ADVANTAGES OF USING LETTER OF CREDIT AS A WAY OF PAYMENT

• Guarantee of goods delivery with required quality and quantity within the terms stipulated by agreement
• Confidence that payment will be done against real shipment of goods
• Possibility to get lower purchase prices for goods and longer term for its payment
• Possibility to have post-import financing and privileges in lending
• Significant decreasing of advance payment size on import agreement
• Possibility to make structural payments schedule by agreement with consideration of own interests
• High level of legal safety since letters of credit are the subject to International Unified Rules, which should be executed by all banks
• Getting consulting services from banking specialists in the sphere of foreign trade documentary operations
• Consideration of documents in accordance with international requirements

CYCLE OF LETTER OF CREDIT

1. Buyer and seller conclude agreement stipulating payment through letter of credit
2. Buyer provides instruction for opening of letter of credit to the issuing bank
3. Issuing bank opens letter of credit and send it to advising bank with request to advise letter of credit to beneficiary. Advising bank may act as executing and confirming bank
4. Advising bank advises opening of letter of credit to beneficiary (Seller)
5. Seller ships the goods of buyer (after getting of letter of credit by beneficiary and being sure that its conditions correspond with the conditions of agreement)
6. Delivery of goods to the Buyer
7. Providing of documents to executing/confirming bank. Checking of documents by executing bank. In case of it absolutely conformation with conditions of letter of credit, bank makes payment to beneficiary
8. Sending of documents to the issuing bank and getting of reimbursement by the executing bank from the issuing bank.
9. Transfer of documents on letter of credit to the buyer