I (Meaning and importance of Exports) Unit Structure

11.12.2 
 PROCEDURE FOR OPENING LETTER OF CREDIT 
The following are the steps in the process of opening of a 
letter of credit. 
1) Exporter‘s Request 
The exporter requests the importer to issue L/C in his favour. 
L/C is the most secured form of the payment in foreign trade. 
 
2) Importer‘s Request to his Bank 
 
 
The importer requests his bank to open a L/C. He may either 
pay the amount of credit in advance or may request the bank to 
open credit in his current account with the bank. 
3) Issue of L/C 
 
 
The issuing bank issues the L/C and forwards it to its 
correspondent bank with a request to inform the beneficiary that the 
L/C has been opened. The issuing bank may also request the 

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advising bank to add its confirmation to the L/C, if so required by 
the beneficiary. 
4) Receipt of L/C 
 
 
The exporter takes in his possession the L/C. He should see 
to it that the L/C is confirmed
5) Shipment of Goods 
 
 
Then the exporter supplies the goods and presents the full 
set of documents along with the draft to the negotiating bank. 
6) Scruting of Documents 
 
 
The negotiating bank then scrutinizes the documents and if 
they are in order makes the payment to the exporter. 
7) Realisation of payment 
 
 
The issuing bank will reimburse the amount (which is paid to 
the exporter) to the negotiating bank. 
8) Documents to importer 
 
 
The issuing bank in turn presents the documents to the 
importer and debits his account for the corresponding amount.