Professional Documents
Culture Documents
Flow Based Letter of Credit
Flow Based Letter of Credit
• Incoming 700,707,710.720
• SWIFT Integration & Manual
• Sales Contract & File
• Replacement
BB Compliance Issues
• System shall clearly mention bank’s position and liability against DC
advice and liability
• System shall confirm DC through swift or manual
• System shall verify DC as per International (UCP latest version) and Local
(Foreign Exchange Policy) guideline – Is it scrutiny?
• System shall have options for substitution flag
• Substitute Documents?
• System shall have silent or open confirmation flag ?
• Open Confirmation
• Silent Confirmation
• System shall have DC lien flag – Is BB Allowed?
• System shall have facility for DC transfer w/o substitution?
Notes
• Charge & Commission:
• Schedule of Charge declaration product wise
• Customer wise exception
• Rights base manipulation facility
• Doc:
• Product wise document required flag for LC issuing (Mandatory/Optional)
• Incoterm
• PI
• Misc. (Existing Issues):
• Liability with tolerance
• Partial Payment
• Bill Amendment
• Shipping Guarantee
• Sales' Contract Replacement(Many to Many)
Notes
• --Insurance
• Customer???
• Account??
LC Draft
LC Issue
LC Issue
LC Draft:
• Customer Request(lc initiation request) – not in current scope
• Contrac Detail Entry (canbe ritrive from draft)
LC Issuance Flow:
• Customer Request (lc initiation request) – not in current scope
• Limit Retrive & Checking
• Contrac Detail Entry (canbe ritrive from draft)
• Margin Lien – if applicable (in sanction tells FDR as security margin)
• Document Attachment
• Transaction Build
• Submission for verification.
LC Amendment Flow:
• Customer Request (lc initiation request) – not in current scope
• Limit Retrive & Checking
• Contrac Detail Entry (canbe ritrive from draft)
• Margin Lien – if applicable (in sanction tells FDR as security margin)
• Document Attachment
• Transaction Build
• Submission for verification.
Bills Module
• Abc
• Def
ess 8
roc
d it P
Pay
7
6 Instruction for Payment
Issue LC to Advising Bank
2
Advising Bank 11
Pay to Nego Bank
Advise to Exporter
3
Nominated Bank
4
Apply for LC
1
9 Issuing Bank
Pay
Ship the goods to Applicant 10
Letter of Credit Steps
• Step 1: The importer and exporter agree on the sale terms and come
into the contract encompassing the type of products, delivery
schedule, mode of payment etc. After this, buyer arranges for his
bank (Issuing Bank) to open a Letter of Credit in favor of the supplies.
The buyer’s bank is liable to prepare LC as per importer’s instructions
to the exporter and required LC documents including – Bill of Lading,
Commercial Invoice, Transport Document such as Bill of Lading,
Airway Bill, etc., Insurance Document, Inspection Certificate,
Certificate of Origin and any other document as per the sale contract.
Letter of Credit Steps
Reimbursement bank
Issuing Bank
Available with..
(Nominated
Bank) Pays to..
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MT 710
Document Advising Confirming
Beneficiary Advise Through
Presented to Bank Bank
Document
Presented to
Nominated Bank Type
• Accepting Bank
• Accepts the term draft(s) drawn by the beneficiary
• Available by : BY ACCEPTANCE
• Paying Bank
• Makes payment to the sight draft(s) drawn by the beneficiary
• Available by : BY PAYMENT, BY MIXED PYMT, BY DEF PAYMENT
• Negotiating Bank
• Negotiates the draft(s) and/or documents presented by the beneficiary
• Available by : BY NEGOTIATION
SWIFT Message Flow in Letter of Credit
Applicant Beneficiary
1 1
• Advice to
third bank
• MT 700 & 701: Send LC with Confirmation 700 & 701 • LC Advice 710 & 711
6 202
Issuer Receiver
759
Import LC Opening Process
• Initiate The LC
• Evaluate The LC