The Letter of Credit Process

International shipping isn't as simple as putting something in a box and affixing a stamp on it. For million-dollar freights that affect the fortunes of businesses worldwide, a number of logistical procedures via letters of credit (LC) provide a sense of security and safety. The following details the process for using LCs during the shipping/payment process:

The Purchase: An international importer agrees to purchase a product from a domestic exporter. To minimize financial risks, the exporter requests that the importer provide payment with a LC.

The LC Request: The importer puts in a request to their bank for a LC to the exporter's domestic bank. This document ensures payment to the exporter upon product delivery.

Shipment: The product is packaged and shipped across international lines to the importer.

LC Analysis: The documents are delivered to an advising bank. The advising bank searches for discrepancies and issues; if a problem is found, the documents are returned to the exporter for correction. Documents can be resubmitted continuously until they are compliant with the terms of the LC.

Compliance: Once LCs are deemed compliant, the documents are forwarded to the importer's bank. The bank sends confirmation that the shipment was received.

Confirmation: The importer's bank analyzes the transaction to confirm that all terms are completed. Once this has been determined, the importer's banks send payment to the exporter's bank.

Payment: With everything confirmed and completed, funds are forwarded to the exporter.

Learn more about potential LC problems or see how QLC provides solutions that simplify the LC process for businesses around the world.