Letter of Credit issuance

Letter of credit is an payment undertaking of a bank for account of the importer to pay the exporter the value of the goods. Bank of China promises to honor such undertaking provided the required documents are submitted and the terms and conditions of the credit are complied with.

1. Improve negotiating status - issuing of letter of credit means that the importer provides the exporter with conditional payment commitment of the bank upon a bank’s credit, in addition to its commercial credit. It improves credit and negotiating status of the importer, so may be able to negotiate for a low purchase price and better terms;
2. Ensure goods – ensure to the extent that documents proved that the goods supplied are as per goods ordered;
3. Reduce capital occupied - if issuing an letter of credit upon given credit facility, importer does not need  spend self-owned capital in the stages of issuing the letter of credit in the issuing bank, exporter’s preparation of goods and delivery.

1. Importer and exporter wish to promote the level of trade credibility on each other's business activities;
2. The imported commodity is within a seller's market and the exporter insists on settlement with L/Cs;
3. Both importer and exporter want to select trade finance to improve liquidity.

1. The importer submits the “Application for Issuing Letter of Credit”, the bank issues the letter of credit upon approval against sufficient security or line of credit;
2. After receipt of the documents, Bank of China  will pay or accept after determined the compliance of the documents;
3. Bank of China will pay at maturity.