Who issues lc

Whereas in a revocable LC changes to the LC can be made without the consent of the beneficiary. A 'time' or 'date' LC will specify when payment will be made at a future date and upon presentation of the required documents. How strict compliance? Other courts require payment upon substantial compliance with documentary requirements. Sellers should be careful and remember that the bank may insist upon strict compliance with all documentary requirements in the LC.

If the documents do not conform, the bank should give the seller prompt, detailed notice, specifying all discrepancies and shortfalls. Letters of Credit deal in documents, not goods. The bank need not look past the documents to examine the underlying sale of merchandise or the product itself.

The letter of credit is independent from the underlying transaction and, except in rare cases of fraud or forgery, the issuing bank must honor conforming documents. The letter of credit should have an expiration date that gives sufficient time to the seller to get all the tasks specified and the documents required in the LC. If the letter of credit expires, the seller is left with no protection. Three dates are of importance in an LC:. The date on the Bill of Lading. A good source to give you an idea of the timelines would be your freight forwarding agent.

As a seller check with your freight forwarding agent to see if you would be in a position to comply. Letters of credit could also have discrepancies. Even a discrepancy as small as a missing period or comma can render the document invalid.

I have explained above 8 main parties involved in Letter of Credit. However, some of the parties in letter of credit mentioned above may act as functions of one or more parties under Letter of Credit. You can also read more information by clicking Letter of credit - How does LC work? What are the advantages of Letter of Credit to Exporter?

How LC is benefited to Importer? Are there any disadvantages to importer for a consignment under Letter of Credit? What are the disadvantages of LC to an exporter? How to check authenticity of LC? What is Prime Banker? Yes, I am sure, once after going through that articles you will have a good knowledge about Letter of Credit.

Would you like to share your knowledge and experience about parties in Letter of Credit? Other post about import export cauching. Advantages of LC - letter of credit — to Importers. Disadvantages of Letter of credit LC for Exporter. Disadvantages of LC letter of Credit to Importer. How Letter of Credit LC works. Is Airway bill a documents of title? How to start Export Business?

What are the risks and solutions in Export Business? Service Tax - Click here to read complete notification under Budget What is Bank post shipment credit to exporters?

Difference between LC expiry and shipment date expiry. Payment procedures in Triangular exports. When can an exporter release bill of lading from shipping company? How does Wire transfer work in international business?

Import of Textile and Textile Articles Rules to import Man-made staple fibers How to import Knitted fabrics or Crocheted fabrics How is assessable value calculated by customs for imports? Difference between general dry container and half height container Tips to import Vegetable Textile fibers, Yarns How to import Man made filaments, yarns How is IGM filed under high sea sale?

If you are calling a contract that has already been created, click on the contract reference number in the Summary screen. The details of the contracts that you have entered will be displayed in a tabular form. The LC Contract Details screen consists of a header and footer that contains fields specific to the contract being entered. Besides these, you will also notice six tabs and a vertical array of buttons along the lines of which you can enter details of the contract.

Contract details are grouped into the various screens according to the similarities they share. The LC Contract Screen contains eigt tabs along the lines of which you can enter details of the contract.

The eight tabs are:. Click this tab to enter the essential terms of the LC. This screen along with its fields has been detailed under the head Entering Main Contract Details. Under this tab, you can set the preferences specific to the letter of credit contract. In the screen that corresponds to this tab, you can enter the details of all parties involved in the LC. This screen along with its fields has been detailed under the head Entering Party Details.

Using this tab, you can track the limits for joint venture customers who are parties to the letter of credit contract. Click on this tab to enter details of the tracers that should be generated for an LC. This screen along with its fields has been detailed under the head Specifying Advises for an LC. On the Contract Detailed screen are also displayed some buttons. They enable you to invoke a number of functions vital to the processing of an LC contract.

These buttons have been briefly described below. Click this button to capture the details of draft drawn for the LC. You can specify the name of the insurance company that is covering the goods traded under the LC. On invoking this function you will be presented with a screen where the ICCF rate, amount, currency and the waive charge parameter can be specified.

The Processing Charges and Fees manual, details the procedure for maintaining charge rules. It also deals with the linking of a charge rules to a product and the application of the rule on an LC. Click this button to invoke the Settlement screens. Based on the details that you enter in the settlement screens the LC will be settled. The details of these screens have been discussed in the Settlements manual.

This button invokes the Tax services. The Processing Tax manual details the procedure for maintaining tax rules and schemes. It also deals with the linking of a tax scheme to a product and the application of the scheme on an LC. In the screen that corresponds to this button, you can specify details of the cash that you collect as collateral form a customer for the LC that you process. The details of this screen are discussed under the head Specifying Collateral details for an LC.

Click this button to view the details of the events and accounting entries that a contract involves. Clicking this button invokes the Contract Linkages screen.

In this screen, you can link an LC to a deposit or account, and indicate the funds that you would like to block. Click this button to specify values for the user defined fields UDFs.

If the LC is transferred to a new party, you can view the transaction details. Click this button to capture the customer related documents in central content management repository. Click this button to view the remarks entered at different stages of the contract. Enter valid inputs into all the mandatory fields or you will not be able to save the contract. After making the mandatory entries for the LC, save the contract by either clicking save icon in the toolbar.

On saving the contract after entering all the required details in the system, the system validates the value of the contract amount against the following:. If the transaction currency and the limit currency are different, then the system converts the amount financed to limit currency and checks if the same is in excess of the product transaction limit and user input limit. You have the option to amend all the unauthorized entries made for an LC.

However, after authorization, certain fields cannot be amended. Through the screens that follow in this section, you can process all types of LCs import, export, invoice, clean, guarantees, shipping guarantees. You can choose to enter the details of a contract using the following methods:.

To facilitate quick input, you only need to input the product code. Based on the product code, many of the fields will be defaulted. Overwrite on these defaults to suit your requirement. You can add details that are specific to the LC like the LC amount, details of the buyer and the seller, etc. For contracts uploaded from incoming MT, Undertaking Amount will be defaulted to LC Amount and undertaking expiry date will be null.

Undertaking expiry date can be specified on amend of contract once the contract is created through incoming MT If you modify the LC amount, the undertaken amount will not be impacted. However, the non-undertaken amount will be respectively modified based on the change in LC amount. You may choose to proceed or cancel. Specify the acknowledgement reference number.

Alternatively, you can select the reference number from the option list. The list displays all the acknowledgement reference numbers and type of registration maintained at LC registration screen which are authorized and unprocessed. The system defaults the details captured in registration screen if acknowlegement is captured on clicking populate P button beside Product Code.

Select the product from the list of products created in the LC. Contract Reference Number. The Contract Reference Number identifies a contract uniquely. It is automatically generated by the system for each contract. The Contract Reference Number is a combination of the branch code, the product code, the date on which the contract is booked in Julian format and a running serial number for the booking date. The Reference Number consists of a three-digit branch code, a four-character product code, a five-digit Julian Date and a four-digit serial number.

In addition, a contract is also identified by a unique User Reference Number. But you have the option to change the User Ref Number. This message identification number will be used to identify an incoming message coming from an external system. This is defined as the ICN number. If the incoming message results in an outgoing message, the ICN number will be linked to the outgoing message also.

The system will not allow to capture, the same source reference number for more than one advising or reimbursing contracts. The operations that you can perform on an LC are determined by the type of LC being processed. The operation that you specify will determine the accounting entries that are passed and the messages that will be generated. You can select an operation from the option list available.

The type of operation that you can perform on an LC has been listed below:. While defining a product, you defined a broad outline that can be applied on LCs. However, while processing an LC involving a product, you need to enter information specific to the LC. Specify the amount for which the LC is drawn. Similarly, if the amount is greater than the limit specified for every conveyance of the linked policy, the system will display an override. System defaults this value from the product level.

However, you can modify it. The value displayed here is not picked up in the field 40F. The effective date that you capture for a guarantee will be printed on the instrument. By default, the system displays the Issue Date, in the Effective Date field. You can change the default value for a guarantee to a date in the past or future. Commission for a guarantee, will be calculated according to your specifications for the product that the guarantee involves.

In the LC Product Definition screen, you can indicate if commission is to be calculated from:. All LC contracts will be associated with the standard tenor maintained for the product under which the contract is being processed. In case both the tenor and the expiry date are specified, the system will ignore the tenor that is manually entered and recalculate it based on the expiry date. However, for a specific LC contract, you can choose to maintain a different tenor.

The tenor of an LC can be expressed in one of the following units:. When you change the tenor and move to the next field, the system automatically updates the expiry date based on the tenor specified. If you leave this field blank, the system will calculate the expiry date based on the tenor. Now, suppose that you have specified both the tenor and the expiry date. In that case, the system ignores the tenor and recalculates it based on the expiry date.

You can modify the expiry date. When you change the expiry date and move to the next field, the system automatically updates the tenor based on the expiry date specified. The closure date, which is dependent on the expiry date, will also be recalculated. The system will validate when a new limit line is attached during actions other than New. The number of days specified as the Closure Days is calculated from the expiry date of the LC, to arrive at the Closure Date.

If the closure date falls on a holiday, the system will prompt you with an override message. Stop Date. This date will be defaulted to LC Expiry date. Stop date cannot be earlier than Issue date and later than expiry date.

Specify date on which the pre-advice was initiated from the adjoining calendar. The current date is defaulted as pre-advice date, if the operation is Pre-advice LC; however you can change to an earlier date.

A pre-advice is a brief advice of documentary credit sent by the Issuing Bank to the Advising Bank. This is to be followed by the LC instrument that contains all the details of the LC. It notifies the recipient that the named buyer has opened an LC for a specified amount on a named seller beneficiary. This is defaulted from the product level.

The value displayed here can be amended at the contract level. However, once the contract is authorized, you cannot make any amendments. Tolerance denotes the variance that has to be built around the LC amount, to arrive at the actual availability amount for the LC. The tolerance percentage is used to build the Maximum LC amount, when some component of the trade transaction like the freight, insurance, etc. This amount will be considered as the LC outstanding LC amount.

The negative tolerance is the percentage that should be subtracted from the LC amount, to arrive at the Minimum LC Amount. The negative tolerance is captured for information purposes only. It will form part of the LC and amendment instruments. The positive and negative tolerance specified for the product associated with the LC is defaulted. If you change the defaulted Positive Tolerance, an override message is displayed.

This amount is arrived at, by adding the positive tolerance to the LC amount. This clause further qualifies the LC amount. Select one of the following options from the adjoining drop-down list:. The liability percentage is used to track the maximum LC amount against a given percentage. A bank would like to limit its exposure to a new or existing customer as LC is a commitment given by the bank.

Although the bank sanctions an LC limit maximum LC amount which includes tolerance to a customer it may like to specify a percentage over and above this limit. This will result in the customer being shown to be liable or tracked for a higher amount. Specifying a liability percentage is from the perspective of risk management and provides cushion to the bank.

This amount is computed by the system using the method indicated above, only if you have specified a liability tolerance. If a Liability tolerance has not been specified, you can enter a liability amount of your choice. However, the liability amount that you can enter should be at least equal to the maximum LC amount.

The system will display an override message if you try to amend, cancel or close an export LC that is linked to an import LC. The above mentioned validations are also done while uploading an LC contract. The details of this party are captured in the Contract Main Screen. It is then defaulted to the Parties screen. If none of the parties in the LC is a customer of the bank, you should enter the CIF ID defined for the walk-in customer and give the details of one of the parties for it.

The party type of the counterparty of the LC is defaulted based on the type of LC you are processing. You can change the default. If the applicant is a customer of your bank, specify the CIF ID assigned to the customer, the related details of the customer will be automatically picked up. Indicate the party type of the customer who is the counter party of the LC.

You can select the valid party type from the adjoining option list. The details of the other parties involved in the LC are captured in the Parties screen. The Customer Details specified in this screen will be defaulted to the Parties screen. The system does not do any validations based on the Expiry Date.

It is used only for information purpose. Enter the date of the Their Reference. This would normally be the date on which you have a correspondence from the party regarding the LC. This will be picked up appropriately in the correspondence sent for the LC.

For an export LC, a reference for the Issuing Bank is mandatory. It is optional for other parties. LCs can revolve in Time or in Value. Select the appropriate option from the adjoining drop-down list. The mode of reinstatement for a revolving LC can be either automatic or manual. Check against this field to indicate that the mode of reinstatement is automatic.

For the letters of credit that revolve in time, you can specify the reinstatement frequency. This frequency represents the maximum number of reinstatements applicable to the LC. Based on the value you specify, the LC Liability Amount is computed and displayed. During LC reinstatement, the system calculates the next reinstatement date based on the units and the current reinstatement date. If the number of reinstatements exceeds the frequency set here, the system displays an override message when you save the LC.

You need to ratify this override at the time of contract authorization. Frequency is not applicable to the LCs that revolve in value. In such cases, once the LC is availed, the system reinstates it with the maximum contract amount during end of day operations. For this, the reinstatement option should be set to 'Automatic'.

For LCs, which revolve in time, the maximum number of reinstatements is calculated based on the Reinstatement Frequency you specify. In the Units field, you can choose one of the following:. On saving the amendment after checking this option, PCLS event takes place. The Limits, Outstanding Liability and the Cash Collateral are released to the extent of unutilized amount. You can reopen the closed LC as existing. You have to manually release as part of manual partial closure.

The system allows manual partial closure during the partial closure days, until the LC is closed. In case of a partially confirmed export LC contract, the system excludes the bill amount in the initial stage from the confirmed and unconfirmed portions. If the LC that you are processing is a guarantee you should specify its type. Click the adjoining drop-down list and select one of the following values:. This field displays the current amount that is available for availment under the LC.

This value is automatically updated when there are availments, amendments or reinstatements so that it reflects the current amount that is available under the LC. This field displays the current outstanding liability amount under the LC. This value is automatically updated when there are availments, amendments or reinstatements so that it reflects the current amount under the LC.

Enter information about the LC that is intended for the internal reference of your bank. This information will not be printed on any correspondence regarding the LC. However, the remarks are displayed when the details of the LC are displayed or printed.

However you can amend this field by adding the undertaking amount. Specify the status of the LC contract. The option list displays all valid statuses that are applicable. Choose the appropriate one.

At the branch level, if you have enabled group level status change for the LC, the system displays the status of the group with which the LC is associated. However, you can unlock and modify the statuses of individual contracts.

Thus, you can use this field for changing the status of an LC contract manually. These validations are applicable only if drafts information is maintained in the Drafts sub-system.

These validations are applicable for both Import and Export LC products. Cumulative Reinstatement - Where the credit indicates that the reinstatement is on a cumulative basis, in the above example the sixth installment may be the cumulative for 6 months, i.

Reinstatement can be done as Auto or Manual. If Auto reinstatement and revolves in time options are selected, then the system calculates maximum liability amount as per the frequency maintained and pass entries for the same. If Auto reinstatement, revolves in time and Non cumulative options are selected, then the system calculates initially the maximum liability amount during booking of contract and reverse the unutilized value of the particular period at the end of respective period.

System calculates and displays the frequency of reinstatement as per the values maintained in Revolves and Units options. System calculates and display next reinstatement date as per the frequency maintained when reinstatement is maintained as auto and frequency as time.

If auto Reinstatement and Frequency options are selected, then the system reinstates during EOD after every availment is made. If you select manual Reinstatement and Frequency, then the user can reinstates the value of contract anytime after availment is made. If reinstatement is dependent on value, then cumulative reinstatement is not supported by the system. Specify whether the credit granted under the LC you are processing should be tracked against the credit limit assigned to the customer under a Credit Line.

Check this box to indicate that limit tracking is required for the LC. In the subsequent fields of this screen, you can specify details of the line under which the credit is to be tracked. Specify the type of party involved in the LC you are processing, whose details you would subsequently enter. The parties involved in the LC can be specified in any sequence. However, a party code can be used only once in each LC.

You can change the default to suit the LC you are processing. The system uses the Expiry Date and the Last Shipment Date specified for the LC you are processing, and arrives at the period of presentation. If the sum of the latest shipment date and period for presentation is greater that the expiry date of an import LC, the system will display an override message. Check this box to indicate that the amendment number should be incremented with every amendment. You can select one of the following values from the adjoining option list:.

However, if you change the INCO term, the document and clause details will be not be updated automatically. You will have to manually change them if required. Check this option if you want to link an export LC to an import LC. This field is applicable only for import LCs. An export LC can be linked to only one import LC. While issuing a guarantee, the option list displays all valid bill of lading reference numbers and import LCs. Similarly, while issuing a back to back LC, the option list displays all valid export LCs maintained in the system.

You can choose the appropriate one. This field is initially defaulted from product level. However, you can then check or uncheck it at the contract level.

The system defaults the rule narrative from the product level. However, you can modify this. The system displays the current maximum unconfirmed LC amount. This amount is derived by deducting the confirmed amount from the maximum LC amount. The system checks this box by default for Letters of Credit.

You can operationally control the beneficiary confirmation process for an LC, but you cannot modify it after the first authorization. You can amend the financial fields in LC Contract Online screen. Authorization of these amendments is done through LC Contract online screen. If Beneficiary Confirmation Requires is not selected at the contract level, then any financial and non-financial amendment is done using the LC Contract online screen.

You can view the message using the Message Preview screen. Check this option to indicate that the LC can have an associated confirmation message. Check this box to confirm the partial amount. The remaining amount can be confirmed after you receive the approval from the external agent. The system defaults the status of the checkbox based on the product maintenance. If you check this box, the system picks up the contract during EOD operations for status processing.

If you do not check this, the system will not consider the LC contract for automatic status processing. Specify the percentage of LC Amount to be confirmed. If percentage is not specified, the system will calculate the percentage based on the confirm Amount specified.

Specify the amount to be confirmed. If Confirm Amount is not specified, the system will calculate the confirmed amount based on the Confirm Percentage specified. Confirm Percent is considered for calculation. The Parties screen can be used to record the details related to all the parties involved in the LC.

The documents, tracers and messages that are generated will be sent to the parties concerned, based on the details you specify in this screen. Specify the party type beneficiary, accountee, applicant, advising bank, issuing bank, reimbursing bank, advice through bank, confirming bank, claiming bank. The adjoining option list displays all party types available for the LC.

Once the record has been saved, you can change party names by amending the record, provided the LC is not linked to a bill. Also, you cannot change party names for a transferred or an availed LC. If MT has been already sent to Reimbursing bank, then MT will be sent to the Reimbursing bank for intimating change of Beneficiary. Counterparty will be changed and the limits, if any, for the old Beneficiary will be reinstated and will be tracked against the new Beneficiary.

MT will be generated to the old Advising Bank. MT will be sent to the Advising bank intimating the change of Beneficiary and Reimbursing bank. Specify a valid party ID against the party type. The adjoining option list displays all party IDs available for the LC. On specifying REB in the party type, the adjoining option list will display all IDs having the contract currency as that of the LC currency. The system validates for the ADB membership of the selected Bank.

Enter the name of the Customer. The party name can be characters in length. However, please note that in the SWIFT messages that you generate only 35 characters will be included. In case of an upload of MT, the value in field 20 of the message is displayed here.

Specify the template ID. The advices for a party will be sent to the default media maintained in the Customer Addresses table. If you want to send the advices through another medium, you should indicate it in the Parties screen. The address should be also indicated. The advices will be sent through the new medium, only if you indicate so in the Advices screen of contract processing.

If not, the advice will continue to be sent to the default address defined for the party. You can use this feature to send a one-off advice, through a different medium. The issuer of LC is a bank or an individual. This is enabled only for the party type ISB issuing Bank. The party type is defaulted from CIF maintenance. However, you can amend the value before authorizing the contract.

If issuer of LC is a bank, tags 52A and 52D will be populated. The parties involved in an LC depend upon the type of LC you are processing.