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LOC

Former Member
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What is LETTER OF CREDIT, how it could be determained in SAP

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Answers (3)

Answers (3)

Former Member
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hi]

A letter of credit is a legally negotiable document issued by a bank at the request of an importer. The letter of credit ensures the financial ability of the importer to pay for the goods by substituting the credit of a bank for the credit of the importer.

The importer sends a purchase order to the exporter.

After receiving the purchase order, the exporter issues an order confirmation.

The exporter ships the goods to the importer as the letter of credit’s terms require.

After shipping the goods, the exporter gives the negotiating bank the valid letter of credit and the required shipping documents.

The negotiating bank examines the validity of the shipping documents for any discrepancies.

The opening bank reimburses the negotiating bank for the amount it paid the exporter. In exchange, it receives the shipping documents from the negotiating bank.

The opening bank negotiates with the importer for payment in exchange for the shipping documents.

After receiving the valid shipping documents from the opening bank, the importer presents the bill of lading to the shipping company and claims the goods

The importer, in compliance with the payment conditions the exporter requested, opens a letter of credit at the bank of its choice. This bank is called the opening or issuing bank.

After approving the request for the letter of credit, the opening bank can contact its branch or affiliate (called the advising bank) in the exporter’s country to establish and confirm the letter of credit on behalf of the exporter.

The advising bank authenticates the letter of credit and sends it to the exporter by registered mail.

Former Member
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Hi

Letter Of Credit (LC)

A letter issued by a bank to obtain payment for goods.

When a letter of credit is confirmed, the advising bank guarantees payment only if all stipulations in the letter of credit are conformed to exactly.

Letter issued by a bank, guaranteeing payment for goods or services to a foreign supplier. Payment is made if and when the goods or services have been supplied as stipulated.

Regards

MBS

Former Member
0 Kudos

HI

A letter of credit is a letter issued by a bank to obtain payment for goods. When a letter of credit is confirmed, the advising bank guarantees payment only if all stipulations in the letter of credit are conformed to exactly.(GTS)

http://web.mit.edu/CAO/www/SB2002/AR/F-29.htm

http://www.geekinterview.com/question_details/24384