Letter of Credit (L/C) is a bank commitment that provides payment assurance in international trade. It is applied within the framework of ICC UCP 600 rules.
Parties of the Letter of Credit
- Principal (buyer): Opening the letter of credit
- Beneficiary (seller): Beneficiary of the letter of credit
- Issuing bank: Opening the letter of credit
- Corresponding bank: Notification/confirmation/payer
Working Principle
- The buyer opens a letter of credit from his bank
- The bank forwards it to the seller's bank
- The seller ships the goods and presents the documents to the bank
- If the documents are suitable, the bank pays immediately
- The documents circulate between banks and are delivered to the buyer.
Bank's Responsibility
The Bank is responsible for the documents; not because of the quality of the goods. According to UCP 600, payment is made if the documents are "appropriate".
Disputes
- Inappropriateness of documents
- Forgery (fake bill of lading)
- Time lapse
- Rejection decision by the bank
Supreme Court 11. HD
11. HD adopts that in letter of credit disputes, UCP 600 will be directly applied and the Turkish Code of Obligations is secondary.
Commercial law lawyer is recommended.