A letter of credit

A letter of credit

C= Customer T=Teller

T: Hi sir,what may i help you?

C: Yes, I want to open an L/C, but I just konw a little about it,can you help me?

T: off course, i will tell you more detail about it. A letter of credit is a written payment instrument issued by a bank at the request of a customer (always the importer). It will be sent to the exporter to make shipment and prepare the documents specified in the L/C. As soon as the L/C and documents are presented to the issuing bank, the bank must pay to the exporter (beneficiary). The bank acts as the first payer and this is the most important feature of L/C.

C: Okay, i know.but can you introduce the main content of an L/C, i want to know more.

T: Product Name, quality, unit price and amount of goods, ports of loading and destination, price and payment terms, shipping documents, latest shipment date and validity of the L/C. each item will show on the L/C. can you follow me?

C: Oh, yes. you answer always clear. and i want to know how can I send an L/C to my customer?

T: Nomally, the issuing bank will send the L/C to one of its correspondents at the place of export by mail of cable. After verifying the authenticity of the L/C, the correspondent (advising bank) will send the L/C to the exporter.

C: I see,can you tell me my customer how to get the money?

T: The exporter will make shipment and present the L/C with all the documents to a negotiation bank if it is available by negotiation. If the documents are in compliance with the terms of the L/C through carefully checking, the bank will negotiate the documents and send them to the issuing bank for reimbursement. The issuing bank will debit importer's account when releasing the shipping documents to the importer. The whole transaction now comes to the end.

C: I see, Thank you very much. and now i want to open an L/C account, here is my company information,please check it.

T: Okay,wait for a second.(about 10 minutes later)Sir, here is your card, everything is ok, if you have any questions please ask for me, here is my business card.

C: Thanks.

T: you are welcome.