What documents are required for LC?

Documents required for a Letter of Credit

• Shipping Bill of Lading.
• Airway Bill.
• Commercial Invoice.
• Insurance Certificate.
• Certificate of Origin.
• Packing List.
• Certificate of Inspection.

What is LC known as in international trade?

A Letter of Credit is a contractual commitment by the foreign buyer’s bank to pay once the exporter ships the goods and presents the required documentation to the exporter’s bank as proof. As a trade finance tool, Letters of Credit are designed to protect both exporters and importers.

Why LC is used in international trade?

Letters of credit are indispensable for international transactions since they ensure that payment will be received. Using documentary letters of credit allows the seller to significantly reduce the risk of non-payment for delivered goods, by replacing the risk of the buyer with that of the banks.

What is LC document?

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.

How do I submit an LC document?

Commercial Invoice (Proof of Value) Bill of Lading (Proof of Shipment) Packing List (Proof of Packing) Certificate of Origin (Proof of Origin)…Documents Requested in a Letter of Credit Transaction

1. Proof of value of goods being imported.
2. Proof of Shipment.
3. Proof of Packing.

How many types of LC are there in export?

They are Commercial, Export / Import, Transferable and Non-Transferable, Revocable and Irrevocable, Stand-by, Confirmed, and Unconfirmed, Revolving, Back to Back, Red Clause, Green Clause, Sight, Deferred Payment, and Direct Pay LC.

Can LC be issued after shipment?

In general LCs are issued either at “sight LCs” or “Usance LCs.” For the first payment is made “at sight” i.e. right after presentation of the documents. For the latter payment is made after a specified number of days (as determined by the LC) – e.g. “90 days after shipment.”

Who opens letter of credit?

Issuing bank The issuing bank (also called an opening bank) is responsible for issuing the letter of credit at the request of the buyer. Advising bank The advising bank is responsible for the transfer of documents to the issuing bank on behalf of the exporter and is generally located in the country of the exporter.

What are third party documents in LC?

“Third party documents acceptable” means that all documents, with the exception of the draft, may be issued by a party other than the beneficiary of the credit.

What is LC period?

LC Period means, in relation to the fronting fee payable under Clause 13.3 (Fronting fee) with respect to each Letter of Credit the period commencing on the date of issue of that Letter of Credit and ending on the Expiry Date of the relevant Letter of Credit.

What is LC duration?

The credit period of LC can be determined my mutually agreed terms and condition by buyer and seller before sales takes place. Some time, the foreign buyer may demand credit period of 30 days, 60 days, 90 days, 120 days etc.

What is tenor in LC?

Tenor refers to the length of time remaining before a financial contract expires. It is sometimes used interchangeably with the term maturity, although the terms have distinct meanings. Tenor is used in relation to bank loans, insurance contracts, and derivative products.

What is LC validity period?

LC expiry date means the last date to submit the exported documents with bank for negotiation of documents. Here, the exporter need to submit all required documents with bank after export as per the guidelines mentioned in the letter of credit.

Who opens LC importer or exporter?

The importer arranges for the issuing bank to open an LC in favor of the exporter. The issuing bank transmits the LC to the nominated bank, which forwards it to the exporter. The exporter forwards the goods and documents to a freight forwarder.

WHO issues export LC?

Parties to a Letter of Credit Applicant (importer) requests the bank to issue the LC. Issuing bank (importer’s bank which issues the LC [also known as the Opening banker of LC]). Beneficiary (exporter).

What is the importance of transport documents in international trade?

In international trade, such transport documents are more in number and it is very important to know the significance of each type of document and its nomenclature, etc. One of the important aspects to be remembered with regard to any transport document is that it must show the name of the carrier.

What is an export certificate (LC)?

Certification and declaration by the seller/exporter that goods in a particular export shipment are wholly obtained, produced, manufactured or processed in a particular country. Moreover, the nominated bank that needs to pay the money to the beneficiary of the LC (i.e. seller/exporter) may want a:

What are the transport documents?

Another transport document is, it is a courier/Service document that evidences receipt of goods for delivery and should appear on its face to indicate the name of the courier/service and should be stamped/signed or otherwise authenticated by such courier/service. This document should also indicate the date of pick-up or receipt.

What is a conditional LC transaction?

What that means is that in a LC transaction, the payment from a bank to the seller/exporter is conditional upon the ability of the seller to generate the documents that are requested by the buyer/importer in the letter of credit.