EXPORT-IMPORT BUSINESS-L/C process illustrated:

1 Issua!ce o" pro-"or#a i!$oice:

In this initial stage, the pro-forma invoice is issued by the exporter mentioning the details
of the export-order- product, price, product specifications, shipment date, mode and terms
& condition on which both the party that is exporter and importer- would conduct the
international business.
% Su&#issio! o" pro-"or#a i!$oice &' t(e ope!er/i#porter to t(e ope!i!) &a!*:
In this stage, the importer submit the pro-forma invoice to the opening bank if he
(importer) find the pro-forma invoice is worth conducting signing it as !""#$#%&'.
+ Ne)otiati!) L/C ope!i!) ter#s a!d co!ditio!s:
In this stage, the importer would re(uest the opening bank for opening )*" mentioning
terms and conditions, along with basis for )*" opening that is on which mode )*" would
be opened. It might be based on margin or based on )I+ ()oan against Imported
+erchandise) or based on a certain limit upon deposited securities with the opening
banks. %erms and condition regarding the product specification, defective criteria,
inspection re(uirement etc. would also be negotiated.
, Ope!i!) o" L/C &' t(e ope!i!) &a!* "a$ori!) t(e correspo!di!) &a!*:
,pening )*" is completed in this stage and send to the corresponding bank in the
exporter country. It might come to the correspondent bank in general ways-
"ourier service
%elex machine
./I0%- mostly used now-a-days.
1. -ut(e!ticatio! a!d ad$ice:
"orrespondent bank authenticate and advices to the negotiating bank. 2oth correspondent
and 3egotiating bank can be same bank.
. I!"or#i!) t(e e/porter &' t(e correspo!de!t/ !e)otiati!) &a!*:
3egotiating bank informs the exporter about the arrival or receipt of the )*" and advices
to take necessary steps for export processing.
0 E/porter1s !e)otiatio! 2it( t(e !e)otiati!) &a!*:
#xporter's negotiates with the negotiating bank about its financial needs to make this
export happen. &iscussion regarding the type of financial arrangements needed is carried
on, which might include 2ack %o 2ack )*"
4. 3egotiating bank opens 2ack to back )*" and offers cash finance as working capital to
assist exporter to perform the order in time. (/hen there arises such need)
5. /ith the financing arrangement undertaken, the exporter takes necessary steps to
arrange raw materials, finish production and send the goods to the port of export.
67. -rra!)e#e!t o" L/C docu#e!ts a!d su&#issio!:
#xporter arranges all the )*" documents and submits those to the negotiating bank. %hese
documents include-
2ill of lading
Invoice
$acking )ist
"ertificate of origin- produced by chamber of commerce or #xport $romotion
bureau.
Inspection certificate
2ill of exchange, etc.
66. #xporter has the choice either to sell the documents to the negotiating bank that is
discounting* negotiation of the bills or not discounting it.
68. 3egotiating bank will scrutini9e the documents to see whether these are :I3
,;&#;< that is whether there is any discrepancy as per )*" terms and condition.
6=. !fter scrutini9ing, the negotiating bank will send the documents for the :$ayment
collection< to the paying bank. (;eimbursing bank)
6>. ,pening bank receives the documents and checks those to find :I3 ,;&#;< as per
the )*" terms and conditions. ,pening bank will immediately pay if these are :I3
,;&#;<, but won't pay if these are :3,% I3 ,;&#;<. !gain if it receives a
:discrepancy waiver< from the importer, it will make payment.
61. !s per directive of the negotiating bank, the opening bank will pay the export bills to
the 3,.%;, account of the negotiating bank. %he bank which holds the 3,.%;,
account of the negotiating bank will immediately informs the negotiating bank about the
payment. %his information comes to the international department of the negotiating bank
who informs the related or concerned branch of the bank who later informs the exporter.
3otes-
?? @et used to with the diagram that we used in the class to describe the )*" process
using the example of +,33, "eramics and /!))+!;%. $ractice with different
examples.