EXPORT IMPORT

DOCUMENTATION

NAME - Harshit Tiwari

ROLL NUMBER – 2100110700084
SEC - B
 Letter of credit

A letter of credit, or a credit letter, is a letter from a bank guaranteeing

that a buyer’s payment to a seller will be received on time and for the
correct amount. If the buyer is unable to make a payment on the
purchase, the bank will be required to cover the full or remaining
amount of the purchase. It may be offered as a facility
 Letter of credit

 A letter of credit is a document sent from a bank or financial

institute that guarantees that a seller will receive a buyer’s payment
on time and for the full amount.
 Letters of credit are often used within the international trade
industry.
 There are many different letters of credit including one called a
revolving letter of credit.
 Banks collect a fee for issuing a letter of credit.
What is the process of getting an LC?

The process of getting an LC consists of four primary steps, which are enlisted here:

Step 1 - Issuance of LC
After the parties to the trade agree on the contract and the use of LC, the importer
applies to the issuing bank to issue an LC in favor of the exporter. The LC is sent by
the issuing bank to the advising bank. The latter is generally based in the exporter’s
country and may even be the exporter’s bank. The advising bank (confirming bank)
verifies the authenticity of the LC and forwards it to the exporter.

Step 2 - Shipping of goods

After receipt of the LC, the exporter is expected to verify the same to their
satisfaction and initiate the goods shipping process.
Step 3 - Providing Documents to the confirming bank
After the goods are shipped, the exporter (either on their own or
through the freight forwarders) presents the documents to the
advising/confirming bank.

Step 4 - Settlement of payment from importer and

possession of goods
The bank, in turn, sends them to the issuing bank and the amount is
paid, accepted, or negotiated, as the case may be. The issuing bank
verifies the documents and obtains payment from the importer. It
sends the documents to the importer, who uses them to get
possession of the shipped goods.
 Documents required
 Duly filled application form with passport-sized photographs
 KYC of the applicant, co-applicants, partners, directors (Passport, Voter ID card, Aadhar Card,
Driving License, etc)
 Bill of Exchange
 Commercial Invoice
 Certificate of Origin
 Health and Insurance certificates – Original
 Buyer’s Financial Documents
 Packing, Shipping, and Transport Documents
 Landing airway bills, cargo receipts, etc.
 Related Commercial documents – Certificate of Inception
 Official Documents required by the buyer’s/seller’s country
 Any other document required by the lender