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The Customer or Importer opens LC. It is opened through a bank and normally bank has specific form. It is preffered to have a facility agreement with bank so that you can open LCs on lesser margins and costs.
1. your company has to have LC facilities with a bank .
2.LC Bank Facility range should be enough to cover LC amount
3.There is a bank form for openning LC including beneficiary's Name, short description og goods, amount, beneficiary's address last date of shippment, expiry date, inco terms, ...and more.
4.fill the form, sign it by bank signature authorized, and send it to bank.
The basic requiremnts for LC opening is Performa invoice.And LC is opened by Banks.
A letter of credit is a method of securing payment to a vendor. When a seller asks a buyer to obtain a letter of credit, it means the seller would like to ensure payment for a product he sells to that customer. Typically letters of credit are issued by a bank. The most common forms are standby letters of credit for domestic transactions and documentary letters of credit for international transactions.
There are two type of Letter of Credit:
Domestic/Inland Letter of Credit
Foreign/International Letter of CreditEstablish the terms of the sale with your vendor. You will need to determine the following: How much product will you buy each month? How often will payment be due? With the answers to these questions, the amount guaranteed by the letter of credit can be determined. Typically the amount of the letter of credit will total30 days worth of product, plus or minus10 percent.
Do you need a documentary or standby letter of credit? A documentary letter of credit is used for international transactions and usually covers only one transaction. A standby letter of credit is a long-term contract covering a year or more.
Contact your bank to draw up the letter of credit. Once the terms of the sale have been established, your banking officer will draw up the letter. In most cases, if you hold a line of credit with the bank, the amount of the letter of credit will be held against the line of credit. If no line of credit exists, the bank may hold the amount against a money market account.
Letter of credit is opened by: Purchaser’s Bank at the customer request with necessary credentials and LC terms accepted by the Paying Bank at sellers instructions/requests.
If Performa invoice is Approved , As per the PI we have to give the Basic information to bank , about terms of Payment , then as per your Instructions Bank will issue the LC.
issuing bank opens letter of credit followed by the instructions of importer
The buyer request the bank to open letter of credit submitting the PI from supplier & other requirement from his bank
The buyer opens the LC from his bank.
Opening LC
You just have to submit the LC application filled to your bank or just visit the bank counter and they will help you to fill it.
Depends on your credit rating in the bank, the bank will block a margin from your bank account which will be1% up to100% of the LC amount you required.
Payment
Once the seller submit the required documents as you mentioned in the LC application, the payment will be released to the sellers bank by your bank after the verification made by your bank.
Letter of credit is opened by fill up some prescribed form from country wise bank with a LC open application. In this time must need the related buyer's authorizaion signature on Proforma Invoice as Acceptance and the prescribed form from Bank. After filled up the all forms and authourization signature buyer submit his related bank to make a Letter of Credit. Next procedure at the sight of Bank.
Applicants needs to have approved LC limit from their Bank. Within the limit an LC can be opened by with submission of duly filled & authorized application enclosed all the requirements of application.
LC is always opened by a buyer on demand of supplier as a secured mode of payment.
bank who open letter of credit
the account holder go to bank and give order to bank to issue letter of credit with name that account holder determine after paying fees
