Letter of Credit Process

To avail Letter of Credit from SST Group, the LC Provider in Dubai, please follow the Letter of Credit Process given below.

• The buyer presents their trade deal by submitting a buy and sell agreement or a proforma invoice.
• Secondly, SST Group will do an analysis of the trade deal between the buyer and seller. And will also, inform the party, if their request is approved or not.
• And, if approved, we will send the service agreement to the client. Also, we will inform them about the admin charges to initiate their transaction.
• Once they sign the service agreement and pay the admin charges, we will start working on their DLC transaction. Further, we will send the LC draft to the buyer for their review.
• Finally, upon receipt of Letters of Credit draft approval and the issuance fee, we will open the required Import LC from our European Bank account in favor of the seller.
• Certainly, it will not take more than 2 banking days to complete the transaction.

What is Letter of Credit

• A Letter of Credit (LC) is considered one of the most secure and widely used payment instruments available to buyers. It provides assurance to the seller that payment will be made in a specified currency within a defined time frame—provided the seller submits all required shipping documents to the bank as outlined in the issued LC.
• So, what exactly is LC Payment? Also known as Import LC, LC at Sight, or simply Letter of Credit, it is a formal undertaking issued by a bank on behalf of the buyer in favor of the seller.
• It guarantees both payment and shipment assurance, making it a highly trusted instrument in international trade. This payment method plays a crucial role in global transactions and operates under the International Chamber of Commerce's UCP 600 guidelines.
• Under this arrangement, the buyer arranges for the issuance of a Documentary Credit in favor of the seller. The bank provides an irrevocable commitment to pay the seller, contingent upon the submission of documents that strictly comply with the terms of the LC—including those related to product quality, quantity, and shipping.
• The required documents typically include the Invoice, Packing List, Ocean Bill of Lading or Air Waybill, and the Certificate of Origin of the goods. Once these documents are submitted by the seller, the bank reviews them for compliance and proceeds with the payment process.
• This is how the LC MT700 format safeguards both buyers and sellers in international trade transactions.

Why Do Importers and Exporters Prefer the LC Payment Process?

Using MT700 offers assurance to both buyers and sellers in a trade transaction. It guarantees that the buyer will receive goods in accordance with the agreed contract, while ensuring the seller receives payment for the supplied goods. Additionally, sellers may benefit by securing a credit line or packing credit against the issued MT700 to support their export operations. Below are some key reasons why LC Payment Terms are favored by both parties.

For Importers / Buyers:
1. When used as a financial tool, a Letter of Credit allows the buyer to structure a payment schedule with the seller’s consent.
2. It serves as a financial guarantee, confirming that payment will be made upon submission of the documents specified in the MT700 terms and conditions.
3. Buyers can purchase goods without having to make advance payments.
4. It ensures that the supplier adheres to all conditions mentioned in the issued MT700.

For Exporters / Suppliers:
1. Payment is guaranteed upon submission of documents in accordance with the MT700 terms.
2. It minimizes the risk in case the buyer attempts to alter or cancel the order.
3. The buyer cannot withhold payment or reject goods based on disputes after delivery, although they retain the right to raise complaints.
4. Suppliers have the flexibility to adjust the delivery schedule based on operational convenience.
5. MT700 may also be used by the seller to obtain packing credit or working capital to mobilize their exports.

Who Involved in the Letter of Credit process

Applicant – The buyer who requests their bank to issue the Import LC for purchasing goods or services from the seller.
Beneficiary – The seller or supplier in whose favor the Letter of Credit is issued and who ultimately receives the payment.
Issuing Bank – The buyer’s bank that issues the MT700 on their behalf in favor of the supplier.
Advising Bank – The intermediary bank that receives the LC from the issuing bank and forwards it to the supplier, usually one with an existing relationship.
Supplier’s Bank – The bank representing the seller, where the MT700 is ultimately received and processed.

Apply for Letter Of Credit