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(a) letter of credit
Letter of credit (AnticipatoryLetterofCredit)) is characterized by the importer exporter after the first payment, delivery mode of trade, is a preferential financing to exporters, importers of convenience. Whoever wants to use the advance payment letter of credit, the seller and the buyer in the negotiations, the exporter to the importer to advance the proposed terms of payment, the amount and method specified in the letter of credit. The importer agree, importers fill and expressly signed application for letter of credit.
(two) apply advance credit trade
1 contract commodity market supply shortage of goods, the importer with favorable competitive payment as soon as possible, in order to obtain goods to meet market needs.
2 exporters of shortage of funds or liquidity problems, exporters require the use of letter of credit, but the importer can use this opportunity to as the reason for the offer of payment, in order to drive the price down.
3 importers for search goods, supply timely caught, it will advance credit to export agents or contractors, timely flexibility to seize the consumer goods, to be in competition with payment in advance to rival.
(three) the types of letter of credit
1 advance the full amount of credit
Advance the full amount of credit (CleanPaymentCredit) approach is drawn on by the exporter (CleanBill) advance payment, or payment in advance. In addition to issuing clean outside must attach a letter of guarantee (Statement), the contents of the book is to ensure that the exporter is responsible for the delivery of required documents stipulated in the credit, ensure timely delivery.
If the beneficiary personnel did not fill the documents or will advance diversion, risk contract goods or not purchasing contract and brings, advances to banks assume no liability, the risk should be borne by the importer or the issuing bank in accordance with the provisions of the terms of the credit have to repay the principal and interest.
2 red clause letter of credit
Red clause letter of credit (RedClauseLetterofCredit) for anticipatory credit amount amount amount, advance terms with red color print font, in clear, eye-catching, so called red clause letter of credit.
In international trade practice, in recent years to advance payment terms are not in red font, but also general.
Red clause must show that allows exporters advance amount, and then on the date specified payment documents, bank deduct prepayment of principal and interest, pay the balance.
Importers agreed with the red clause letter of credit, if the risk, the importer shall bear the responsibility of advance, so the use of red clause letter of credit should be cautious in.
3 green clause credit
Green clause letter of credit (GreenClauseLetterofCredit) and red clause credit function is similar, but the contents and ways of green clauses contained in the letter of credit than the red clause credit more strict.
The use of green clause credit practices, Department of exporters shall contract goods purchased in advance of funds, bank name stored in warehouse, the warehouse receipts to banks, to ensure that the advance amount according to stipulated in the credit, and controlled by the misappropriation of funds to reduce the risk of.
Practice in international trade, the importer agree to adopt green clause letter of credit, the importer shall provide a guarantee or collateral to the issuing bank, and generally where the use of the number of green clause credit under the advance amount is larger, in order to determine the function, must be marked "green clause credit in the credit" (GreenClauseCredit) the words.
4 packing credit
Packing letter of credit (PackingLetterofCredit) also known as packing loan (PackingLoan), its function is that the exporter, after receipt of the L / C, with the credit terms to the bank in advance the amount of purchase contract for goods and packaged for shipment, shipment after the advance payment amount deducted interest in negotiation. This approach is a "pre shipment finance the exporter bank give exporters" (Pre-ShipmentFinance).

Risk financing bank shall bear the advance of financing. In order to reduce the risk of bank, sometimes in advance to exporters to provide collateral and go through the relevant formalities.
(four) function applies to advance credit.
1 the advising bank is authorized to answer the beneficiary in advance, the amount is not more than $200000 (20% for the amount of the credit). With the advance payment under the letter of credit, in accordance with the payment released the same day the exchange rate to pay and pay the additional interest. Deduct prepayment should of drafts under this credit amount.
TheNegotiatingBankisherebyauthorizedtomakeadvancetotheBeneficiaryuptoanaggregateamountofU.S.$200000 (20%oftheamountofL/C).
Theadvances, withtheinterestatrulingrateofexchangeatthetimeofpaymentofsuchadvance, aretobedeductedfromtheproceedsofthedraftsdrawnunderthiscredit.
Or use another expression of sentences are as follows:
2.Weherebyauthorizeyoutomakesuchadvances, whicharetoberepaid, withinterest, fromthepaymenttobemadeunderthiscredit.
3.ItisunderstoodthatthemakingofthetemporaryadvancesorthepaymentstotheabovementionedBeneficiaryshallbeoptionalonthepartofyou.
(five) who paid in advance
Anticipatory credit is exporters under the letter of credit issued by the provisions of clean and sign the guarantee (ensure payment documents), to the amount the negotiating bank or nominated bank prepaid in whole or in part under the credit.
The letter of credit, who pay in advance? The following advances mode:
1 by the importer directly advances: importers in the issuing, shall be submitted to the advance in cash, or to exporters in accordance with the provisions of advance, immediately to cash equal to the issuing bank, the exporter the interest paid by importers charge.
2 by the issuing bank to the issuing bank for the importer: advance payment, and by the issuing bank for interest.
3 by the paying bank instead of issuing bank or importers advance: if the terms of the credit by the bank for payment in advance, the interest paid by banks charge.
Whatever the kind of advance, its principle is who advances and who to charge interest. As the advance amount losses borne by the importer. But exporters may not use the advance payment of a debt or compensation payment, can not be used for any expenses unrelated business and credit.