Described in different names such as – Documentary Credit, LC at Sight & Import LC, Letter of Credit stands as an important tool for carrying out global trade transactions in a safe and secure way. If you’re looking to get an Import Letter of Credit for your overseas trade deals, then it’s a must to know about its issuance process and how it works for you. In this blog, we are going to discuss on – What is Import LC issuance process and the Letter of Credit Working Process.
What is Import LC?
Import LC is issued by the importer’s bank on their behalf upon request and in favor of the exporter involved in the trade deal. This acts as a guarantee provided by the bank that the exporter will receive on time, once the goods are received. Concluding the trade deals by using Import LC as a payment term reduces the risks involved and also increases the creditworthiness. Issued by a bank, LC MT700 ensures that the exporter will get their payment, only if they meet certain terms as agreed in the contract and after submitting the mentioned documents, as proof of shipment.
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How Does Import LC Works?
The important benefit of having import LC is – it reduces the risk involved in global trading. With the LC MT700, the importer can rest assured that the payment will release to the exporter; only if they meet the conditions as agreed in the contract. On the other hand, the exporter will also have peace of mind; as there is a ZERO chance of non-payment or delayed payment of the delivered goods. Having an Import Letter of Credit also increases the creditworthiness of the buyer, because the LC is issued on behalf of the buyer from a rated bank. And this enables the buyer to get better negotiation of prices of the imported goods.
Import LC Issuance Process
If the buyer or the seller wants to secure their trade deals from the risks involved. Then they choose a Letter of Credit as their payment term. It gives the required assurance to both parties. MT700 has been used as the most popular payment term in international trade. So, how to open a Letter of Credit, and what is its issuance process?
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To get a Letter of Credit on their behalf, the buyers want to contact their bank with an LC request. If they have the existing bank facilities, then the bank will accept their request to open LC on their behalf. In case, if the buyer didn’t have the existing bank facilities. Then the bank will demand the buyer to provide a 100% cash margin to proceed with their request. And if they have enough cash funds in their bank account, then the bank will decline their request. By this, the buyer may lose their trade deal.
So, we, Bronze Wing Trading Ltd, the Letter of Credit Providers in Dubai are here to help importers to secure their trade deal by providing the required MT700 from our European Bank Accounts at ZERO cash margin.
Are you looking to get Import Finance Facility for your import deal? Is your bank asking for collateral or cash margin before issuing the instrument? Submit your requirements to us! We are the leaders in providing trade finance services for importers and exporters.
