The L/C is a payment undertaking by Bank of China to a foreign importer. Bank of China will fulfil its payment obligation when the terms stipulated in the L/C are complied with.

Features

1.Improve bargaining position - L/C’s provide the exporter with a conditional payment commitment on top of the commercial credit - giving better credit which may win more favourable price terms;

2.Warranty of cargo - the trade itself will be warranted by the bank - the ownership of the cargo, shipping date and quality of cargos are all controlled under the documents and terms;

3.Reduce fund occupation - for the importer who avails of an L/C, utilisation of funds will be minimized during the period between the L/C issuance and payment.

Target Customers

1.Importers and exporters who wish to promote their levels of trade credit;

2.The imported commodity is within a seller's market and the exporter insists on settlement by L/C;

3.Both importer and exporter opt to use this trade finance instrument due to a lack of liquidity.

Process

1.The importer submits the application for issuance of a L/C, and Bank of China will issue the L/C based on margin or credit line taken up after examination and approval;

2.The exporters prepares and ships the goods in accordance with the relevant L/C clauses after having been advised of the L/C;

3.The exporter presents the documents required by the L/C and the presenting bank mails the documents to Bank of China to request payment or acceptance;

4.Upon receipt of the documents, after examination and approval, Bank of China will make payment or acceptance to the exporters;

5.Bank of China makes the payment when acceptance is due.