How Letter of credit received to Seller bank

Here are the steps outlining how a Letter of Credit (LC) is delivered to the seller's bank in international trade:

1. Buyer Requests the LC

• The buyer applies for a Letter of Credit from their bank (the issuing bank) after agreeing on the terms with the seller.

2. Issuing Bank Prepares the LC

• The issuing bank reviews the buyer’s creditworthiness and prepares the LC document according to the agreed terms.

3. Issuing Bank Sends the LC

• The issuing bank sends the LC to a correspondent bank or directly to the seller's bank. This communication often happens via secure SWIFT (Society for Worldwide Interbank Financial Telecommunication) messaging.

4. Correspondent Bank Transfers the LC (if applicable)

• If there is an intermediary or correspondent bank, it verifies the LC details and forwards it to the seller's bank.

5. Seller’s Bank Receives the LC

• The seller’s bank (also called the advising bank) receives the LC and verifies its authenticity.

6. Seller’s Bank Advises the Seller

• The seller’s bank informs the seller about the LC’s arrival and shares the document, ensuring all terms are correctly outlined.

7. Seller Prepares Shipment and Documents

• Once the LC is confirmed as valid, the seller ships the goods and prepares the necessary documents (e.g., bill of lading, invoice, certificate of origin) for presentation to the bank.

This process ensures a secure payment mechanism for both the buyer and the seller in international trade.

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