Import Letter of Credit

IMPORT LETTER OF CREDIT

Following steps are required to open an LC against an import purchase order:

PURCHASE ORDER
1.       Create purchase order with bank document type ‘Letter of Credit’
2.       Complete purchase order details

LETTER OF CREDIT OPENING
3.       Go to manage tab in purchase order window and click on ‘Letter of credit / import collection button’
4.       Mentioned the following information in the following tabs:
a.       General
                                                               i.      Application date
                                                             ii.      Bank document number – usually it is a LC number issued by bank
                                                            iii.      Select bank and agreement
                                                           iv.      Select facility type
                                                             v.      Date of receipt
b.      Lines
                                                               i.      Add shipment lines
                                                             ii.      Specify each shipment amount
                                                            iii.      Select expected and actual maturity dates
c.       Bank document
                                                               i.      Select documentary credit type
                                                             ii.      Documentary credit nature
                                                            iii.      Select tolerance type i.e. none, plus, minus, plus/minus
                                                           iv.      Specify tolerance percentage
                                                             v.      Select expiration date – LC expiration date
                                                           vi.      Mention place of expiration
d.      Bank details
                                                               i.      Advising bank – vendor advising bank
                                                             ii.      Date of issue
                                                            iii.      Available with
e.      Terms
                                                               i.      Partial shipment i.e. allowed/not allowed
                                                             ii.      Transshipment i.e. allowed/not allowed
                                                            iii.      Port of loading
                                                           iv.      Latest shipment date
                                                             v.      Destination port
                                                           vi.      Description of goods
                                                          vii.      Incoterms i.e. FOB, CIF etc.
                                                        viii.      Documents required
                                                           ix.      Special instructions
                                                             x.      Bank charges – to be bear by party, company or both
                                                           xi.      Draft i.e. at sight
                                                          xii.      Period of presentation
                                                        xiii.      Confirmation instructions
                                                        xiv.      Additional information for issuing bank
f.        Insurance
                                                               i.      Insurance status
                                                             ii.      Insurance vendor number
                                                            iii.      Insurance number
5.       Confirm the purchase order
6.       Go to LC document and confirm it

PRODUCT RECEIPT / GOODS RECEIPT NOTE (GRN)
7.       Create product receipt
8.       Select Shipment (LC shipment number) with product receipt
9.       Post the documents – Note: Make sure the amount of receiving goods should be matched with LC shipment selected or should be under the range of tolerance

PURCHASE INVOICE
10.   Go to Invoice tab and click on Invoice button
11.   Mentioned vendor invoice number
12.   Select shipment
13.   Post the invoice

PAYMENT
14.   Go to Payment Journal
15.   Create payment line against the vendor
16.   Settlement the payment with an invoice which has bank document attached with
17.   Close the form
18.   Verify the bank transaction type ‘settlement’ from payment journal lines payment tab
19.   Post the payment

SETUP REQUIRED
1.       Cash and bank management parameters – mark the bank documents > Letter of credit
2.       Facility groups
3.       Facility types
4.       Facility agreements

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