1. Fill in the application form
Before opening an L/C, the importer needs to contact the bank where the company has opened an account and obtain a template for the application form with the letterhead of the bank where the account is opened.
According to the terms of the import contract, the importer fills in the application form. The application form should be filled in in accordance with the specific provisions of the contract terms, and the requirements of the L/C should be stated clearly and completely, without any unclear records.
The importer fills in the bank’s “Application Form for Opening an Irrevocable Letter of Credit”, usually in triplicate, one copy is retained by the business department, one copy is retained by the finance department, and the other copy is submitted to the bank. The application form submitted to the bank must be stamped with the official seal, financial seal, and legal representative’s seal, and the following materials must be submitted to the bank: import agreement, foreign trade operator registration form (if necessary), import license, import quota and other import approval documents (if necessary), agency agreement (if necessary).
2. Sign the contract and pay the deposit
The bank signs the “Letter of Credit Contract” with the importer (customers who have signed the “Comprehensive Credit Line Contract” with the bank do not need to sign). The branch registers in the head office’s credit system and prints the billing notice.
When the importer applies to the bank for opening an L/C, it should pay a certain proportion of the deposit to the bank, and the amount is generally determined by the credit status of the importer. In my country’s import business, the issuing bank requires the applicant to pay a certain proportion of RMB deposit according to the situation of different enterprises and transactions.
Tips
Notes on depositing a deposit for opening an L/C and documents required for opening a letter of credit
1. The original and copy of the import contract.
2. Confirm the foreign currency exchange rate for the deposit of the deposit with the issuing bank, calculate the handling fee and postage, and fill in the “Deposit Transfer Application Form”.
3. Fill in the fee voucher (not required when disbursing).
4. Check (some banks require transfer check).
5. Deposit slip (only required when transferring from company current account to L/C deposit account).
6. Bring company seal (official seal, financial seal, legal representative seal).
3. Opening L/C
After the bank verifies the application form and related materials, it will issue L/C.
After receiving a certain deposit from the importer, the issuing bank will open L/C according to the content and requirements of the L/C application.
If the importer requires to modify the import L/C issued by the bank, it is necessary to fill in the bank’s “Application for Modification of Letter of Credit” and affix the official seal. If it involves an increase in the LC amount, the increase will be treated as an opening.
4. Opening time
In about one to two weeks, the importer will receive a copy of the L/C telegram issued by the bank.
5. L/C Payment
The issuing bank receives the overseas documents, examines them, and notifies the applicant. The full set of documents can only be handed over to the applicant after the applicant makes up 100% of the deposit or promises to pay.
6. Bank makes external payment or accepts/refuses payment
After examining the documents, if there are no “discrepancies”, L/C will be released. The importer pays the money, receives the relevant documents, and arranges customs clearance after the goods arrive at the port.