3.5  CONTENTS OF THE LETTER OF CREDIT

Banks normally issued letter of credit (L/C) on forms which clearly  indicate the banks name and extent of the banks obligation under the credit. The contents of the l/c of different Banks may be different .In general l/c contain the follwing information :-

i) Name of the buyer : who is also known as the accounted since it is for his account that the credit has been opened.
ii) Name of the seller : Who is also known as the beneficiary of the credit.
iii) Moment of the credit : Which should be the value of the merchandise plus any shipping charges intent to be paid under the credit.
iv) Trade terms : Such as F.O.B and CIF
v) Tenor of the Draft which is normally dependent upon the requirements of the buyer.
vi) Expiration date : Which is specified the latest date documents may be presented. In this manner or by including additionally a latest shipping date, the buyer may exercise control over the time of shipment.
vii) Documents required : Which will normally include commercial invoice consular or customers invoice, insurance policies as certificates, if the source is to be effected by the beneficiary and original bills of lading.
viii) General description of the merchandise :   Which briefly and in a general manner duly describes the merchandise covered by a letter of credit.


3.6 PROCEDURES OF OPENING THE L/C

The importer after receiving the proforma invoice from the exporter, by applying for the issue of a documentary credit, the importer request his bank to make a promise of payment to the supplier. Obviously, the bank will only agree to this request if it can rely on reimbursement by the applicant. As a rule accepted as the sole security for the credit particularly if they are not the short of commodity that can be traded on an organized market, such an arrangement would involve the bank in excessive risk outside its specialist field. The applicant must therefore have adequate funds in the bank account or a credit line sufficient to cover the required amount.

Banks deal in documents and not in goods. Once the bank has issued the credits its obligation to pay is conditional on the presentation of the stipulated documents with in the prescribed time limit. The applicant cannot prevent a bank from honouring the documents on the grounds that the beneficiary has not delivered goods on redder reissues as contracted.

The importer submit the following documents before opening of the L/C :
a. Tax Identification Number (TIN)
b. Valid Trade License.
c. Import Registration Certificate (IRC)

The Bank will supply the following documents before opening of the L/C :
a.  LCA form.
b. Application and Agreement form.
c. IMP form
d. Necessary charge documents for documentation.

The above documents / papers must be completed duly signed and filled in by the party according to the instruction of the banker.