Basic letter of credit procedure
There are different types of letters of credit and various scenarios in which letters of credit (L/C) are used. The basic letter of credit procedure:
Amendments
When the letter of credit is advised to the seller by the advising bank, the seller checks if the requirements of the letter of credit can be met. If the seller is unable to meet any term or condition of the letter of credit, or the letter of credit differs from the purchase and sale agreement, the seller must notify the importer and request an amendment to the letter of credit.
For example, the seller asks to extend the expiry date and the latest shipping date if they are unable to manufacture the merchandise in time. An importer can request an amendment to increase the value of the letter of credit to purchase a higher quantity of merchandise.
When all parties agree, the amendment is incorporated into the terms of the letter of credit and advised to the exporter through the advising bank. The seller starts shipment after the amendments have been agreed to.