Flow of Letter of Credit

     Flow of letter of credit
Step 1: Buyer and seller conclude the sales contract and agreed to use an LC as the method of payment.
Step 2: Buyer approaches the Issuing Bank to issue an LC on his behalf in favour of the seller with all the terms and conditions specified.
Step 3: Issuing Bank issues the LC and requests the advising bank to advise or confirm the credit to the LC beneficiary (seller).
Step 4: Advising/confirming bank authenticates the LC and sends the LC to the LC beneficiary
Step 5:Seller prepares and despatches the goods to the buyers country.
Step 6:Seller presents the draft and/or documents to the nominated bank
Step 7: Nominated (nominated  as the negotiating bank)Bank checks documents presented against the LC terms and Conditions an seeks instruction from seller on documentary discrepancies.
Step 8a: Nominated Bank forward the draft and/or documents to the issuing Bank.

Step 8b: If documents are free from discrepancies are supposed by sellers indemnity, nominated bank claims reimbursement from the appointed reimbursing bank.
Step 8c: Reimbursing bank pays the nominated bank against a valid reimbursement authority received from the issuing bank and statement from negotiating bank that the documents complied with LC terms.
Step9 : Nominated Bank credits the net proceeds into the sellers account.
Step10 : Issuing Bank checks documents presented against the LC terms and conditions. If documents are free from discrepancies, Issuing Bank  reimburses bank.
Step11 : Issuing Bank presents documents to the buyers for payment.
Step12 : Once payment is received from the buyer, Issuing Bank releases documents to the buyer for latter to collect his goods

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