Import foreign exchange payment: Detailed explanation of L/C business process and analysis of the trend of foreign exchange purchase and payment

In international trade, letter of credit (L/C) is one of the most widely used payment tools, and its operation process covers all aspects from application to final delivery. At the same time, with the development of globalization and the advancement of Internet technology, cross-border payments have gradually become an indispensable part of people’s daily lives. This article will focus on the specific operating steps of L/C, and briefly discuss the main application scenarios and development trends of current purchase and payment of foreign exchange.

1. L/C business process

1. Preparation before issuance

The buyer and seller decided to adopt L/C as the settlement method through consensus. Subsequently, the importer needs to submit an application for issuance of a certificate to the bank, and pay a certain proportion of deposit or provide corresponding guarantee according to the specific circumstances.

2. L/C issuance and notification

After approval, the bank will officially issue a letter of credit and send the original to the advising bank in the exporting country. The advising bank is responsible for verifying the contents of the letter of credit and forwarding it to the exporter.

3. Exporter confirmation and performance

After receiving the L/C, the exporter should carefully check whether its terms are consistent with the contract. If there are any discrepancies, the importer can be requested to make corrections through the original issuing bank. After confirmation, the exporter begins stocking goods, arranging transportation, and preparing relevant documents in accordance with the requirements of the letter of credit.

4. Document submission and review

When the goods are loaded onto the ship, the exporter must submit a complete set of documents together with a copy of the letter of credit to the advising bank within the specified time. The latter will strictly review these documents to ensure that they fully comply with L/C regulations.

5. Claims and Payments

Once the documents are confirmed to be correct, the advising bank will pay the exporter. The bank then sends all the documents to the issuing bank and requires the latter to reimburse the funds advanced.

6. Importer’s redemption order and delivery

Finally, the issuing bank checks the authenticity and accuracy of the documents again after receiving them. If everything is normal, the importer will be notified to come and handle the redemption procedures. After the importer pays, he can take delivery of the goods with the documents.

2. Current situation of foreign exchange purchase and payment

In recent years, as my country’s economic strength continues to strengthen and the internationalization of the RMB accelerates, more and more consumers choose to shop directly on foreign websites. According to statistics, in the field of cross-border payments, more than 80% of transactions are of the nature of purchasing and paying foreign exchange. Such activities mainly include payment of study abroad fees, purchase of overseas goods, and travel expenses.

Due to the lack of effective domestic payment channels in the early days, most such transactions relied on services provided by international credit card organizations such as Visa. However, this situation is changing as local brands such as UnionPay, Alipay and WeChat Pay gradually enter the world stage. Currently, many well-known e-commerce platforms such as SaSa, Gmarket, etc. already support the above payment methods.

In addition, in order to further promote the development of cross-border e-commerce, government departments have also launched a series of preferential policies and encouraged more financial institutions to participate in this emerging business. Up to now, more than ten institutions have obtained pilot qualifications to carry out cross-border e-commerce foreign exchange payment business.

In short, whether it is the L/C settlement mechanism in traditional trade or the emerging personal foreign exchange purchase and payment model, they are constantly adapting to changes in market demand and striving to provide participants with a more convenient and efficient service experience.