In case of larger amount importation L/C is used. It is a costly process than TT.
An irrevocable Letter of Credit is also an often used payment method. It is often referred to an L/C. Letters of Credit are formal payment methods that offer a lot of protection to the parties.
Simply put, a letter of credit is a letter written by the importer's bank to the exporter. It verifies that the payment will be guaranteed when the bank is presented with the concrete documents (bill of loading, and freight documents). Most letters of credit are "irrevocable" once the importer has had them sent.
A letter of credit usually includes applicant (you, the importer), beneficiary, opening bank, negotiating bank, specification and quantity of the goods, amount of money, loading port and destination port, shipment date, the validity date of the L/C, terms and conditions agreed by both the importer and seller, and the documents required by the importers (bill of loading, commercial invoice, packing list, insurance certificate, etc.)
L/C payment terms procedures:
a. You (the importer) applies to open the L/C to us (the seller) through a bank who can open the L/C in your country.
b. The opening bank will inform The Bank of Seller that the L/C has been opened.
c. The Bank of Seller will inform us that the L/C has been established.
d. Seller will check all the terms and conditions listed in the L/C. If all terms and conditions are acceptable, They'll arrange the shipment within the time specified in the L/C.
e. After the goods are loaded onto the ship without any damage, the captain will issue the clean bill of lading to seller.
f. They will submit the clean bill of loading and other relevant documents to The Bank of seller to gather the payment. Only with clean bill of loading can you claim the ownership of the goods.
g. The Bank of seller will send the clean bill of lading and relevant documents to your bank (the opening bank).
h. The opening bank will inform you that all documents are received.
i. You will go to the bank to make the payment to get the clean bill of loading and relevant documents.
j. With all of these documents, you can clear the import Customs and pick up the goods after the goods arrive on the destination sea port.
