摘要：International Trade Flow Chart of Letter of Credit Introduction Letter of Credit (LC) is a legal document issued by the bank on behalf of the buyer to assure th
International Trade Flow Chart of Letter of Credit
Introduction
Letter of Credit (LC) is a legal document issued by the bank on behalf of the buyer to assure the seller that the payment will be made on time and in full. Letter of Credit is one of the most commonly used payment methods in international trade. It reduces the risk of non-payment for the seller and ensures that the buyer receives the goods on time. International Trade Flow Chart of Letter of Credit outlines the process and steps involved in a typical letter of credit transaction.
Step 1: Issuing of Letter of Credit
Letter of Credit transaction begins when the buyer and seller agree on the goods, price, and payment terms. Once the terms are agreed upon, the buyer approaches his/her bank to issue the letter of credit in favor of the seller. The bank would usually charge a fee for issuing the LC, which is known as the LC fee. The buyer's bank would send the LC to the seller's bank. The seller's bank would verify the LC before forwarding it to the seller.
Step 2: Shipment of Goods
Once the seller receives the LC, he/she would start preparing for the shipment of goods. The seller would ensure that the goods are in good condition, the quantity is correct and all the necessary documents are ready. The seller would then arrange for the transportation of goods to the port of shipment. The seller would obtain an inspection certificate from an authorized inspection agency and submit it along with other documents to the bank.
Step 3: Presentation of Documents and Payment
After the shipment of goods, the seller's bank would receive the necessary documents related to the shipment, including the bill of lading, commercial invoice, packing list and inspection certificate. The bank would verify the documents and ensure that they are in accordance with the terms of the LC. If the bank is satisfied with the documents, it would release the payment to the seller. If the documents are not in order, the bank would reject them and ask the seller to correct them. The seller can only receive the payment after the bank is satisfied with the documents.
Conclusion
International Trade Flow Chart of Letter of Credit outlines the process and steps involved in the LC transaction. It is important for both the buyer and the seller to understand the requirements and procedures involved in the LC transaction. Letter of Credit is a secure and effective way of dealing with international trade because it reduces the risk of non-payment for the seller and ensures that the buyer receives the goods on time.
