Your Global Logistics & Financial Partner
(212) 997-01555 | trade@express-service.com
Sample Procedure for Express Letter of Credit
The following is a detailed summary of the steps involved in a purchase order transaction that is paid for by letter of credit and the benefits to the seller and supplier.
Terms:
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Beneficiary – This is the person or company that is paid under a letter of credit when all conditions are met.
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Issuing Bank – This is the bank that issues the letter of credit and checks the Documents presented by the Beneficiary through its Advising Bank.
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Advising Bank – This is the Beneficiary’s bank. The Issuing Bank corresponds with the Beneficiary through the Advising Bank.
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Documents – Each letter of credit lists specific documents that the Beneficiary must produce in order to trigger payment under the letter of credit. These normally include, among others, a bill of lading, commercial invoice, packing list, and certificate of origin.
Transaction Structure:
1. Your company enters into a purchase agreement with your supplier.
2. Your company completes an Application for an Irrevocable letter of credit with information pertaining to you transaction and then submits it to Express Service for processing.
3. The letter of credit is usually issued within 24 hours of the time we receive your completed application. Upon issuance, the Issuing Bank sends the letter of credit to the Advising Bank electronically.
4. The Advising bank establishes the authenticity of the letter of credit and informs the Beneficiary (i.e., your supplier) that it has been received.
5. Your supplier produces and ships goods to your company against the letter of credit.
6. The Supplier / Beneficiary presents the Documents to the Advising Bank for payment under the letter of credit.
7. The Advising bank sends the Documents to the Issuing bank which checks to make sure they conform to the terms of the letter of credit.
8. Your company pays Express Service for the amount drawn under the letter of credit or has previously made arrangements for extended credit terms.
9. Express Service through the Issuing Bank releases the Documents to your company and the Issuing Bank wires the funds to your Supplier through its Advising Bank.
Express Service | 1410 Broadway, New York, NY 10018 | tel (212) 997-0155 | fax (212) 997-4385 | trade@express-service.com
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