Register Letter of Credit

This document explains how you register a letter of credit, either for import or export purposes.

Outcome

A letter of credit is registered, belonging to one of the following two categories: Import or export. It has status 10 = Preliminary and can be reviewed in 'Letter of Credit. Open' (RMS100).

Connect the letter of credit to a purchase order or customer order. For more details, see Process Letter of Credit in M3.

Use the registered information to keep track of the status of the purchase or sales by manually or automatically updating the status of the letter of credit for each step in the transaction.

See Managing Letters of Credit for Import Purposes.

Before you start

See Managing Trading Risk.

Follow These Steps

Enter Start Data

Start 'Letter of Credit. Open' (RMS100/B).Set the panel sequence.

This instruction is based on panel sequence EFGH:

E = Basic data; F = Information on supplier/customer and delivery; G = Information on issuing bank; H = Information on beneficiary bank/seller's bank; I = Notification address.
Select sorting order 1 = Import (letter of credit type 1) or 2 = Export (letter of credit type 2).

Note: The sorting order selected controls which type new letters of credit will belong to.
Enter an ID for the letter of credit. Click New.

Enter Basic Data

On the E panel, enter a description (required) and a name.
Enter status and validity end date (required) and define whether the letter of credit is irrevocable or confirmed.
Define amount type (required), currency (required), letter of credit amount (required) and credit deviation.

The credit deviation is only entered if amount type 3 is selected.
Define the date payable type (required) and enter the date payable. Press Enter.

The date payable is required if date payable 2 is selected.

Enter Information on Supplier/Customer and Delivery

On the F panel, enter the customer or supplier (required). Press Enter.

Address and delivery terms are retrieved from the customer file or the supplier file respectively, depending on the letter of credit type selected.
Define whether the order should be confirmed and enter comments on special conditions, goods description or just a personal comment (all optional). Press Enter.

Enter Bank Information

On the G panel, enter the issuing bank (required). Press Enter twice.

Bank name and address are retrieved from 'Bank. Open' (CRS690) but can be changed.
On the H panel, enter the beneficiary bank (required). Press Enter twice.

Enter Notification Address

On the I panel, enter a notification address (optional). Press Enter to finish.

Parameters to Set


Program ID/Panel	Field	The field indicates …
(RMS100/B)	Sorting order	… the type of letter of credit that should be displayed on the panel. Valid Alternatives 1 = Import (letter of credit type 1) 2 = Export (letter of credit type 2) Which view you select control which type the next created letter of credit will belong to.
(RMS100/B)	Status	… a stage in the lifecycle of a letter of credit. Different statuses are used, depending on whether the letter of credit is used for import or export. The status fields in the header of the B panel controls which letters of credit to display. Valid Alternatives: Import 10 = Preliminary. This status is automatically set when a new letter of credit is registered. 20 = Definitive. This status cannot be set before any orders have been connected. 25 = Request to open letter of credit is sent to the bank (This status is automatically set when printing the request in [RMS100].) 28 = Letter of credit received from the company's bank 30 = Approved and issued 85 = Paid, the final stage 90 = Closed (The letter of credit can be closed at any time during the process.) 99 = Canceled. Valid Alternatives: Export 10 = Preliminary. This status is automatically set when a new letter of credit is registered. 20 = Definitive. This status cannot be set before any orders have been connected. 26 = Received from customer 29 = Returned to customer (for further information or corrections) 40 = Accepted. This status releases the customer order that was connected to the letter of credit in (RMS101). (As long as the status is less than 40, the customer order automatically has block code 5. This means that a picking list cannot be printed.)When setting the status 40, you are also requested to enter the definitive letter of credit number from the bank in (RMS100/R). This number is then used as invoice number when the invoice is created. 50 = Accepted and sent to the advising/confirming bank 81 = Paid, not confirmed (Statuses 81 and 85 are automatically set when recording the payment in [ARS110].) 81 = Paid, confirmed 90 = Closed 99 = Canceled.
(RMS100/B)	Letter of credit	… an ID for a letter of credit consisting of up to eight alphanumeric characters.
(RMS100/E)	Valid to	… the last valid date for the letter of credit. The letter of credit amount is made available by the buyer's bank until this date.
(RMS100/E)	Irrevocable	… whether the letter of credit is irrevocable. The field is used for information purposes only. A revocable letter of credit may be canceled by the buyer's bank at any time prior to the presentation of documents at the seller's bank or the negotiating bank. Consequently, the seller cannot rely upon it as a sure source of payment for the exported goods. If the letter of credit is irrevocable, the buyer's bank guarantees that it will pay the seller if the buyer does not pay. The irrevocable letter of credit can only be canceled with the consent of all parties concerned.
(RMS100/E)	Confirmed	… whether the letter of credit is confirmed. An unconfirmed letter of credit indicates that the bank (the correspondent of the issuing bank) – usually the seller's bank – has no legal obligation to honor the credit. Instead, it is advising the credit without any responsibility or engagement on its part. A confirmed letter of credit indicates that this bank has jointly assumed the issuing bank's obligation. The confirming bank is legally required to pay the seller/beneficiary, regardless of the ability of the issuing bank to pay.
(RSM100/E)	Letter of credit amount type	… the type of amount used in the letter of credit. This type is used when connecting the letter of credit to a purchase order or customer order. The total order amount is then automatically compared to the letter of credit amount. If the order amount exceeds the letter of credit amount, a warning message is displayed. Valid Alternatives 1 = Exact amount 2 = Maximum amount 3 = Approximate amount. If alternative 3 is selected, the permitted deviation must be defined as a percentage.
(RSM100/E)	Date payable type	… when the funds covered by the letter of credit are available. The field is used for information purposes only. There is no connection to the files in accounts receivable and cash flow management. Valid Alternatives 1 = At sight 2 = At a specific date defined in the 'Date payable' field. Example The buyer specifies that the letter of credit requires drafts at 50 days sight. This means that the buyer does not have to pay any cash until 50 days have elapsed from the time the draft is received by the bank.
(RMS100/E)	Date payable	… the date when the letter of credit amount is to be paid to the seller/beneficiary (see above).
(RMS100/E)	Letter of credit amount	… the funds covered by the letter of credit. The amount is presented with up to two decimals.
(RMS100/E)	Allowed credit amount deviation – percentage	… the deviation allowed from the credit amount expressed as a percentage. This value is printed on the import letter of credit. For export letters of credit, it is used for information purposes. A deviation can only be specified if amount type 3 (approximate amount) is selected – see above. The credit amount must be sufficient to cover all costs within the terms agreed to in the sales contract or order. Defining a maximum deviation allowed may facilitate the transaction, since it enables the bank to deal with minor deviations from the credit amount without upsetting the original agreement.
(RMS100/F)	Special conditions	… a brief description on any particular conditions connected to the goods delivery (one line). If the letter of credit is used for import purposes, this line is printed on the letter of credit created.
(RMS100/F)	Description of goods	… a brief description of the delivered goods (one line). If the letter of credit is used for import purposes, this line is printed on the letter of credit created.
(RMS100/F)	Comment	… a personal comment (one line). It is used for information purposes only and is not printed on any documents.
(RMS100/G)	Issuing bank	… the ID of the bank which originally established the credit. If the letter of credit is used for import or export purposes, the issuing bank is usually the buyer's (importer's) bank.
(RMS100/H)	Beneficiary bank no	… the ID of the advising bank. The advising bank is the issuing bank's correspondent, usually the seller's bank of account. If the bank has agreed to confirm the letter of credit, it is also called the confirming bank.
(RMS100/I)	Notify address lines	… an address used to send a message to a third party. This is the address to notify upon the imminent arrival of goods at the port or airport of destination. Notification can also be used to report damage of goods in the shipment. The address of an agent representing the broker may be used. Many buyers also require that their customs broker be notified about the arriving goods.