Basic concept for Applicant for International Trade

1. Presented by
Md. Samsujjaman (Sobuj)
Senior Officer
Finance & Accounts Dept.
New Hope Farms Bangladesh Ltd
Mamarishpur, Mollikbari, Bhaluka, Mymensingh.
Cell: +8801710357458
Email: sjjaman2002@gmail.com

2. The name "letter of credit" derives from the
French word "accréditation", a power to do
something, which derives from the Latin
"accreditivus", meaning trust.
Letter of Credit: Is a written instruments issued
by a bank at the request of customer, the
importer (buyer), whereby the bank promises
to pay the Exporter (Beneficiary) for goods or
services, provided that the Exporter
represents all documents call for, exactly as
stipulated in the letter of credit, and meet all
others terms and condition set out in the
letter of credit.
But in Europe prefer to use “documentary credit”
or “D/C” instead of L/C.

3. a) Central Bank
b) Foreign Exchange management act /Custom
Act
c) Uniform Custom and Practice for
Documentary Credit (UCPDC)
d) International Chamber and Commerce (ICC)

4. A transaction in a Letters of Credit may involved
several parties from the issue of the L/C till
making payment of the bill to the seller-
a) Applicant/Importer/Consignee: The buyer
who finalizes the terms & conditions of
purchase transaction and submits the request
to his bank for issuing L/C in favor of seller.
b) Beneficiary/Exporter/Consigner: The seller of
the Letter of Credit is generally the person in
whose favor the credit has been issued.

5. Issuing Bank/Opening Bank: An issuing bank is
the one which on receipt of the request from
it’s customer, the applicant (buyer’s) bank
examines the proposal and open L/C in favor
of beneficiary with the stipulated terms and
conditions.
Advising Bank/Corresponding Bank: In case of
seller (beneficiary) reside in a foreign country
or different place, the issuing bank may contact
some others bank in the beneficiary country
may agree to advice the credit to the
beneficiary & thus play the role of an advising
bank.

6. Confirming Bank: The confirming bank adds it’s
guarantee to the credit opened by another bank,
thereby undertaking the responsibility of
payments/negotiation acceptance under the credit,
in additional to that of the issuing bank.
Confirming bank playing an important role where
the exporter is not satisfied with the undertaking
of only the issuing bank.
Reimbursing Bank: Reimbursing bank is the bank
authorized to honor the reimbursement claim in
the settlement of
negotiation/acceptance/payments lodged with it
by the negotiation bank. It is normally the bank
with which issuing bank has an account from
which payment has to be made.

7. Nominated/Negotiating Bank: The negotiating
bank is the bank who negotiates the
documents submitted to them by the
beneficiary under the credit either advised
though them or restricted to them for
negotiation. On negotiation of the documents
they will claim the reimbursement under their
credit and makes the payment to the
beneficiary provided the documents submitted
are in accordance with the terms & conditions
of the L/C.

8. Terms Definition Activities
Applicants Importer Buy
Beneficiary Exporter Sell
Issuing/Opening
Bank
Importer's Bank Issues L/C
Advising Bank Exporter’s Bank Advise L/C
Confirming Bank Advising Bank or
3rd Party Bank
Confirm
L/C
Paying Bank Any bank as
Specified in L/C
Pay as draft

10. H.S (Harmonized System) Code: The HS was
created and is administered by the Brussels-
based World Customs Organization (WCO).
There has 8 digit & The first 6 digits of an HS
code indicate the same product description for
all 190 countries, but that does not mean that
the rates of customs duties are the same &
other 2 digit country Identification of goods or
Services.
Tenor: The length of time until a loan is due. For
L/C purpose usually it would credit
30/45/60/90/180 days for reimbursement.

11. SWIFT: SWIFT stand for Society for World wide
Interbank Financial Telecommunication.
Belgium based global banking network that
enrich 6495 banks & financial institute in 178
countries 24 hours a day. SWIFT is highly
secure network to send & receive fund transfer,
L/C related, remittance message etc.
Payment At Sight: A payment due on demand. An at
sight payment will require the party receiving the
good or service to pay a certain sum immediately
upon being presented with the bill of exchange.

12. Deferred payment: A sum of money paid under
a deferred payment arrangement.
FOB (Free on Board): FOB port" means that the
seller pays for transportation of the goods to
the port of shipment, plus loading costs. The
buyer pays cost of marine
freight, transport, insurance, unloading, and
transportation from the arrival port to the
final destination.

13. CFR (Cost and Freight): "Cost and Freight" means
that the seller must pay the costs and freight
necessary to bring the goods to the named
port of destination but the risk of loss of or
damage to the goods, as well as any additional
costs due to events occurring after the time the
goods have been delivered on board the vessel
is transferred from the seller to the buyer when
the goods pass the ship's rail in the port of
shipment.

14. CPT-Carriage Paid to: Carriage paid to..."
means that the seller pays the freight for the
carriage of the goods to the named
destination. The risk of loss of or damage to
the goods, as well as any additional costs due
to events occurring after the time the goods
have been delivered to the carrier is
transferred from the seller to the buyer when
the goods have been delivered into the
custody of the carrier.

16. Transshipment: Transshipment is the shipment
of goods or containers to an intermediate
destination, then to yet another destination.
One possible reason for transshipment is to
change the means of transport during the
journey (e.g., from ship transport to road
transport), known as translating.

17. 1. Revocable (বাতিল য াগ্য)
2. Irrevocable
3. At Sight
4. Deferred/ Usance
5. Unconfirmed
6. Confirmed
7. Transferable
8. Assignment of Proceeds
9. Revolving
10. Standby
11. Back to Back

18. Revocable: The buyer and the bank that
established the LC are able to manipulate the
LC or make corrections without informing or
getting permissions from the seller. According
to UCP 600, all LCs are irrevocable, hence this
type of LC is obsolete.
Irrevocable: Any changes (amendment) or
cancellation of the LC (except it is expired) is done
by the applicant through the issuing bank. It must
be authenticated and approved by the beneficiary.

19. At Sight: A credit that the announcer bank
immediately pays after inspecting the carriage
documents from the seller.
Deferred/Usance: A credit that is not
paid/assigned immediately after presentation,
but after an indicated period that is accepted
by both buyer and seller. Typically, seller
allows buyer to pay the required money after
taking the related goods and selling them.

20. Unconfirmed: This type does not acquire the
other bank's confirmation.
Confirmed: An LC is said to be confirmed when a
second bank adds its confirmation (or
guarantee) to honor a complying presentation
at the request or authorization of the issuing
bank.
Transferable: A letter of credit can be transferred
to the second beneficiary at the request of the
first beneficiary only if it expressly states that
the letter of credit is "transferable". A bank is
not obligated to transfer a credit.

21. Assignment of Proceeds: Transferring all or part
of the proceeds from a L/C to 3rd Beneficiary.
To receive an assignment of proceeds, the
beneficiary of L/C is require to submit in
writing, a request to the bank to assign the
funds to a different person or company.
Revolving: Single L/C that cover multiple-
shipments over a Long period. Instead of
arranging a new L/C for each
separate shipment.

22. Stand by: Operates like a Commercial Letter of
Credit, except that typically it is retained as a
"standby" instead of being the intended
payment mechanism.
Back to Back: A pair of LCs in which one is to the
benefit of a seller who is not able to provide
the corresponding goods for unspecified
reasons. In that event, a second credit is
opened for another seller to provide the
desired goods. Back-to-back is issued to
facilitate intermediary trade.

23. 1. Financial documents: Bill of Exchange- an
unconditional order in writing, addressed by
one person to another, signed by the person
giving it, requiring the person to whom it is
addressed to pay on demand, or at a fixed or
determinable future time, a sum certain in
money to or to the order of a specified person,
or to bearer.
2. Commercial documents: Proforma Invoice (PI),
Packing List
a) Proforma Invoice: a Proforma invoice is a
document that states a commitment from the
seller to provide specified goods to the buyer
at specific prices.

24. 2. Commercial documents: Proforma Invoice (PI),
Packing List
a) Proforma Invoice: a Proforma invoice is a
document that states a commitment from the
seller to provide specified goods to the buyer
at specific prices.
Content of PI:
 The word invoice (or Tax Invoice)
 A unique reference number (in case of
correspondence about the invoice).
 Date of the invoice

25.  Credit terms
 Tax payments if relevant
 Name and contact details of the seller
 Tax or company registration details of seller
e.g. Business Identification Number (BIN) for
Bangladesh businesses.]
 Name and contact details of the buyer
 Date that the goods or service was sent or
delivered
 Purchase order number (or similar tracking
numbers requested by the buyer to be
mentioned on the invoice)
 Description of the product(s)

26.  Unit price(s) of the product(s) (if relevant)
 Total amount charged (optionally with
breakdown of taxes, if relevant)
 Payment terms (including method of payment,
date of payment, and details about charges for
late payment)
B) Packing List: It commonly includes an itemized
detail of the package contents and does not
include customer pricing. It serves to inform all
parties, including transport agencies,
government authorities, and customers, about
the contents of the package. It helps them deal
with the package accordingly.

27. 3. Shipping documents: Transport document,
insurance certificate, commercial, official or
legal documents.
4. Official documents: License, embassy
legalization, origin certificate, inspection
certificate, sanitary certificate.
5. Transport document: Bill of Loading, airway
bill, lorry/truck receipt, railway receipt, CMC
other than mate receipt, forwarder cargo
receipt.
6. Insurance documents: Insurance policy or
certificate, but not a cover note.

28. One-time Requirement:
 Membership certificate of any Chamber of
Commerce & Industries or concerned
association
 No-Objection-Certificate (NOC) from existing
bank mentioning no outstanding of overdue
bill of entry and no objection to extend trade
facilities against IRC No……

29. Annual/Periodic Requirement:
 TIN Certificate (Certificate of last assessment year)
 VAT Certificate (Most recent)
 Trade License (Renewed copy)
 Renewed IRC or BOI permission
For Every Subsequent LC/LCA:
 LC Application Form (For LC only) (2 Page = 1 Set)
 LCA Form (For both LC & Contract) (6 copy= 1 set)
 IMP Form(Foreign Exchange Regulation Act/
Money Exchange Form)- 2 copies (1set)
 Proforma Invoice
 Insurance cover note
 Any other approval (if required by govt./import
policy/FX regulation)

30. ① Negation with beneficiary (Seller) & Issuing
Sales Contract & Proforma Invoice.
② Collect L/C Application from (1pcs), LCA from
(6pcs set) & IMP from (2pcs) & Fill up
according to sales contract & PI & Write
Application for opening L/C to Bank.
③ According to PI, Issuing Insurance “cover note”
from Insurance company.
④ Along with L/C Application, LCA, IMP &
Insurance cover note submit to bank.
⑤ After submitting to bank Asking for Draft
copy of L/C.

31. ⑥ After getting draft copy checking carefully &
send to checking to beneficiary.
⑦ After finishing checking, if okay then inform
to bank for completing. If need amendment,
then inform to bank amendment &
completing.
⑧ Next beneficiary will send (Load) goods or
service, after loading beneficiary will send B.L,
C.I, Packing List & Other’s necessary
documents directly to your bank or you.
⑨ If they send you directly, after checking, you
represent to bank for endorsing along with
Accepting of Payments.

32. ⑩ After getting's or endorsing those documents
from bank collect Insurance Policy from
Insurance company.
⑪ All the documents give to your CNF Agents
for clearing your goods & Services.

33. Sales
Contract(Applicant
& Beneficiary)
Exporter will Loading
goods, then He will send
CI, Packing List , PI, BL &
Others Documents to you
or to Bank
Collected form L/C
related from Bank(L/C
Application, LCA, IMP) &
Fill up these
Issuing Insurance
Cover note from
Insurance company
according to PI
Submit to Bank (fill up
from along with
Insurance Cover note)
Collect L/C draft copy
& Both Parties
Checking, If need
amend, Communicate
with Bank for Amend
Endorse it from Bank
by Accepting of
Payments & Issuing
Insurance Policy
Summit all the
documents to your
CNF Agents to
Release the goods

34. Through good relationship some one can Import
with L/C- that procedure name Latter of Credit
Authorization (LCA).
Here, no need to fill up L/C Application from. But
need apply in Bangladesh Bank prescribe “KA”
form. Therefore, you should have to knowledge
about import policy whether which goods or
Services can import through LCA.
Under LCA we can import Capital Machinery &
Raw Materials but did not spares Parts.