LETTER OF CREDIT

-a letter issued by a bank to another bank (typically in a different country) to serve as a guarantee for payments made to a
specified person under specified conditions.

Participants

1. Beneficiary
2. Buyer/Applicant
3. Issuing Bank

Purpose

Ultimately, the purpose of a letter of credit is to ensure

successful business transactions between sellers and buyers.

Types

Revocable letter of Credit – can be changed at any time by

either the buyer or the issuing bank will no longer notification to
the beneficiary.
Irrevocable Letter of Credit- only allows change or cancellation
of the letter of credit by the issuing bank after application by the
buyer and approval by the beneficiary.

BILL OF LADING

-A bill of lading is a legal document between a shipper and a carrier that details the type, quantity and destination of the
goods being carried.

-It is issued by carrier, or its agent, to the shipper as a contract of carriage of goods.

-It is detailed list of a shipment of goods in the form of a receipt given by the carrier to the person consigning the goods.

Three function of Bill of Lading

 It is a conclusive receipt
 It is contains or evidence
 It is serve as a document of title to the goods

Purposes

1. Provenance of the Contract of Carriage

While the actual contract is hashed out when the shipper or shipping agent books with the shipping line, the bill is
proof that a contract exists.
2. Receipt of Goods
The bill of lading is a receipt given to the shipper in exchange for the cargo. It serves as proof that the carrier has
gotten the goods from the shipping agent in good condition.
3. Title to the Goods
The bill of lading serves as a document of title, declaring that the holder has the right to claim the goods. The title
itself varies based on the way the bill of lading has been assigned.
12 Common Types of Bill Lading

1. Straight Bill of Lading:

This is typically used when shipping to a customer. The “Straight Bill of Lading” is for shipping items that have already
been paid for.

2. To Order Bill of Lading:

Used for shipments when payment is not made in advance. This can be shipping to one of your distributors or a customer
on terms.

3. Clean Bill of Lading:

A Clean Bill of Lading is simply a BOL that the shipping carrier has to sign off on saying that when the packages were
loaded they were in good condition.

4. Inland Bill of Lading:

This allows the shipping carrier to ship cargo, by road or rail, across domestic land, but not over seas.

5. Ocean Bill of Lading:

Ocean Bills of Lading allows the shipper to transport the cargo over seas, nationally or internationally.

6. Through Bill of Lading:

Through Bills of Lading are a little more complex than most BOLs. It allows for the shipping carrier to pass the cargo
through several different modes of transportation and/or several different distribution centers.

7. Multimodal/Combined Transport Bill of Lading: This is a type of Through Bill of Lading that involves a minimum of
two different modes of transport, land or ocean.

8. Direct Bill of Lading:

Use a Direct Bill of Lading when you know the same vessel that picked up the cargo will deliver it to its final destination.

9. Stale Bill of Lading:

Occasionally in cases of short-over-seas cargo transportation, the cargo arrives to port before the Bill of Lading.

10. Shipped On Board Bill of Lading:

A Shipped On Board Bill of Lading is issued when the cargo arrives at the port in good, expected condition from the
shipping carrier and is then loaded onto the cargo ship for transport over seas.

11. Received Bill of Lading:

It is simply a Bill of Lading stating that the cargo has arrived at the port and is cleared to be loaded on the ship, but does
not necessary mean it has been loaded.

12. Claused Bill of Lading:

If the cargo is damaged or there are missing
quantities, a Claused Bill of Lading is issued.

Parts of Bill of Lading

TRUST RECEIPT

-Trust Receipt (TR) is a type of short-term import loan to provide the buyer with financing to settle goods imported under
Letter of Credit where title of goods is held by the bank.

-A trust receipt is a notice of the release of merchandise to a buyer to a bank, with the bank retaining the ownership title
of the release asset.

-A short term trade financing facilities offered to customers to finance the purchase/import of goods.

-The trust receipt is a signed contract by the customer (barrower) on the strength of which the bank releases shipping
documents to the customer, who will hold and sell the goods as a trustee
for the bank.

Purpose

 It is a short-term import loan used to finance the purchase/ import

of goods.
 TRs are given by importers to banks in exchange of money that
they can use in purchase/ import of goods.
 In a TR agreement the title of the goods are held by the banks but
the importers can take possession of the goods and sell it as a
trustee until he/she pays the full amount of credit.
 The customer can pay the credit on the earliest time they can or
on the due date of the TR.

Parts of Trust receipt

TR- is like a letter including the following:

Duly executed TR agreement;

Bill of exchange accepted by the Customer; and
A TR facility line of credit granted by the Bank.

WAREHOUSE RECEIPT

-is a document that provides proof of ownership of commodities (e.g., bars of copper) that are stored in a warehouse,
vault, or depository for safekeeping.

-Given to the person who deposits any material in

the warehouse.

-A document that provides proof of ownership of

commodities that is stored in a warehouse, vault, or
depository for safekeeping.

-Uses by warehouse operators themselves, as

evidence that a commodity of a specified quantity or
quality has been secured and is being safeguarded at
their premises, ahead of a pre-arranged shipment or
delivery date.

WAREHOUSEMAN
o is a person lawfully engaged in the
business of storing goods for profit.
> Only a warehouseman may issue warehouse receipts

Purpose

Safe keeping

Parts

Negotiable Receipt

allowing for the transfer of ownership of the commodity in question without actually having to deliver the goods
physically.
 is deliverable to the bearer or to another party named

Non-Negotiable Receipt

 must be endorsed upon transfer

 allow delivery of commodities only to one pre-approved party, and must therefore be endorsed by that party upon
transfer of the goods.

PLEDGE & MORTGAGE

Pledge

 Is used when the lender takes actual possession of the property.

 Cash deposit or placing of owned property by a debtor (the pledger) to a creditor (the pledgee) as a security for a
loan or obligation.

Mortgage

 Is used for creating charge against immovable property which includes land, buildings etc (anything that is
permanently attached to earth.)

Mortgagee – a person or organization that lends money to someone for buying property.
Mortgagor – a person who borrows money for buying property. A person who takes out a mortgage in order to buy
property.

Four parts of mortgage payment

PRINCIPAL – amount applied to the loan, which pays down the balance due.
INTEREST – percentage changes according to the economy. This is the cost charged for borrowing money.
TAXES – this will be adding to your monthly payment.
INSURANCE – this will tell how much will increase your monthly mortgage payment.

A mortgage and pledge work together to secure financing for the borrower and security for the lender.