Letter of Credit is a sales contract stating that payment will be made by the L/C between the vendor and the purchaser. Sales contract information is recorded by Letters of Credit option located under Import > Main Records.
Letter of Credit definition window opened by "New" option located in Letters of Credit browser includes the following fields:
No: It refers to the record number of L/C. It is a mandatory field.
Arrangement Date: It shows when the L/C is created. It displays the current date as default. It is a mandatory field.
Due Date: It refers to the date until which L/C stands valid. It displays the current date as default.
Document Delivery Date: It refers to the last date on which the beneficiary must deliver the required documents.
Policy Due Date: When the policy date of the L/C expires, due date is shown in this field.
Auxiliary Code: It is the second coding field of 10-character long used to group the L/C definitions. It is used to group slips according to the company-specific criteria.
Authorization Code: It is used to make detailed authorization definition.
Status: The status of the L/C record is specified and tracked over this field. It has two options: In Force and Closed. The L/C payment status info is updated automatically.
Description: It is used to enter explanatory information about the L/C.
File Info
File Code and File Name fields are used to relate the L/C record to the Import Operation Slip.
File name and code for which the L/C is opened is entered in these fields. In both fields, import operation slips are listed and the relevant slip is selected. Since the Letter of Credit is a contract, users are allowed to save the L/C record without selecting an import operation slip. After the bank approves the L/C, the relevant import operation slips can be related to the record.
There can be multiple records having the same import file code (Import Operation Slips related by Export to File option). This file info is listed in "Import Files" tab.
The Letter of Credit information is recorded under the following headings:
- General Info
- Bank Info
- Other Info
- Requested Documents
- File Info Details
General Info
The following information is recorded under The L/C General Info tab:
Transaction / Reporting Currency, F. Currency, Exchange Rate and Total fields are used to enter currency and exchange rate information over which the L/C will be processed. Amount is calculated over the specified exchange rate info. Currency type and exchange rate info of the first selected import file is displayed in transaction currency and exchange rate fields as default.
The total amount of all invoices related to the file is displayed in transaction currency total field in the transaction currency type.
Local Currency: Invoice amount related to the import/export file is transferred to this field automatically. It is non-editable.
Partial Shipment: This field is used to allow/block the exporter performing partial shipment (shipment in amount which is less than the actual order amount/quantity). It has two options: Yes and No. It is for information purposes only.
Revocable: It is a Letter of Credit type. It has two options: Yes and No. Revocable letters of credit can be changed or cancelled by the importer or importer's bank without giving any prior notice given to the exporter. If it is Irrevocable, L/C includes an article of absolute guarantee considering that good's price will be paid by the Issuing Bank provided that all requirements stated in the opening letter are fulfilled wholly. When the L/C is irrevocable, it cannot be withdrawn, disarranged or cancelled without the approval of the parties.
Insurance Coverage: This field indicates how the relevant goods sent to the importer are insured against the possible loss or damage risks. It has three options:
- By Our Insurance Company
- By Issuing Bank
- By AR/AP
Revolving: It is a Letter of Credit type. As per the terms and condition of the Revolving L/C, when it is partially or wholly used, it can be renewed within the previous amount without the need of any amendments.
Collateral: This field is used to specify whether the L/C is collateral. This kind of letters of credit are an instrument of guarantee more than an instrument of payment. In case that one of the parties does not fulfill their liabilities stated in the contracts, Collateral L/C is issued on behalf of the contractor by the bank in order to provide collateral as a security when it is requested by the other party (employer).
Transfer: This field is used to indicate whether it is allowed to transfer the goods from one vehicle to another. It has two options: Yes and No.
Confirmed: This field is used to indicate whether the L/C is confirmed. If the Issuing Bank is not known well by the exporter, the exporter will demand security from another bank in his own country to ensure that policy he'll drawn will be made. If this policy drawn by the exporter is not paid by the issuing bank, the other bank in exporter's company undertakes to cover his policy. This bank is called the Confirming Bank. Banks get a commission for confirming. If the L/C is not confirmed, advising bank informs the exporter about the validity of the L/C in line with the instructions of the Issuing Bank, and the Issuing Bank does not undertake any liability or guarantee.
Letter of Credit Usage: It indicates when the L/C will be used. It has three options:
- At Sight of The Requested Documents
- After Loading The Documents on The Vehicle
- After Presenting The Documents to The Issuing Bank
Back to Back: It is a Letter of Credit type. Back to Back L/C is used when the L/C issued on behalf of the exporter is not transferrable or when it is transferrable and the required trading conditions are not fulfilled to transfer the L/C. If the exporter does not produce the products he is exporting and purchase them from a foreign manufacturer, Back to Back L/C acquire significance.
In this case the exporter gives an instruction to his bank to issue a L/C, and as a collateral, he presents the L/C issued on behalf of him by the importer.
Red Clause: It is a Letter of Credit type. Red Clause L/C constitutes an exception of the general L/C principle as it prescribes that beneficiary will be made payment at sight of the requested documents.
Green Clause: It is a Letter of Credit type. Green Clause C/L provides the opportunity to have advanced payment prior to the shipment of goods. He delivers a part of these goods to either a public warehouse or a third party warehouse, and the beneficiary is paid at sight of the delivery receipt.
Bank Info
The L/C Bank Information is entered under Bank Info tab located in L/C definition window.
Bank Info tab consists of two sections: Bank Info and Credit Info. Bank information entered in the L/C definition window is as below:
Issuing Bank Info
Issuing Bank is generally importer's bank and issues the L/C upon the instruction of the importer.
The relevant bank is selected from Banks browser accessed over the Bank Account Code and Account Name fields. Transaction currency selected in the General Info tab must be the same with the transaction currency selected for the bank account. Otherwise, user is warned.
Account No: It refers to the account number of the selected bank.
Currency Type: It refers to the currency type of the selected bank.
Reference No: It refers to the L/C operations reference info kept in bank.
Letter of Credit Payment: The payment type is specified in this field. It has three options:
- Cash
- On Credit
- Cash + On Credit
If "On Credit" or "Cash + On Credit" option is selected, credit information which will be used in the L/C payment is entered under Credit Info tab.
Notifier Bank Name and Address: The bank which notifies the exporter concerning the L/C is entered under Notifier heading. This bank is usually exporter's bank.
Confirmer Bank Name and Address: The bank which confirms the L/C is entered under Confirmer heading. (The exporter requests from a third bank or an advising bank to guarantee the L/C, and this bank is called the Confirming Bank.)
Reimbursement Bank Name and Address: Reimbursement bank information is entered under Reimbursement heading. (In cases that there is not an account relation between the L/C bank and the payment bank, Reimbursement Bank steps in the process. Upon the instruction of the Issuing Bank, it pays the L/C amount, and debits the Issuing Bank. Reimbursement Bank makes payment on request without going further into the details of the L/C transaction.)
Credit Info
If "On Credit" or "Cash + On Credit" option is selected in Letter of Credit Payment field, credit information which will be used in the L/C payment is entered in Credit Info tab. Credits belonging to the Issuing Bank account are listed, and a credit which is in force, is selected from the list. Currency type of the bank account is saved in Currency Type field.
Other Info
Domestic and foreign surcharges of the export and import L/C, shipment address and similar information is recorded in Other Info tab of the L/C definition window.
Domestic and Foreign Surcharges: Parties who will cover the surcharges are entered in these fields. They have two options:
- Belongs to Company
- Belongs to AR/AP
The party who will pay the surcharges is selected.
Notifying Bank Commission: This field refers to the party who will pay the notifying bank commission. It has two options:
- Belongs to Company
- Belongs to AR/AP
The party who will pay the commission is selected.
Commission Rates
Commission rates are entered for the Issuing Bank and the Notifying Bank in this section.
Shipment Address: It refers to the AR/AP shipment address where the delivery will be made.
Transport Type: It refers to the vehicle which will be used in delivery. Transport type specified in the import file is transferred to this field, and it cannot be changed.
To Transport Company
Delivery point and delivery date notified to the transport company are entered under this heading.
Requested Documents
The relevant documents requested for the L/C to be in export or import operations are recorded under Requested Documents tab in the L/C definition window. Documents are listed and selected in Document Code and Description fields. The number of documents are entered in Number of Originals and Number of Copies fields.
File Info Details
All import operation slips related to the import file selected in "File Code" field in the L/C definition are listed in detail under File Info Details tab.