L/C (Letter of Credit) Operation Chart
Dept. of Knitwear Manufacturing Technology
BGMEA University of Fashion & Technology (BUFT)
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.
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Operation Chart of Letter of Credit (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.
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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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Founder & Editor of Textile Learner. He is a Textile Consultant, Blogger & Entrepreneur. He is working as a textile consultant in several local and international companies. He is also a contributor of Wikipedia.