This document explains on a summary level how letters of credit are used as payment documents to reduce the payment risk in international trade.
For information on principles and types of letters of credit. See Using Letters of Credit for International Payments – Overview.
Goods are imported or exported based on the terms of the letter of credit. Payment is made by the buyer's bank and reported in M3.
The results of the export affects the credit status of the buyer.
The following files are updated:
For information on account entries created, see the respective sub-process.
Based on the Request for Purchase, these options are available:
Manage letters of credit for import purposes.
Launch 'Letter of Credit. Open' (RMS100). Record the letter of credit and connect it to a purchase order. Use the registered information to keep track of each step in the workflow until you have paid the goods.
Manage letters of credit for export purposes.
Record the letter of credit and connect it to a customer order in (RMS100). Similarly to when importing goods, the manual or automatic setting of statuses control the life cycle of the letter of credit. However, the workflow itself is different.