8/3/2019 Certification IB

http://slidepdf.com/reader/full/certification-ib 1/5

LETTERS OF CREDIT  

BY:

HEMANT DESHMUKH 

18 Feb 2012

8/3/2019 Certification IB

http://slidepdf.com/reader/full/certification-ib 2/5

LC 

 LC is a financial instrument for settlement of tradeacross the globe.

Reinforces the buyer’s integrity, adding to it the

banker’s undertaking to make payment.

Sellers need to make shipments of the goods

specified and present the shipping documents before

getting the payment.

 Rules under UCPDC 500 govern the LC transactions

globally. 

8/3/2019 Certification IB

http://slidepdf.com/reader/full/certification-ib 3/5

PROCESS FLOW  

EXAMPLE:

BHARAT ELECTRONICS has decided to import LCD

screens from SANYO TRADERS in China.

Bharat Electronics is banking with SBI-Mumbai and

Sanyo Traders is banking with HSBC-Shanghai.

Price agreed by the parties is USD 1,00,000.

Payment is agreed to be executed via Letter of Credit.

8/3/2019 Certification IB

http://slidepdf.com/reader/full/certification-ib 4/5

PROFORMA

INVOICE

1. Importer and Exporter enter into a sales

agreement and the seller issues a

PROFORMA INVOICE to the buyer

BHARAT ELECTRONICS

( IMPORTER )

SANYO TRADERS

( EXPORTER )

8/3/2019 Certification IB

http://slidepdf.com/reader/full/certification-ib 5/5

PROFORMA INVOICECritical First Step

A PROFORMA INVOICE is an invoice provided by asupplier prior to the shipment of merchandise,

informing the buyer of the kinds and quantities of 

goods to be sent, their value, and important

specifications (payment terms, time of shipment,

weights and dimensions, shipping terms, etc.).

Essentially the proforma invoice is a quotation laid

out in the format of your proposed billing invoice

summarizing the key terms of your sales contract .