Let us talk now talk about the parties involved in the process of a letter of Credit.
The originator is the causer of the letter of credit. It is the company or individual that is generally importing goods from another country. The originator will request credit from a bank to pay for the merchandise.
The Issuing bank would be the financial institution that supports the importer and extends the lines of credit for him or her. This bank will make the payments to the exporter based on the terms and conditions established in the letter of credit. This bank operates usually from the importer's country.
There is also an Advising bank. This financial institution works as a correspondent to the issuing bank and in cooperation with the beneficiary. This bank will inform the exporter if a Letter of Credit has been opened to their favor.
The Credit Beneficiary is the person or company that receives the benefits from the Letter of Credit and that can demand the payment to the issuing bank once the conditions established by the agreement are met.
There may also be a Confirming bank if the importer required it and if it is indicated in the letter of credit. This bank would work as a link between the issuing bank and the exporter and it may also take the responsibilities of the first one
A letter of credit must generally contain a set of data, including an identification of time, an amount by which the credit is opened and the signature of the policyholder.
A letter of credit has the following process:
First of all, the importer and exporter sign an agreement in which they establish the terms of the transaction. This is the letter of credit.
An issuing bank is chosen in order to issue a Letter of Credit for the exporter or seller of the merchandise.
The exporter would then choose an advising bank that would be a correspondent to the issuer bank. The role of this bank is to inform whether the agreement was met based on the expectations of the exporter.
If the importer requested it, a confirming bank would inform the seller when there is a letter of credit to their favor.
The seller must go to the bank in which credit is available to submit any documentation. This is done in order to verify that the shipment was made pursuant to the terms and to request payment according to the specified deadline.
The originator is the causer of the letter of credit. It is the company or individual that is generally importing goods from another country. The originator will request credit from a bank to pay for the merchandise.
The Issuing bank would be the financial institution that supports the importer and extends the lines of credit for him or her. This bank will make the payments to the exporter based on the terms and conditions established in the letter of credit. This bank operates usually from the importer's country.
There is also an Advising bank. This financial institution works as a correspondent to the issuing bank and in cooperation with the beneficiary. This bank will inform the exporter if a Letter of Credit has been opened to their favor.
The Credit Beneficiary is the person or company that receives the benefits from the Letter of Credit and that can demand the payment to the issuing bank once the conditions established by the agreement are met.
There may also be a Confirming bank if the importer required it and if it is indicated in the letter of credit. This bank would work as a link between the issuing bank and the exporter and it may also take the responsibilities of the first one
A letter of credit must generally contain a set of data, including an identification of time, an amount by which the credit is opened and the signature of the policyholder.
A letter of credit has the following process:
First of all, the importer and exporter sign an agreement in which they establish the terms of the transaction. This is the letter of credit.
An issuing bank is chosen in order to issue a Letter of Credit for the exporter or seller of the merchandise.
The exporter would then choose an advising bank that would be a correspondent to the issuer bank. The role of this bank is to inform whether the agreement was met based on the expectations of the exporter.
If the importer requested it, a confirming bank would inform the seller when there is a letter of credit to their favor.
The seller must go to the bank in which credit is available to submit any documentation. This is done in order to verify that the shipment was made pursuant to the terms and to request payment according to the specified deadline.
About the Author:
Wade Henderson - recognized Professional - 15 yrs in the Business Finance Field - strong reputation for getting the deal done. IMMFinancial.com
0 comments
Post a Comment