Letter of Credit process

Posted on 28 April 2023 Category : For Beginners

MECHANISM OF DOCUMENTARY LETTER OF CREDIT

In a Documentary letter of credit, the sequence of events may be as follows:

(i) The buyer and seller agree to the terms of sale, including opening of letter of credit.

(ii) The buyer approaches his bank to open letter of credit and incorporate the documents, specified in the export contract, in letter of credit.

(iii) Opening Bank opens the letter of credit and advice the exporter about opening of credit, through the advising bank.

(iv) After receipt of advice of opening of credit, if exporter is happy with the terms of credit and is in accordance with the contract of sale, proceeds to execute the export contract.

(v) Exporter ships the goods and obtains the relevant documents specified in the credit.

(vi) Exporter presents the documents to a bank that may be paying/negotiating bank; whichever one is appropriate to him.

(vii) The bank checks the documents and effects the payment if the documents are in order.

(viii) After payment to exporter, negotiating bank sends the documents to the issuing bank for reimbursement.

(ix) Issuing bank checks the documents and if they are in order makes reimbursement to the

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Shahid MOMIN: On 02 May 2017 THANX TO EXPOR IMPORT WEBSITE. IT IS VERY USEFUL TO EXPORT IMPORT JOB PROFILE. IT GIVES ALL ANSWERS TO THE CANDIDATE.

Danish : On 21 November 2017 How to arrive at assessable value for a DDP, CIF, FOB. Same one method for all or different for 3. What is the best method.for x works. 20% OF FOB VALUE is taken in which case.if its lower than freight? Basically which is the best method for arriving at assessable values for above inco terms Rgds Danish 21 Nov, 2017.

chunaraan: On 29 June 2022 Namaskar and greetings for the day Sir ! Hope that all is fine and nice over there and that you are well safe and sound with your loved ones. I am presently working as Business Development Executive for a South American based co. that is doing export of wooden logs and my basic job is to find clients for these wood and then offering them our prices, terms of payment etc. and communicate the same to my office at Suriname. Finally what they will offer me for this business transaction I have to inform the same to my client and if both agreed mutually to terms and conditions of business as well as prices, then the deal is done. I have been in this job since last Nov. 2019, when I went over there for a small training of about 45 days and then returned back to India to start marketing over here at gandhidham which is the hub of all types of woods from all over the world. Now, I am facing mainly two types of problems in my job due to which I am not getting the result. First is the price variation. As our co. prices are too high no client even bothered to discuss any business deal. ( Gandhidham is a very big sized market of wood where clients will go for big quantities but at very competitive prices) . To some extent this price problem is solved by convincing my co. that our prices are too high and we have to lower it down to market accepted level. Now the other major problem that I am facing is payment terms and conditions. As per the co. in terms of business, they need Site L/c before shipment, meaning no loading of containers will be done unless we get a confirmed L/c that can be encashed after shipment. So co. needs pre shipment L/c whereas client asks for post shipment L/c to be opened after about 60 days of shipment and about 15 days before this shipment arrives in India. Now , both these terms are polar apart- pre shipment L/c and post shipment L/c- no client over here wishes to give pre shipment L/c for many reasons - one is that they do not want to lock their money in L/c for about 75 days before shipment comes to india. Secondly , there are suppliers over here who give this facility of opening L/c as Usance L/c of 120 to 180 days after the shipment comes to India. Last but not the least the biggest reason for not opening pre shipment L/c is due to a question of trust. We do not have any office or yard over here at gandhidham, while all other suppliers from malaysia, Africa have their offices or agents and clients can easily contact them for any problem in consignment as quality of logs, measurement for getting compensation. Now the client says if we give you pre shipment L/c and if there is any problem regarding quality or any other issue for getting compensation, then who will be contacted. So if you can guide me on these practical issues as to how to secure order from clients as per our terms of pre shipment L/c. How to develop trust in clients that we will listen to their problems and will compensate for any quality or measurement issue. It is a big problem for me and all my efforts are going to waste . Clients are willing to give trial orders of say 100 cbm which will cost minimum about 22000 US$ but regarding payment, they ask to open L/c before 15 days when shipment arrives to India. Sir, also I wish to do some course on Export Import marketing / business for my own personal information , or may be to start my own export import business if luck permits me that in future or may be for getting better job prospects. So please suggest to me what is the best course in the market that I can do as a beginner and it is online with no charges . I also wish to join your course, do tell me how to join it . The other courses that I have searched for are too expensive and beyond my capacity to afford. I want from someone who is very practical and teaches us theory along with practical guidance. So please tell me how to join your course and what is the duration of this course. Also suggest solutions for my current job problem of pre and post shipment L/c.

antony: On 30 June 2022 I have been reading your articles about Letter credit terms and related topics. I must say they are well structured with information in an easy to understand manner. Very useful information.We are a trading company based out of Dubai and wondering if we can talk about a deal which we are intend to do with LC. I would like to take your consultation.

simon: On 16 July 2022 Please I hereby wish to inform you that we are direct provider, finance trader, lender, lessor and monetizer of financial instruments such as Bank Guarantees(BG) , Standby Letters of Credit(SBLC) , Letter of Credit (LC) , Non Collateral LOAN and OTHERS from HSBC Bank, Barclays Bank, Deutsche Bank or any other AA rated Bank in United States of America, United Kingdom, United Arab Emirates, Germany, Hong Kong, China and other countries.... For your information, we can monetize your financial instruments at 80% LTV and also you can use our leased or purchased financial instruments as collateral to collect funds/cash from your Bank anywhere in the world for your projects, import and export business. NB: Agents, Brokers, Consultants and Intermediaries are welcome to bring their clients from anywhere around the world based on commission and we will work together in complete confidence for the benefits of all parties involved. Please contact us anytime you need financial instruments or Non Collateral LOAN

Muhammad Shahid: On 13 February 2023 Sir,kindly inform about bank contract,dafferd payments, is their any mod of import without LC

Letter of Credit process

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