ 1 ISSUED BY THE BUYERS BANK
INTERMEDIARY
+ 1 ISSUED BY THE INTERMEDIARYS BANK
SELLER
 DOCUMENTATION
REQUIREMENTS
INVOICES PHYTOSANITARY CERTI

BILLS OF EXCHANGE LICENSES

INSPECTION CERTIFICATES BILLS OF LADINGS

C/O: CERTI OF ORIGIN BILLS OF LADING / AIRWAY

BILLS
EMBASSY LEGALIZATION INSURANCE POLICIES
SECTION 2:
REAL STATE
ETHODS OF PAYMENT IN VIETN
 REAL STATE
At present, sight L/Cs and L/Cs up to 60,
90, or 120 days are most common.

Most local banks have established customer

service centers to take care of L/Cs opened
at bank branches in an effort to provide
customers with equivalent services inside
the cities.

In 2006, the government changed a

regulation that required Vietnamese
companies to deposit 80 percent of the L/C
value prior to its opening at the bank. Banks
now collect the deposits from companies
based on creditworthiness. This deposit can
range from 20-100 percent of the L/C.
 SECTION 3:
POTENTIAL RISKS TO
EACH PARTY
 TO EXPORTER:
MAINLY FROM THE
IMPORTER
TO IMPORTERS
 TO THE BANK

Examination of the documents is the

main risk for banks due to the strict
compliance.

Banks are no experts regarding goods

and trade.

When there are discrepancies on the

credit, if a bank does not fulfill its
obligation to examine the documents in
a reasonable way, banks can be liable
for losses and damages.
SECTION 4:
CASE STUDY
CASE STUDY 1
TRADING PARTNERS FRAUD
Echopack INC & Vietnamese Firms

2016
CASE STUDY 1
TRADING PARTNERS FRAUD

Different
Signature

Real Delivery

HUNDREDS OF THOUSANDS USD LOSS

FOR VIETNAM
CASE STUDY 1

SOLUTIONS

Being CAUTIOUS

Being FULLY AWARED

Being INFORMED
CASE STUDY 2
BANKERS FRAUD

Nov
2011

HSBCs

Employee
CASE STUDY 2
BANKERS FRAUD

500
MIL VND

Commission
CASE STUDY 2

SOLUTIONS

PROCESS reviewed

BANK self-improved

DEALING promptly
SECTION 5:
SOLUTIONS
 BANK
Strengthen human resource
management, inspection and
supervision of compliance with the
regulations on management and use
of seals.

Report immediately to State Bank of

Vietnam and law enforcement
agencies to prevent further damage
and deal with the problems promptly.
 EXPORTERS
Discuss directly with their partners or
hold talks with business associations,
consulting firms, commercial sections
or embassies to select honest
partners.

Be cautious when striking the first

deal with a foreign business.
 IMPORTERS
Seek an injunction to prevent the
issuing or corresponding bank paying
on the basis that the beneficiary has
acted fraudulently.

Seek an injunction preventing the

seller from relying on falsified
documents.
USING UCP 600 L/C
Because UCP 600 standards are
internationally recognised its always
best to use letters of credit that are
covered by them.

If a letter of credit is subject to UCP it

will state this somewhere on it. It
might include a statement like This
letter of credit is subject to the latest
version of Uniform Customs and
Practice for Documentary Credits
published and updated by the
International Chamber of Commerce.
THANKS FOR LISTENING