A Letter of Credit (LC) is an undertaking by a bank, on behalf of an importer (the applicant) to the beneficiary to make payment, provided that the exporter complies with all the terms and conditions stipulated by the credit. Letters of credit can be confirmed or unconfirmed and are irrevocable upon Issuance. Payment is made at Sight, Deferred Payment, and Mixed payment or by Acceptance. Cash Backed LC involves the applicant providing funds for the opening of the LC. Unconfirmed Sight and Deferred LC involve payment at a later date upon presentation of compliant shipping documents. Confirmation Line and Usance LC involve opening a Confirmed LC using the bank’s offshore facility which will be repaid by the customer at maturity. Requirements for Letters of Credit
- One set of documents from the supplier to the issuing bank(Zenith Bank).
- Two sets of documents submitted to overseas bank for payment (the document will later be forwarded to the bank) The documents required for processing of Risk Assessment Report (RAR)
- Copy of Form M
- Transport Document
- Commercial Invoice/Final Invoice
- Packing List
- Standard combined Certificate of value and Origin (CCVO) (Form C16)
- Manufacturer Certificate/Certificate of analysis/Photosanitary Certificate NB: All Shipping documents must be issued after Form M approval date and Letters Credit issuing date. That is shipping Document must not predate Form M and Letter of Credit.