Professional Documents
Culture Documents
LC Guidelines
LC Guidelines
FOrmaLities
Presented by
Nazrul Islam
Assistant Vice President &
Head of Ibrahimpur Branch
Prime Bank Ltd; Dhaka
1
What is Import?
• To bring in, from abroad, something in kind of
goods or services is Import.
2
Who is eligible to Import?
• As per Importers, Exporters and Indenters
(Registration) Order-1981 no person can
import goods in to Bangladesh unless he is
registered with CCI & E or exempted from the
provision of the said Order.
• An AD shall have to deal with those
customers who are known to Ads having a
business place in Bangladesh and can be
traced easily (GFET-1996, Vol-1,Chapter-
15,Para-2)
3
What is L/C?
4
Definition according to UCP
According to UCP-600 (2007 Rev) Credit means any
arrangement, however named or described, that is irrevocably
and thereby constitutes a definite undertaking of the issuing
bank to honour complying presentation.
Honour means:
• To pay at sight if the credit is available by sight payment
• To incur a deferred payment undertaking and pay at maturity if
the credit is available by deferred payment
• To accept a bill of exchange (draft) drawn by the beneficiary and
pay at maturity if the credit is available by acceptance.
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Types of letter of credit: Continue...
• Green Clause L/C: is a credit with special clause incorporated into it which
not only authorises the advising bank to grant pre-shipment advances but
also storage cost for storing the goods prior to shipment. It is useful in
situations where shipping space is not readily available, e.g some African
counties. It is so called so because the credit was originally written in Green
Ink to draw attention to the unique nature of this credit. At present this type of
Credit is not in use.
• Standby L/C: is a documentary credit or similar arrangement, however
named or described, which represents an obligation to the beneficiary on the
part of the issuing bank to:
a) Repay money borrowed by the applicant, or advanced to or for the
account of the applicant.
b) Make payment on account of any indebtedness undertaking by the
applicant
c) Make payment on account of any default by the applicant in the
performance of an obligation.
• This concept introduced by North American country. It is a type of Guarantee.
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Parties involved in the letter of credit:
Main Parties:
i) The issuing bank
ii) The confirming bank
iii) The beneficiary
• Issuing Bank: Issuing bank means the bank issues
letter a credit at the request of an applicant or on its
own behalf.
• Confirming Bank: Confirming bank means the bank
that adds its confirmation to a credit upon the issuing
bank’s authorization or request.
• The beneficiary: the beneficiary means the party
whose favour the L/C is established
9
Parties involved in the letter of credit:
Other Parties:
i) The applicant
ii) The advising bank
iii)The nominated paying /negotiating/
accepting bank
iv)The reimbursing bank
v)The transferring bank (if any)
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Parties involved in the letter of credit:
Other Parties: Continue...
i) Applicant: Applicant means the party on whose request the
credit is established.
ii) Advising Bank: Advising Bank means the bank that advises
the credit at the request of the issuing bank.
iii) Nominated bank means the bank with which the credit is
available or any bank in the case of a credit available with any
bank.
Negotiating bank is a bank which negotiates the bill and pays
the amount to the beneficiary.
Negotiation means the purchase by the nominated bank of
drafts (drawn on a bank other than the nominated bank) and or
documents under a complying presentation, by advancing or
agreeing to advance funds to the beneficiary on or before the
banking day on which reimbursement is due to the nominated
bank.
11
Parties involved in the letter of credit:
Other Parties: Continue...
12
Operations of Documentary Letter of Credit:
i) Issuing
ii) Advising
iii) Amendment (if necessary)
iv) Presentation and
v) Settlement
13
Operations of Documentary Letter of Credit:
Continue...
i) Issuing of Letter of Credit:
Before issuing of a L/C, the buyer and seller located in different
countries, concludes a sales contract providing for payment by
doc credit. As per requirement of the seller, the buyer then
instructs the issuing bank to issue a credit in favour of the seller
(Beneficiary). Instruction/Application for issuing a credit should
be made by the buyer ( Importer) in the issuing bank’s standard
form. The credit application which contains the full details of the
proposed credit, also serves as an agreement between the bank
and the buyer. After being convinced about the necessary
conditions contained in the application form and sufficient
conditions to be fulfilled by the buyer for opening a credit, the
opening bank then proceeds for opening the credit to be
addressed to the beneficiary.
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Operations of Documentary Letter of Credit:
Continue...
16
Operations of Documentary Letter of Credit:
Continue...
a) Settlement by payment:
b) Settlement by Acceptance
c) Settlement by Negotiation
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Operations of Documentary Letter of Credit:
Continue...
19
Operations of Documentary Letter of Credit:
Continue...
23
As required by Guidelines for Foreign Exchange
Transaction (GFET), Volume-1 the credit report of the
supplier should be obtained in all cases of L/C
involving Tk.10,00,000/- or over against indent issued
by local indenting agent and over Tk.5,00,000/-
against proforma invoices issued by the supplier
direct.
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