Financial Load Variations—Eight Types of Letters of Credit

Abstract

Financial load is for transit time only and borne by the beneficiary.

• 1. The importer applies for a letter of credit to his bank—issuing bank (IB).

• 2. The IB issues a sight letter of credit with Bill on IB and forwards it to an agent (advising bank) (AB) bank in the exporter’s country with a request to forward it to the beneficiary.

• 3. The AB forwards a letter of credit to the beneficiary, if satisfied with the terms and conditions the beneficiary makes goods ready, despatches the goods and prepares the documents.

• 4. The beneficiary forwards the documents to the advising bank (AB).

• 5. AB forwards the documents to the IB.

• 6. IB checks the documents, if satisfied, debits the importer’s account and remits funds to the AB for the credit of the beneficiary’s account.

• 7. The IB forwards the documents to the importer.

• 8. The AB credits the beneficiary’s account and forwards payment advice. Payment by the issuing bank is without recourse.