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Commercial Law and Practice WS03 D3
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Commercial Law and Practice WS03 D3
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LEGAL PRACTICE COURSEConsolidation of Documentary Letters of Credit (LC) Process
1. Importer (Buyer) and Exporter (Seller) negotiate terms of International Supply Agreement
2. Importer instructs its bank, the Issuing Bank, to open a LC in favour of the Exporter
3. Importer’s bank (the Issuing Bank) issues the LC to the Exporter’s bank – the Confirming
Bank (also known as the Advising Bank)
4. LC is received by Confirming Bank which checks the LC then passes it to the Exporter
5. Goods are shipped by Exporter
6. Shipping documents are prepared and submitted to Confirming Bank by Exporter
7. Confirming Bank checks documents. If they comply with LC, Confirming Bank sends
documents to Issuing Bank and may pay Beneficiary/Exporter in advance of being
reimbursed by Issuing Bank
8. Issuing Bank checks documents again. If correct, they are released to Importer and
Importer’s account is debited (9.)
10. Issuing Bank reimburses Confirming Bank
11. Payment sent to Beneficiary/Exporter if this didn’t happen at Stage 7.
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