L/C (Letter of Credit) Operation Chart

Last Updated on 21/12/2020

L/C (Letter of Credit) Operation Chart

Muhammad Rahat
Dept. of Knitwear Manufacturing Technology
BGMEA University of Fashion & Technology (BUFT)
Email: smrahatsaif@gmail.com


What is L/C?
L/C means Letter of Credit. It is one of the most used words in garment merchandising sector. L/C plays an important role both buyer and seller. Letter of credit is a guarantee given by the buyer’s bank to pay the amount to the seller’s bank on maturity. Generally L/C is used for international sales transactions. L/C deals only in documents but not goods. L/C helps in avoiding risk by having intermediate buyer and seller bank that ensure proper payment. L/C is beneficial to the seller as all terms and conditions are mentioned in the L/C and buyer cannot hold seller responsible for any other reason that is not mentioned in the L/C and buyer cannot dispute falsely on the quality of goods received by him. An apparel merchandiser should have clear concept on LC. If you see the following operation chart of L/C carefully then you can learn how to operate L/C in apparel exporting business.

You may also like: How to Open Back to Back L/C in Garment Export Business

Operation Chart of Letter of Credit (L/C):

lc operation chart
Fig: Operation chart of L/C

Explain of the the above image:

1. Exporter ↔ Importer: Negotiation.

2. Importer → Importer Bank: Import license, L/C

3. Exporter: Commodity

4. Importer Bank → Exporter Bank: L/C

5. Exporter Bank → Exporter: L/C

6. Exporter ↔ Trade department, inspection, custom, insurance. Shipper: License, Documents.

You may also like: Master Export LC Opening Process in Garment Buying House

7. Exporter: Shipping

8. Exporter → Exporter Bank: Documents

9. Exporter Bank → Exporter: Payment

10. Exporter Bank → Importer Bank: Documents

11. Importer Bank → Exporter Bank: Payment

12. Importer Bank → Importer: Notification

13. Importer → Importer Bank: Payment

14. Importer Bank → Importer: Documents

15. Importer → Customs: Claiming.

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1 thought on “L/C (Letter of Credit) Operation Chart”

  1. Hi sir,
    this was a very good explanation of L/C.
    thank you very much for Visualising the concept than the old paragraph method..


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