Letter of Credit Opening steps

Letter of Credit Opening steps

Letter of Credit image

 

 

 

 

 

Step One:       If any importer wants to open a L/C, the importer is to be a customer of the bank and the importer will maintain a Current Account.

Step Two      Importer submits an application requesting for opening L/C for US$. …….. for import of …………… (goods name) which H.S. Code ……… from India at 50% cash margin.

 

Importers name: M/S. Maisha Trade Syndicate

Address: 52/7,West Raja Bazar, Dhaka-1215.

Phone: ……………………………………..

Date: 03-09-2012

The Manager

ABC Bank Ltd.

Moulvi Bazar Branch,

Dhaka

Subject: Request for opening L/C for US$. …………… for import of …………… (goods name) from …………….. (Country of Origin) at ……. % cash margin.

Muhtaram,

Aslamu-Alaikum.

We like to inform you that we are maintaining a Current Account No. ……………. with your Branch. Now we like to open an L/C for US$. ………………. for import of ……………. (goods name) from at 15% cash margin  and subsequently post import   at 25% margin on landed cost.

Kindly open the L/C by 04.09.2012 as urgent basis.

Ma-assalam.

Yours faithfully

Sd/-

Proprietor

For Maisha Trade Syndicate

Enclosed:

(1) Proforma Invoice

(2) Insurance cover note with money receipt and VAT.

Step – Three: After receiving the parties application, Manager refers:

(i) The application to F.Exchange Inc-harge, and

(ii) F.Ex-change to the import In-charge (Dealing officer)

Step – Four: After receiving the party’s application (Party’s own Pad), the concern dealing officer supply a prescribed printed L/C application form, LCAF, IMP Form, and a set of charge documents.

Step – Five:    To obtain the following papers/documents, importer duly filled in, signed and submitted the document to the L/C opening Bank.

Importer submitted papers are as follows:

a)      L/C application form with Tk.150/- adhesive stamp.

b)       LCAF

c)        Proforma Invoice / indent / purchase order / contract having details of merchandise,   price delivery & payment terms etc.

d)       Marine Insurance cover Note with money receipt issued by approved Insurance Co. in Bangladesh in favor of the bank covering the usual marine risk. Marine Insurance should cover the L/C value plus 10%.

e)       IMP Form.

f)        Murabaha agreement & other Charge Documents.

g)       Valid Trade License

h)       Valid IRC (Import registration certificate)

i)         Income Tax Clearance Declaration with TIN.

j)         Membership Certificate from Trade Association.

Other Papers Required:

i)   Photo of the Party (Directors) in case of Ltd. Co.

ii)  Resolution of the Board in case of Limited Co.

iii) Article & Memorandum of Association in case of Limited Co.

iv) Statement of Assets & liabilities of Limited Co.

v)   Three years Audit Report of Limited Co.

vi)   Partnership Deed in case of partnership firm.

vii)  Credit report of the Importer.

viii)  Confidential Report on financial of the Foreign Supplier.

ix)     Undertaking to arrange foreign currency for payment.

x)       Ownership documents/ rent receipt of place of business.

Confidential Report of Beneficiary:

According to exchange control regulations Bank is required to obtain confidential report of the beneficiary before opening L/C, if the amount is exceeded by Tk.5.00 lac against indent & over Tk.2.00 lac against proforma invoice. Bank can write to their foreign correspondents to supply the Confidential Report.

Step – Six:  To scrutinize the submitted documents, if the banker satisfied, the dealing officer made a L/C proposal for opening an L/C.

Step: Seven :  If the branch Manager agreed to open the L/C, the dealing officer posted in a L/C opening register and write the controlling L/C No. to the L/C opening application Form and others related papers.

Columns of L/C Opening Register:

  1. Name & Address of Applicant
  2. Name & Address of Beneficiary
  3. Amount(F.C. & Taka)
  4. DescriptionOf goods
  5. Validity Rate of Margin &
  6. Amount Charges (Commission,Postage, Telex, FCC, Others, Total)
  7.  Liability Amount
  8. LCAF No and Regd. No.
  9. Remarks
  10. Initial of dealing officer

Step: Eight :   After posting in the L/C opening register, we shall have to endorse the LCA Form.

 Endorsement of LCAF:

LCAF Value:

L/C No. ………………….. date: ………………..

Amount ………………….

Rate …………… (B.C.selling rate)

Tk. …………….

……………

Authorised officer

Step: Nine:     Voucher to be Passed:

(1)    Dr.  Customers Liability for opening L/C (Cash)

Cr.  Banker’s Liability for opening L/C (Cash)

(2)   Dr.  Assets as per contra on Letter of Credit image General (Cash)

Cr.  Liability as per contra on Letter of Credit image General (Cash)

and others.

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