Letter of Credit and Documentary Collection(信用证和跟单托收的流程)
The settlement of Letter of Credit and Documentary Collection
Letter of Credit:
Insurance(1-4)
1,The Exporter and the Importer agree on a sale under “Letter of Credit”terms.The Exporter sends a pro-forma invoice to the Importer.
2,The Importer takes the pro-forma invoice to its bank and requests a Letter of Credit.
3,The Importer’s Bank issues a L/C and sends it to the Exporter’s Bank.
4,The Exporter’s Bank matches the L/C and notifies the Exporter that it’s OK to ship the merchandise to the Importer.
Shipment(5-7)
5,The Exporter ship the merchandise to the Importer ,but gathers all the documents and sends them to the Exporter’s Bank.
6,The Exporter’s Bank checks that all the documents match the requirements of the L/C and sends them to the Importer’s Bank.
7,The Importer’s Bank verifies that the documents matches the requirements of the L/C and notifies the Importer that everything is OK.
Payment(8-10)
8,The Importer pays the Importer’s Bank in order to be able to collect the documents that it will need to collect the merchandise and clear Customs.
9,The Importer’s Bank sends the Importer’ payment to the exporter’s Bank.
10,The Exporter’s Bank notifies the Exporter that it has been paid.
Documentary Collection:
It is a process by which an exporter asks a bank to “safeguard” .its interests in the foreign country by not releasing the documents. It is accompanied by a Bill of Exchange (also called a Draft). It involves a Letter of Instructions to the Presenting Bank.
Remitting Bank:
Receives the documents from the exporter and then sends them to the Presenting Bank. It has no obligation to render judgment or advice on the quality of the packet of documents; it just transmits them to the Presenting Bank.
The Remitting Bank is instructed to sign the Draft on behalf of the Importer.
The Remitting Bank only does so if it is convinced that the Importer will eventually pay.
The Remitting Bank “avals” the Draft.
Presenting Bank:
The bank that interacts with the importer on behalf of the exporter.Receives the documents from the exporter or from the Remitting Bank and holds them until the importer either signs a draft or pays the exporter. Follows the Letter of Instructions from the Exporter.