L c openinfg

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

27 April 2012 Dear Sir

Please let me know the processor of opening new LC ( Letter Of Credit ) also tell what document require and who is open LC and why

Thanks & Rgds

Mukesh Kumar

RAMESH KUMAR VERMA

RAMESH KUMAR VERMA (Expert)
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27 April 2012 proforma invoice and certificate of origin as well as request letter bill of lading (AWB) is mandatory submit in bank

Letter of Credit L/c also known as Documentary Credit is a widely used term to make payment secure in domestic and international trade. The document is issued by a financial organization at the buyer request. Buyer also provide the necessary instructions in preparing the document.

The International Chamber of Commerce (ICC) in the Uniform Custom and Practice for Documentary Credit (UCPDC) defines L/C as:

"An arrangement, however named or described, whereby a bank (the Issuing bank) acting at the request and on the instructions of a customer (the Applicant) or on its own behalf :

Is to make a payment to or to the order third party ( the beneficiary ) or is to accept bills of exchange (drafts) drawn by the beneficiary.
Authorised another bank to effect such payments or to accept and pay such bills of exchange (draft).
Authorised another bank to negotiate against stipulated documents provided that the terms are complied with.

A key principle underlying letter of credit (L/C) is that banks deal only in documents and not in goods. The decision to pay under a letter of credit will be based entirely on whether the documents presented to the bank appear on their face to be in accordance with the terms and conditions of the letter of credit.

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