Letter of Credit Process
more about FastLC for B2Bs
in LC Process
Steps in the Letter of Credit Process
- Buyer and seller agree to terms including means of transport,
period of credit offered (if any), and latest date of shipment acceptable.
- Buyer applies to bank for issue of letter of credit. Bank will
evaluate buyer's credit standing, and may require cash cover and/or
reduction of other lending limits.
- Issuing bank issues LC, sending it to the Advising bank by airmail
or electronic means such as telex or SWIFT.
- Advising bank establishes authenticity of the letter of credit
using signature books or test codes, then informs seller (beneficiary).
- Seller should now check that LC matches commercial agreement
and that all its terms and conditions can be satisfied.
- Seller ships the goods, then assembles the documents called for
in the LC (invoice, transport document, etc.).
- The Advising bank checks the documents against the LC. If the
documents are compliant, the bank pays the seller and forwards the
documents to the Issuing bank.
- The Issuing bank now checks the documents itself. If they are
in order, it reimburses the seller's bank immediately.
- The Issuing bank debits the buyer and releases the documents (including
transport document), so the buyer can claim the goods from the carrier.
About the Process