Question

Please answer your client’s question about this LC?

1)     Who is the advising bank?

2)     Who is the issuing bank?

3)     Can importer cancel this LC?

4)     Can your client ship 70 computers at the time (two shipments)?

5)     Can this order be shipped from Vancouver?

6)     Your client needs 6 months to manufacture 140 laptops. How do you solve this issue?

7)     What part will confirm this LC? Is it mandatory?

8)     Can exporter present the documents in February 2021?

Export Documentary Credit in SWIFT Format

·        TO: ROYAL BANK OF CANADA - TORONTO

·        FROM: SAUDI ARABIAN MONETARY AGENCY, RIYADH SAUDI ARABIA

·        IRREVOCABLE DOCUMENTARY

·        CREDIT NUMBER: 98765

·        DATE OF ISSUE: 19/07/2020

·        DATE AND PLACE OF EXPIRY: 19/02 /2021, TORONTO

·        Applicant: AFZAL TRADING 785-34 PORT SAID ST. RIYADH 4S89 SAUDI ARABIA

·        BENEFICIARY: TORONTO CAMERA COMPANY 7 2875 EVANS AVENUE, SUITE 501 ETOBICOKE, ONTARIO M9C IAJ CANADA

·        CURRENCY CODE, AMOUNT: USD 100,000.00

·        DRAFTS AT: 90 DAYS FROM BILL OF LADING DATE

·        DRAWEE: ROYAL BANK OF CANADA, INTERNATIONAL TRADE CENTRE, 180 WELLINGTON ST. WEST, TORONTO, ONTARIO M5J IJ1, CANADA

·        PARTIAL SHIPMENT: ALLOWED

·        TRANSHIPMENT: NOT ALLOWED

·        LOADING ON BOARD / DISPATCH TAKING IN CHARGE AT/ FROM ANY EAST COAST CANADIAN PORT FOR TRANSPORTATION TO JEDDAH PORT, SAUDI ARABIA

·        LATEST DATE OF SHIPMENT: 19/09/2020

·        DESCRIPTION OF GOODS AND/OR SERVICES: 140 Laptops Model ABC

·        UNIT PRICE: $700 US

·        CLEAN ON-BOARD OCEAN BILL OF LADING MADE OUT TO THE ORDER OF ISSUING BANK

·        ALL DOCUMENTS MUST MENTION IMPORT PERMIT#24680

·        CONFIRMATION REQUIREMENT: ADD YOUR CONFIRMATION

Answer 1

Here it is very important that we first understand the commercial letter of credit in international transactions . This is an international transaction as it is taking place between a buyer in Saudi Arabia and a Seller in Canada . The instrument used for financial transaction here is Letter of Credit . Here two banks are involved one is an issuing bank which on behalf of the customer in Saudi Arabia authorises the advising bank to make payment to the seller or beneficiary . Now as is clear from this clarification :

1. The advising bank here is Royal Bank of Canada - Toronto

2. The issuing bank here is : Saudi Arabian Monetary Agency , Riyadh , Saudi Arabia

3 . Can Importer cancel this LC : This is not possible because if we read the third line of LC it says irrevocable documentary which means it cannot be cancelled without the consent of issuing bank , advising bank and the beneficiary . So an importer cannot cancel it .

4 . Can your client ship 70 computers at the time ( Two Shipments) ? Here if see the partial shipment clause in the LC it is written allowed it means 70 computers can be shipped at the time .