Hi,

I have a hard time completing this exercise. It is based on the letter of credit. I have answered some questions but I am not able answer all of them.

FIN UAK1:F21BSPLAUS66WAXXX0687086568}

**{4:{177:Date and Time (YYMMDDHHMM):170903 0737}

**{451:acceptance/rejection:0}}

**---------------------------------------------------------------------------------------------------------------------

**{1:FIN MESSAGE/Session/OSNF01 BSPSPABRXXX 0687 086568}

**{2:Output Message Type700 issue of a documentary credit

**Input Time/MIR1600 960902BSPUS2766568524

**Received fromBSPSPABR

**Banco San Paolo

**Sao Paulo

**(branch)

**Output Date/time170903107370100710

**Priority/Delivery/Obsol.Normal}

**--------------------------------------------------------------------------------------------------------------------

**:27sequence of total:

**1/1

**:40Aform of documentary credit:

**IRREVOCABLE

**:20documentary credit no.:

**1015100009530

**:31Cdate if issue:

**170902

**:31Ddate and place of expiry:

**171016 SEATTLE, WA

**:50applicant:

**PRODUTOS ALIMETICIOS LTDA

**AVE DES CONQUISTADORS

**SAO PAULO, BRASIL

**:59beneficiary:

**COMMODITIES TRADING CO. INC.

**6300 MONTGOMERY ST

**KALISPELL, MT00101 USA

*:32Bcurrency code amount:

**currency code:USDUSDOLLAR

**amount: #99799.14#

**:41Davailable with/by-swift addr:

**BSPLAUS66

**BANCO SAN PAOLO

**LOS ANGELES AGENCY

**:42Cdrafts at:

**270 DAYS AFTER B/L DATE

**:42Adrawee - BIC:

**YOURSELVES

**:43Ppartial shipment:

**PERMITTED

**:43Ttransshipment:

**PROHIBITED

**:44Bfor transportation to:

**CFR, FROM ANY PORT OF CANADA OR USA TO SANTOS-SP PORT

**:44Clatest date of shipment:

**171006

**:45Adescr goods and/or services:

**ERVILHAS VERDES, CANADENSES STRICTLY IN ACCORDANCE WITH

**IMPORT PERMIT NR:0299-00/0677-5

**46Adocuments required:

**+SIGNED COMMERCIAL INVOICE IN TWO ORIGINALS AND TREECOPIES

CONTAINING COMPLETE DESCRIPTION OF THE GOODS AS WELL AS BNFS

**DECARATION STATING THAT IT IS IN ACCORDANCE WITH THE IMPORT

**PERMIT A.M. AND AMENDMENTS THERETO IF ANY

**+2/3 ORIGINAL PLUS THREE COPIES OF CLEAN ON BOARD BILL OF

**LADING CONSIGNED TO THE ORDER OF PRODUTOS ALIMETICIOS LTDA

**AND MARKED "FREIGHT PREPAID" SHOWING IN FIGURES AND WORDS THE

**AMOUNT OF FREIGHT PREPAID, INDICATING TRANSPORTING COMPANY

**AND VESSEL'S NAME, SHIPPING DATE AND B/L NUMBER

**+COPY OF BNFS' TELEX/FAX IN WHICH THEY HAVE ADVISED US AND ALSO

**THE APPLICANT QUOTING THE NR. OF THIS L/C WITHIN TWO WORKING

**DAYS AFTER SHIPPING DATE OF THE FOLLOWING INFORMATION:

**1) THE INVOICED CFR AMOUNT

**2) THE AMOUNT OF FREIGHT PREPAID

**3) THE DATE OF SHIPMENT

**4) B/L NUMBER

**5) TRANSPORTING COMPANY AND VESSEL'S NAME

**THE CONTENTS OF THIS MESSAGE MUST BE FULFILLED FOR INSURANCE PURPOSE

**+DRAFT IN DUPLICATE ISSUED BY BENEFICIARY DUE AT 270 DAYS AFTER

**B/L DATE DRAWN ON APPLICANT SHOWING THE NUMBER OF THIS L/C

**+BENEFICIARIES DECELARATION WHETHER THEY WILL OR NOT AVAIL

**THEMSELVES OF THE REMAINING BALANCE, IF ANY, AND IN THE LATTER

**CASE THEIR AGREEMENT TO ITS CANCELLATION

**+ORIGIN CERTIFIATE IN ORIGINAL AND TWO COPIES

**+PHITOSANITARY CERTIFICATE IN ORIGINAL AND TWO COPIES

**+PACKING LIST WITH CODE AND DATE OF PRODUCTION AND MATURITY

**IN TWO ORIGINALS AND TWO COPIES

**47Aadditional conditions:

**+INSURANCE WILL BE COVERED HERE

**+WILL NOT BE ACCEPTED ANY ADDITIONAL CHARGES EXCEPT FREIGHT

**PREPAID AMOUNT ON BILL OF LADING

**+THE DOCUMENTS MUST BE SENT TO US BY D.H.L. COURIER

**+THIS L/C COVERS FOB VALUE NOT EXCEEDING USD.80.679, 14 THE

**BALANCE IS ESTIMATE OF FREIGHT CHARGES

**+ON COMMERCIAL INVOICE MUST BE MENTIONED SEPARATELY THE

**VALUE FOB AND FREIGHT

**+IT IS MANDATORY THAT DOCUMENTS MUST BE PRESENTED TO BSPLAUS33

**SINCE REIMBURSEMENT MUST BE EFFECTED TO SAID BANK ONLY

**+THE DRAFT REQUESTED ON FIELD 46A MUST BE CONSIDERED AS

**ADDITIONAL DOCUMENT SO, THE BENEFICIARY MUST ISSUE TWO (2) SET

**OF DRAFTS DRAWN ON YOURSELVES AND ALSO DRAWN ON APPLICANT

**+THE BENEFICIARY MUST SENT ONE SET OF ORIGINAL DOCUMENTS

**TO PRODUTOS ALIMETICIOS LTDA BY COURIER WITHIN 08 (EIGHT)

**WORKING DAYS AFTER SHIPMENT AND BENEFICIARY'S CERTIFICATE TO

**THIS EFFECT IS REQUIRED

**+EXCEPT B/L OTHER REQUIRED DOCUMENTS CAN BE NEGOTIATED WITH

**COPIES

**+AS PER PREVIOUS AGREEMENT YR COST FOR CONFIRMATION OF THIS L/C

**ARE:

**ADVISE:USD40.00

**NEGOTIATION:0,10 FLAT, MINIMUM USD.75,00 PER NEGOTIATION

**CONFIRMATION:0.25PCT A QURTER OR FRACTION, MINIMUM

**ACCEPTANCE:2.25PCT PER YEAR

**:49confirmation instructions:

**CONFIRM

**:53Areimbursing bank - BIC:

**BSPMIUS33

**BANCO SAN PAOLO

**MIAMI, FL

**:78instructions to pay/acc/neg bk:

**+ON DUE DATE (I.E. 270 DAYS AFTER B/L DATE) FOR PAYMENT OF

**NEGOTIATED AMOUNT IN ACCORDANCE WITH TERMS AND CONDITIONS OF

**THIS L/C PLUS YR COMM/CHGS PLS CLAIM REIMBURSEMENT THRU BSPMUUS33

**TO WHOM WE WILL INSTRUCT ACCORDINGLY, QUOTING OUR L/C NUMBER

**+IT IS OBLIGATORY THAT ALL BANKING CHARGES RELATIVE THIS L/C

**MUST BE MENTIONED IN YOUR REMITTANCE LETTER INFORMING US

**THE VALUE DATE OF REIMBURSEMENT CLAIM

**+BANKING CHARGES (EXCEPT IN THE CASE OF CANCELLATION

**REGARDING NON NEGOTIATION OF DOCUMENTS) NOT MENTIONED IN

**YOUR REMITTANCE LETTER ARE NOT ACCEPTABLE

**+REIMBURSEMENT IS SUBJECT TO ICC URR 525

**:72sender to receiver information:

**EXCEPT SO FAR AS OTHERWISE EXPRESSLY STATED THIS L/C IS SUBJECT

**TO UCP DC (2007 REVISION) UCP NR 600 THIS SWIFT MESSAGE IS THE

**OPERATIVE INSTRUMENT AND NO CONFIRMATION FOLLOWS

**-}

**{5:{MAC:E19BD17F} Authentication Result

**{CHK:5FAED9763816}Checksum Trailer

**{DLM:}Delayed Message}

*End

_____ o _____

This L/C is in the SWIFT format

Banco San Paolo

Letter of Credit Analysis

Read carefully the entire Letter of Credit and answer the questions.

Write (record) the fields' numbers from where you found the answer, beside each answer:

a.Issuing bank

Banco San Paolo

b.Advising bank

BANCO SAN PAOLO:53A

c. Type of credit

IRREVOCABLE :40A

d. Buyer

PRODUTOS ALIMETICIOS LTDA :50

e. Seller

COMMODITIES TRADING CO. INC.:59

f.Settlement

g. Dates relevant to this credit

h. How many types of documents does the LC call for?

List all the documents required by this LC.

Commercial invoice

Bill of Landing

Packing List

Certificate of Origin

Inspection Certificate

Insurance Certificate

Health Certificate

Consular Invoice or legalized commercial Document

Draft or Bill of Exchange

i.Please specify the documents that can be prepared in the office and the documents you have to ask other organizations to prepare or certify them.

j.How do you get these documents?

k. What do you believe it is the biggest problem when some documents under LC are to be prepared by other organizations?

Not understanding the real purpose of letter of credit and also not being able to meet all the term and condition

ofletter of credit.

l.Does this LC require a DRAFT? What is another name for the draft?

m.This is a CONFIRMED Letter of Credit. Explain what a CONFIRMED LC is and which bank confirmed this LC.5 marks

n. Identify the type of the above Letter of credit and explain :

The steps of issuing this credit (you have to identify the parties from the LC) 5 marks

o.List 3 advantages and 2 disadvantages of an LC as a Method of Payment5 marks

Advantages

• Increasing export Coverage
• Mitigates default of the importer
• More favorable payment terms for importers

Disadvantages

• It is Expensive - exporters and importers have to pay high fees when choosing the letter of credit as a payment option
• It is Difficult : requires experienced stuff who possess certain amount of trade finance knowledge.