LC

There are thousands of different abbreviations in the business world particularly in transaction system. One of the useful and i think lovely abbreviation is LC or L/C which goes for letter of credit and is a document issued mostly by a financial institution for the international transaction. It is very popular and common to use LC in international business, because the payment process is safer and Customers and Supplier's bank get involved in the business.But how does this work. step by step :

Step No.1 : After business negotiation between buyer and seller or customer and supplier and after a contract is concluded between them, the buyer's bank issues a letter of credit to the seller.

Step No 2:Second step is Seller consigns the goods to a carrier in exchange for a bill of lading. You can find about Shipment cost in the contract,sometimes shipping is included and sometimes not,there are different types to indicate who pays loading and transportation costs, and/or the point at which the responsibility of the goods transfers from shipper to buyer such as FOB,CIF,C&F which i will write in a separate post later.

Step No. 3:Seller provides bill of lading to bank in exchange for payment. Seller's bank exchanges bill of lading for payment from buyer's bank. Buyer's bank exchanges bill of lading for payment from buyer. This part is Bank side and you don't need to do so much things however you should track the goods.

step No.4 : Buyer provides bill of lading to carrier and takes delivery of goods in destination.
This was a brief about LC,also there are different types of LC like at sight ,3month,6month which business managers particularly Export managers should know them.

Ref:http://en.wikipedia.org/wiki/Letters_of_credit http://www.bizhelp24.com/export-import/letter-of-credit.html http://www.crfonline.org/orc/cro/cro-9-1.html