Letters of credit

1. The buyer and seller enter into a sales contract, in which one of the articles provides for the opening of a letter of credit in favour of the seller.
2. The buyer submits a request to its bank to open a letter of credit, specifying the conditions under which the credit is to be issued in favour of its supplier.
3. The bank receiving the buyer's instructions issues the letter of credit in favour of the seller.
4. A third-party bank, corresponding with the issuing bank in the seller's country, may confirm the credit at the request or with the authorisation of the issuing bank.
5. The seller receives the letter of credit, checks the terms and conditions, and ships the goods according to the specified arrangements.
6. The seller submits the required documents to the confirming bank. If these conform to the terms and conditions of the letter of credit, the bank pays the seller in the agreed way.
7. The confirming bank sends the documents to the issuing bank, which settles its debt with the confirming bank after an additional check of the documents.
8. The issuing bank hands over the documents to the buyer and recovers the amount paid to the confirming bank according to the agreed arrangements.

For a letter of credit, banks may require the following documents:

• Commercial documents: invoices, inspection certificates, customs documents, packing lists, measurement certificates etc.
• Transport documents: bills of lading, air waybills, express courier receipts etc.
• Insurance documents

Commercial terms (Incoterms) are a key element of international sales contracts, as they define the sharing of costs and risks between the parties. The rules in force for letters of credit are the Uniform Customs and Practice for Documentary Credits (UCP) of the International Chamber of Commerce.

Using our Connexis Trade tool, you can submit your letter of credit application online. You can then 
track the status of your transactions in real-time and be directly informed when the goods are 
delivered and you need to pay the issuing bank.

Do you need to pay suppliers or compensate for a delayed payment from a client? Use our loan 
simulator to find the loan that best suits your cash-flow needs. 

Carry out a simulation

Lender: BNP Paribas Fortis SA, Montagne du Parc 3, 1000 Brussels – RPM Brussels – VAT BE 
0403.199.702. Subject to acceptance of your application.