General

• How does the refrigerated container maintain its goods’ temperature?

  Every reefer has an integral refrigeration unit which rely on external power, such as electrical power points at a land-based site, a container ship, or on quay. While a reefer is being transported on a trailer or a train, they can be powered from gen set which attached to the reefer container. Every refrigerated container is able to control temperature from -15o C up to 35o C

• What is Letter of Credit or L/C?

  An international payment method which allows exporter to receive payment without expecting any updates about their goods arrival to be accepted by their buyer or importer. Letter of Credit is issued to facilitate all the involved stakeholders.

• Who are the stakeholders involved in L/C?

  • Applicant, an importer or buyer who apply for an L/C
  • Beneficiary, an exporter or seller who receive an L/C
  • Issuing bank, a bank which issue the L/C
  • Advising bank, a correspondent bank (agent) which proceed the L/C to the beneficiary. Advising bank is not responsible for the content of the L/C
  • Confirming bank, a bank which confirming the request from the issuing bank and fully guarantee the payment
  • Paying bank, a bank which appointed on the L/C to pay the bill
  • Carrier, a freight forwarding company which transport goods via road, sea, or air

• How to make a payment with L/C?

   

  • Importer or buyer send a request to their issuing bank to issue an L/C on behalf of their seller / exporter

   

  In this case, the importer acts as an opener. After fulfilling the requirement to import goods, their issuing bank will do a currency contract with the importer and issue the L/C on behalf of the importer. The issuing of an L/C is conducted by one of the advising banks which afterwards will inform the exporter about the issuing of the L/C. The exporter who receive the L/C is called beneficiary.

  • Exporter hands over their goods to the carrier

  Instead, the exporter will get a Bill of Lading

   

  • Exporter sends the Bill of Lading to the paying bank to receive payment

   

  The paying bank will afterwards handover the money after they receive the Bill of Lading from the exporter. Thereupon, the paying bank will give the Bill of Lading to the importer

  • Importer Hands Over the Bill Lading to the carrier

  The carrier will send the goods after the importer sends the bill lading to the carrier

• What are the documents proceeded during the payment process with L/C?

  • Full set of Bill of Lading
  • Commercial Invoice
  • Packing List
  • Weight note
  • Measurement list
  • Insurance Certificate
  • Consular Invoice
  • Brochure
  • Surveyor Report
  • Manufacture’s Certificate
  • Certificate of Origin
  • Processing License
  • Instruction Manual

• What are the types of L/C?

  There are two point of view in seeing types of L/C. First is based on its strength and secondly is based on its requirements.

  Types of L/C based on its strength:

   

  • Revocable L/C

   

  It is the weakest L/C which could be canceled and changed at any time by the opener or the issuing bank without any permission from the beneficiary or exporter

   

  • Irrevocable L/C

   

  An L/C which could not be canceled within the validity time and the opening bank still guarantees to receive notes drawn on the L/C. There is still a possibility to cancel the L/C, but it requires approval from all the stakeholders involved.

   

  • Irrevocable and Confirmed L/C

   

  The most secure L/C for the beneficiary side. If all the requirements are fulfilled, the opening bank or the advising bank will guarantee all of the payment or money order.

   

  Types of L/C based on its requirement:

   

  • Clean Letter of Credit

   

  An L/C which doesn’t require any additional documents to withdraw the money order, even taking money from the available credits can be done by handing over regular receipts.

   

  • Documentary Letter of Credit

   

  An L/C which require additional documents as mentioned on the L/C to withdraw the money.

   

   

  • Documentary L/C with Red Clause

   

  An L/C which let the beneficiary to withdraw half of the total payment with the regular receipts. Meanwhile the other half of the total payment should be withdrawn by additional documents

   

  • Revolving L/C

   

  An L/C which provide available credits that could be used on each month without any adjustment of the requirements.

   

  Another types:

   

  • Back to Back L/C

   

  In this L/C, the beneficiary is not the goods owner or exporter but they act as an intermediary. Thus, the beneficiary must ask for a help from their bank to issue an L/C for the goods owner or exporter which apparently guaranteeing the L/C they received from abroad.

   

  • Transferable L/C

   

  The beneficiary could ask their paying bank to hand over the full or partial credit rights to the third parties.

   

  • Stand by L/C

   

  A special guarantee which usually used as a “stand by” documents by the beneficiary or the bank on behalf of their customers. In this case, if the applicant fails to carry out a contract or fail to pay the loan, the bank will pay the beneficiary for the submission of a sight draft and send a statement from the beneficiary stating that the applicant or contractor fails to fulfill the contract and fulfill its obligations.

   

  Source : Wikipedia