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The CB will forward the documents to, and will be reimbursed by the IB

The IB will then pass the documents to Buyer & collect payment

Provided the LOC conforms with what was agreed in the sale of contract; Seller
will then ship the goods.
The Seller may decide to ship the goods even where the terms of LOC do not
conform with the terms agreed in the sale of contract (this is considered as
waiver or variation)

On shipment, the Seller will obtain the transpot documents (ie - BOL & other
docs required under the LOC)
These documents will be presented to the CB
Bank will usually require a clean transport document (See Art 27)
It is also open to the parties to stipulate the notations or clauses that may be
accepted

CB will efect payment provide that the docs conform.


Payment will depend on what has been agreed in credit:
Payment at sight deferred payment acceptance credit negotiation credit-

CB will inform Seller of the opening of the credit


A confrmed LOC will contain a clause on the bank's undertaking to pay upon
receipt of relevant documents (BOL, invoice, cert of origin, etc)

IB will instruct CB in the Seller's country to advice Buyer of opening of the


LOC
The CB is usually (not necessarily) the seller's bank
The IB will issue an instruction to the AB to pay
the Buyer applies to Issuing Bank to open a credit in favour of Seller
Buyer will give details (ie- transport docs, invoices, insurance policies, cert
of quality, cert of origin). Instruction will also include time & place for
presenting the documents
See Art 19, 20, 21, 22, 23, 24 of UCP600 on diferent types of transport
documents

contract of sale agreed to efect payment by LOC

STAGES IN A LOC TRANSACTION

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