What is LC?

Documentary Credit

LC is secured and legal payment method. Banks gives us guarantee of payment in this method. LC Allows importers/
Buyers to exporter/seller in which bank or more than one bank gets involved.

Steps of LC Payment

Step 01 Request for quotation from Buyer to seller then Applicant will issue a purchase order to the
Beneficiary after that Beneficiary will issue a pro-forma Invoice to the Applicant.
Step 02 After getting the pro forma Invoice the importer will apply for LC Account to the Issuing Bank.
(Required Documents: NID, TIN Certificate, VAT Certificate, IRC, LC Amount/ Security Money, Trade
License, Pro-forma Invoice, Offer Letter, Passport size 4 copy photo, Insurance coverage and other
documents)
Step 03 Issuing Bank will transmit Letter of credit to Advising Bank
Step 04 Advising Bank will ensure the exporter that LC received and to make the shipment or start the
manufacturing process.
Step 05 After Shipment the Beneficiary will submit all of the export documents to the advising Bank
(Commercia Invoice, Bill of lading, Bill of exchange)
Step 06 After checking the documents, the advising Bank will transmit the Export documents to issuing Bank
for Claim the Payment.
Step 07 The LC issuing bank will cross check the document, will release the payment to advising bank to
provide it to the beneficiary if documents are all okay.
Step 08 The importer will collect the documents from the LC issuing Bank and make the payment to the Bank.

Step 09 After collecting the documents from the Bank, the importer will collect the goods through their
clearing and forwarding agents.