Prerequisites

Before the letter of credit can be issued, the buyer and seller must agree on all details of the commercial transaction, including:

• Quantity, specification, and price.

• Means of transport and latest date of dispatch.

• Carriage and insurance arrangement.

This diagram shows the letter of credit process between the buyer, seller, the buyer's issuing bank, and the seller's advising bank. In this process flow you begin with a terms agreement between the buyer and seller and then work through the buyer and seller's banks to validate funds so that the buyer can obtain the goods being purchased