IMPORT SECTION:

Import section of any bank deals with L/C opening and post import financing i.e. LIM & LTR. Now the procedure from opening L/C to disbursement against L/C is given below.

APPLICATION FOR OPENING L/C:

At first, an importer will request banker to open L/C along with the following documents.

1. An application
2. Indent or Performa Invoice
3. Import Registration Certificate (IRC)
4. Taxpayer Identification Number (TIN)
5. Insurance cover note with money receipt
6. A bank account.
7. Membership of chamber of commerce

Indent or Performa Invoice:

Indent or Performa invoice is the sale contract between seller and buyer in import-export business. There is slight difference between indent and Performa invoice. The sales contract, which is direct correspondence between importer and exporter, is called Performa invoice. There is no intermediary between them. On the other hand, there may be an agent of exporter in importer’s country. In this regard, if the sale contract is occurred between the agent of exporter and importer then it is called indent.

DELIVERED FORMS BY BANKER TO IMPORTER:

After scrutinizing above-mentioned documents carefully, officer delivers the following forms to be filled up by importer and banker should check:

Whether the goods to be imported is permissible or not.
Whether the goods to be imported is demandable or not.

The forms are:
• Import Mercendised Permit Form (IMP).
• L/C Application Form (L/CAF).
• L/C Authorization Form (L/CAF).

PREPARATION OF L/C BY BANKER:

Bank’s officer prepares L/C when above mentioned forms are to be submitted by customer or importer. Before preparing L/C SIBL officer scrutinizes the application in the following manner.

? The terms and conditions of the L/C must be complied with UCPDC 500 and Exchange Control & Import Trade Regulation.
? Eligibility of the goods to be imported.
? The L/C must not be opened in favor of the importer.
? Radioactivity report in case of food item.

Survey reports or certificate in case of old machinery is required. Bank of the importer is called ‘L/C Issuing Bank’. Then issuing bank inform it’s corresponding bank, called “Advising Bank’ or ‘Confirming Bank” located in exporter’s country to advice and the credit forward to the exporter and simultaneously officer makes L/C opening vouchers.

Desk Work:

? One debit voucher to be passed.
? Corresponding credit voucher to be passed (Margin, commission, postage, stamp, F.F.C. and others).
? Liability voucher to be passed.

Accounting treatment:

L/C Applicants A/C or Customer’s A/C

Dr.

Margin A/C

Cr.

Commission A/C

Cr.

Postage A/C

Cr.

Stamp A/C

Cr.

F.FC. (foreign corresponding charge) A/C

Cr.

Telex charge A/C

Cr.


Other A/C

Cr.


Customer’s liability A/C

Dr.

Banker’s liability A/C

Cr.


FORWARDING DOCUMENTARY CREDIT BY ADVISING OR CONFIRMING BANK:

There are usually two banks involved in a documentary credit operation. The issuing bank and the 2nd bank, the advising bank, is usually a bank in the seller’s country. The issuing bank asks another bank to advise or confirm the credit. If the 2nd bank is simply “advice or credit”, it will mention that when it forwards the credit to seller, such a bank is under no commitment or obligation to pay the seller.

If the advising bank is also “confirming the credit”, this mention that the confirming bank, regardless of any other consideration, must pay accept or negotiate without recourse to seller. Then the bank is confirming bank.