Initiate a Letter of Credit

Using this option, you can initiate an Import Letter of Credit (LC) in the application. A letter of credit is a bank document that guarantees that the seller receives payment in full provided the delivery conditions have been satisfied. In the event that the buyer is unable to make payment on the purchase, the bank covers the outstanding amount.

Pre-Requisites

User must be having a valid corporate login credentials to get into the system. This will be under a maker – approver system, or as per user’s access. User must be having a sanctioned limit/credit available for his perusal.

Workflow

How to reach here:

Trade Finance > Letter of Credit > Initiate LC

User has three options to initiate LC

• Using existing Templates
• Using existing Drafts
• Initiating LC ( New Application)

These are explained in detail underneath.

Search LC template

User can save LC application as a Template so that same can be used for creation of similar kind of LCs, if required in future. User can search the saved LC template using Template Name.

Note: LC Application saved as Template can be re used any number of times for LC Initiation.

To search the LC template:

1. In the Search field, enter the template name.
2. Click . The saved LC templates appears based on search criteria.

Field Description

Field Name	Description
Search Result
Template Name	The name using which template is stored and can be used to initiate a LC application.
Beneficiary	The beneficiary name against whom LC is to be created.
Product	The corresponding LC product type and as supported by Host.
Created by	The name of the maker who created the template.
Last Updated	The latest updated date of the template.
Access Type	The type of access granted to template whether it is public or private.

Search LC Drafts

User can save LC application as a Draft so that it can be used if required in future. User can search the saved LC draft using Draft Name.

Note: LC Application saved as Draft can be used only one time for LC Application initiation.

To search the LC draft:

1. In the Search field, enter the draft name.
2. Click . The saved LC draft appears based on search criteria.

Field Description

Field Name	Description
Search Result
Draft Name	The name of the LC application saved as draft.
Saved On	The date on which the draft is saved.

Initiate a Letter of Credit

Using this option, you can initiate an Import Letter of Credit (LC) in the application. To initiate an LC in the application, you must enter details such as your Customer ID, Product, shipment period, and applicable charges etc. You can also give specific instructions to bank.

To initiate the LC:

1. Click Initiate LC on Letter of Credit Initiation screen.

Field Description

Field Name	Description
Party Id	The both primary and secondary party IDs in the application.
Branch	The bank branch where you want to create the LC contract.
Applicant Details
Applicant Name	Displays the LC applicant name based on the selected party ID.
Address	Displays the LC applicant address.
Country	Displays the country of the LC applicant.
Date of Application	The current date as the date of LC application.
Beneficiary Details
Beneficiary Name	The name of the LC beneficiary.
Address	The address of the LC beneficiary.
Country	The country of the LC beneficiary.
Product Details
Product	The Import LC product under which you want to create the Import Letter of Credit.
Revolving	Indicates whether the LC is revolving or not. The options are: Yes No
Revolving Type	The Indicates revolving type. The options are: Value : LC revolves in value. Time : LC revolves in time
Repeat Frequency	The time duration of revolving frequency The options are: Days Month This field is enabled if the Time option is selected in Revolving Type list.
Cumulative	Displays whether the frequency is cumulative for the LC. If it is cumulative then unused amount of previous LC would be added and available for the new LCs. The options are: Yes No
Auto Reinstatement	This states that reinstatement will happen automatically, if not chosen it has to be done manually if required. The options are: Yes No
Transferable	Indicates whether the LC is transferable or not. The options are: Yes No
Date of Expiry	The the expiry date of the LC. The expiry date must be later than the application date.
Place of Expiry	The place where LC would expire.
LC Amount Details
LC Amount	The currency under which the LC can be issued. Indicates the amount for the Letter of Credit.
Tolerance	The level of tolerance on the LC amount to created and would be honored in case of any minor fluctuations in amount.
Total Exposure	Displays the total LC amount including the positive tolerance, with the currency.
Date of Expiry	The the expiry date of the LC. The expiry date must be later than the application date.
Place of Expiry	The place where LC would expire.
Credit Available By	Indicates the manner in which credit is available when the bank is authorized to pay, accept, negotiate or incur a deferred payment undertaking for the credit. The options are: Acceptance Def Payment Mixed Payment Negotiation Payment
Credit Available With	Indicates the details of Bank where credit would become available. It is captured by Bank’s Swift code.
Drafts	The drafts are associated with the LC application. Displays the draft amount for the LC.
Drafts section This section appears if you click Add to add drafts to the LC application. Note: Click to remove any draft added earlier to the LC application. Click Add Another Draft to add new draft.
Tenor (In Days)	The tenor of drafts to be drawn under the documentary credit.
Credit Days From	The date from which the draft tenor is to be counted. Indicates the date type from which the draft tenor is to be counted. The options are: Invoice Date B/L Date Others
Draft Amount	The various drafts amount for the LC application.
Drawee Bank	The drawee bank of the LC.
Template Access Type	Indicates the type of access for the template. The options are: Public Private Applicable only in case of “Save as Template”.

2. From the Party Id list, select the appropriate option. The applicant’s details appear.
3. Enter the beneficiary details.
4. In the Name field in the Beneficiary section, enter the name of the LC beneficiary.
5. In the Address field in the Beneficiary section, enter the address of the LC beneficiary.
6. From the Country list in the Beneficiary section, select the appropriate option.
7. From the Branch list, select the appropriate option.
8. From the Product list, select the appropriate option.
9. From the LC Amount list, select the appropriate option and in the LC Amount field, enter the amount for which the LC is needed.
10. In the Date of Expiry field, select the expiry date of the LC.
11. In the Place of Expiry field, enter the place of LC expiry.
12. From the Tolerance list, enter the the “under” and “above” values in percentage by which the amount of LC can vary.
    In the Total Exposure field the LC amount along with tolerance would be displayed automatically.
13. Select the appropriate option from Transferable field.
14. From the Credit Available By list, select the appropriate option.
15. From Credit Available With, use the lookup and select the right swift code.
16. Select the appropriate option from Revolving field.
1. If you select Yes it will be creating a revolving LC;
1. If you select Time in the Revolving Type field,
1. From the Repeat Frequency list, select the appropriate option and enter the value.
2. From the Cumulative list, select the appropriate option.
   OR
2. Select Value in the Revolving Type field.
17. Select the appropriate option from Drafts field.
1. If you select Yes;
1. In the Tenure field, enter the appropriate value.
2. From the Credit Days From list, select the appropriate option.
3. In the Draft Amount field, enter the appropriate value.
4. In the Drawee Bank field, enter the bank name.
5. Click + Add Another Draft to enable adding another draft details if required, and enter the draft details.
   OR
   Click to remove already added draft.
   OR
   Click Continue to save the details entered and proceed to next level of details.
18. Click Continue or click the Shipment tab.
    The Shipment tab appears in the Letter of Credit Initiation screen.
    OR
    Click Initiate. The transaction is saved and the Letter of Credit Initiation – Verify screen appears.
    OR
    Click Save as Template . The transaction details are saved as a template. (Refer Save as Template section)
    OR
    Click Save as Draft . The transaction details are saved as a draft. (Refer Save as Draft section)
19. Click Letter of Credit Initiation - Shipment tab.

Letter of Credit Initiation - Shipment tab

This tab captures the Shipment details of the LC application process.

Field Description

Field Name	Description
Partial Shipment	Indicates whether partial shipments are allowed under the LC. The options are: Allowed Not Allowed
Shipment Period	The period of shipment during which the goods are to be loaded on board/dispatched/taken in charge.
Transshipment	Indicates whether transshipments are allowed under the LC. The options are: Allowed Not Allowed
Latest Date for Shipment	The latest date for shipment loading goods on board/dispatch/taking in charge. The Latest Date for Shipment should not be later than the LC Expiry Date. It is mandatory to enter either in the Latest Shipment Date or Shipment Period field.
Shipment From	The place of receipt from where shipment will be done.
Shipment To	The place of delivery of goods.
Port of Loading	The place of dispatch or taking in charge of the goods or loading on board.
Port of Discharge	The port of discharge.
Goods	The type of good being shipped has to be chosen.
Description of Goods	The description of goods.

20. From the Partial Shipment list, select the appropriate option.
1. If you select the Allowed option;
1. In the Shipment Period field, enter the details of all shipments.

2. Note: Shipment period field is not dependent on partial shipment allowed flag , user need to enter either latest shipment date or shipment period but not both.

21. From the Transshipment list, select the appropriate option.
22. In the Latest Date for Shipment field, enter the latest shipment date for loading goods on board/dispatch/taking in charge.
23. In the Shipment From field, enter the name of the place where the goods are to be received.
24. In the Shipment To field, enter the name of the place for delivery of goods.
25. In the Port of Loading field, enter the port of dispatch or taking in charge of the goods or loading on board.
26. In the Port of Discharge field, enter the port of discharge of the goods.
27. In the Goods field, choose the desire good being shipped.
28. In the Description of Goods field, enter the description of the goods traded under the LC.
29. Click Continue or click the Documents tab.
    The Documents tab appears in the Letter of Credit Initiation screen.
    OR
    Click Initiate. The transaction is saved and the Letter of Credit Initiation – Verify screen appears.
    OR
    Click Save as Template . The transaction details are saved as a template. (Refer Save as Template section)
    OR
    Click Save as Draft . The transaction details are saved as a draft. (Refer Save as Draft section)
30. Click Letter of Credit Initiation - Documents tab.

Letter of Credit Initiation - Document tab

This tab includes the Inco terms (International Commercial Terms) and required document details along with the clauses list related to the documents. The lists on this tab are populated when you select the appropriate product from the Product list on the Initiate LC tab.

Field Description

Field Name	Description
Upload Documents	Upload Documents functionality will be available in next release.
Uploaded Documents	Upload Documents functionality will be available in next release.
Documents List Documents list have the list of documents with checkboxes to choose along with the number of original or copies submitted and clauses they cater too.
Selected	Displays the documents that you have selected from the list. The selected documents are to be a part of the initiated LC.
Document Name	Name of the document to be uploaded for the LC.
Original	The required number of original documents required for the selected document. It is provided as m/n, where m out of available n documents would be submitted to bank.
Copies	The required number of copies required for the selected document.
Incoterm	Indicates the INCO terms for the LC application.
Clause
View Clause	The clauses maintained in the bank application for each of the document. A document can have multiple clauses.
Selected	The clauses that you have selected from the Clause List. The selected clauses related documents are to be attached to the selected document. You must select at least one clause.
Clause	The name of the clause.
Clause Description	The description and number of the selected clause.
Documents to be presented within/beyond _____ days after the date of shipment but within validity of this credit	The number of days after the date of shipment when the documents will be presented to bank. Note: On adding these days to the date of application, it should be within validity period.

31. Select the Document List checkbox to choose the number of original or copies submitted and clauses.
    In the Document List section, select the required document to be a part of the Initiated LC.
32. In the Original field, enter the number of originals required for the selected document.
33. In the Copies field, enter the number of copies required for the selected document.
34. In the Clauses section, list of clauses for each document will be listed and a checkbox is available against various clauses, user can choose amongst various clauses. Select the required clauses for each selected document.
1. In the Clause List field, click the required clauses and then click to move the selected clauses to the Selected field.
2. In the Selected field, click the required documents and then click to move back the selected clauses to the Complete List.
35. In the Clause Description field, modify the description of the clause, if required.
1. Click Save as Draft . The transaction details are saved as a draft to save the changes.
   OR
   Click Cancel to discard the changes.
36. In the Documents to be presented within/beyond _____ days after the date of shipment but within validity of this credit field, enter the number of days.
37. From the Incoterm list, select the appropriate option.
38. Click Continue or click the Instructions tab.
    The Instructions tab appears in the Letter of Credit Initiation screen.
    OR
    Click Previous. The Documents tab appears in the Letter of Credit Initiation screen.
    OR
    Click Initiate. The transaction is saved and the Letter of Credit Initiation – Verify screen appears.
    OR
    Click Save as Template . The transaction details are saved as a template. (Refer Save as Template section)
    OR
    Click Save as Draft . The transaction details are saved as a draft. (Refer Save as Draft section)
39. Click Letter of Credit Initiation - Instructions tab.

Letter of Credit Initiation - Instructions tab

This tab includes the miscellaneous information such as Advising Bank Swift ID, Charges Borne By , and Remarks.

Field Description

Field Name	Description
Advising Bank Swift ID	The SWIFT ID of the Advising Bank. Click if required, to search and select the bank details, available in the application.
Charges Borne By	Allow user to choose who is to bear the charges of Remittances and other charges applicable. The options are: Beneficiary Applicant
Charges Borne By Beneficiary	User can input details about account etc, and is applicable only if charges borne by is Beneficiary. This would be active only if Charges borne by selected are Beneficiary.
Charges Account	The user account from which charges are to be deducted. This would be active only if Charges borne by selected are Applicant.
Instructions to the Bank (not forming part of LC)	Any additional instructions that you want to give to the bank.
Terms and conditions	This displays the terms and conditions applicable by Bank along with details of charges applicable.

40. In the Advising Bank Swift ID field, click to search and select the bank details, available in the application.
41. From the Charges Borne By list, select the appropriate option.
1. If you select Applicant in Charges Borne By list;
1. From the Charges Account list, select the appropriate account from which charges are to be deducted.
42. Select the Terms and Conditions checkbox to accept the Terms and Conditions.
43. Click Save as Draft . The transaction details are saved as a draft to save the changes. (Refer Save as Draft section)
    OR
    Click Cancel to discard the changes.
    OR
    Click Initiate. The transaction is saved and the Letter of Credit Initiation – Verify screen appears.
    OR
    Click Save as Template . The transaction details are saved as a template. (Refer Save as Template section)
44. The review screen appears. It displays all the 4 sections with their respective fields namely Letter of Credit details, Shipment Details, Documents & Instructions with an option to edit them individually.
    Verify the details, and click Confirm.
    OR
    Click Edit All to modify all the fields for creation of LC.
    OR
    Click Cancel to discard the changes.
    
45. The success message initiation of LC creation appears along with the reference number. Click OK to complete the transaction.

Save as Template

User can save LC application as a Template so that same can be used for creation of similar LCs, if required in future. The application allows the template access as public or private if saved as template.

• Public : A template marked as ‘Public are visible to all the users mapped to the Party ID of the user who created the template. All users mapped to the party will only be able to view and use whereas they will not be able to edit or delete template. Only the creator of the template is allowed to edit or delete the template.
• Private : A template marked as ‘Private’ is available to only the creator of the template. Only creator of the template can use the template while initiating LC and modify or delete such templates.

User can search the saved LC template by template name in search tab. The LC applications earlier saved as template can also be saved as draft while initiating a LC.

To save LC application as template:

1. Enter the required details in LC application.
2. Click Save as Template .

Field Description

Field Name	Description
Template Type	Indicates the type of access for the template. The options are: Public : A template marked as ‘Public are visible to all the users mapped to the Party ID of the user who created a template. All such users will only be able to view and use whereas they will not be able to edit and delete template. Only the creator of the template is allowed to edit or delete the template. Private : A template marked as ‘Private’ is available to only the creator of the template. Only creator of the template can use while initiating LC and modify or delete such template.
Template Name	Name of the template.

3. From the Template Type list, select the appropriate option.
4. In the Template Name field, enter the desired name for the template.
5. Click Save to save the template.
   The transaction details are saved as a template which can be access from the Template tab.
   OR
   Click Cancel to cancel the transaction.

Save as Draft

User can save LC application as a Draft so that it can be used if required in future. It can be re used only one time for LC Application initiation. User can search the saved LC draft using the draft name in search box. The saved drafts can be accessed from the Draft tab. The LC applications, which were saved as draft canalso be saved as template after adding all other necessary fields.

To save LC application as draft:

1. Enter the required details in LC application.
2. Click Save as Draft .

Field Description

Field Name	Description
Draft Name	Name of the draft.

3. In the Draft Name field, enter the desired name for the draft.
4. Click Save to save the draft.
   The transaction details are saved as a draft which can be access from the Draft tab.
   OR
   Click Cancel to cancel the transaction.

FAQs

Can I create a Letter of Credit without providing Advising Bank Details?

Yes, you can, but you will need to give the same later.

Can I create Revocable LCs

No, under this module only irrevocable LC creation is possible.

What if I do not want to have any tolerance?

Please put 0 in the fields under % and above %. By default application will take 10% tolerance, if no value has been provided which is in accordance to Swift guidelines.

When should I create a draft and when should I create a Template?

When you want to use the LC created again and again, save it as template. While if you are leaving your create LC application to be filled at a later stage or usage on a later date, you can save it as draft.

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