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A SHORT COURSE IN INTERNATIONAL PAYMENTS
Settlement by Payment
PROCEDURE
Refer to the diagram on the facing page for each numbered step.
SELLER
1. The seller (beneficiary) ships the goods to the buyer and obtains a negotiable transport document (negotiable bill of lading) from the shipping firm/agent. 2. The seller prepares and presents a document package to the advising/confirming bank consisting of (a) the negotiable transport document, and (b) other documents (e.g., commercial invoice, insurance document, certificate of origin, inspection certificate, etc.) as required by the buyer in the documentary credit.
ADVISING/CONFIRMING BANK
3. The advising/confirming bank (a) reviews the document package making certain the documents are in conformity with the terms of the credit, and (b) pays the seller. 4. The advising/confirming bank then sends the documentation package by mail or by courier to the issuing bank.
ISSUING BANK
5. The issuing bank (a) reviews the document package making certain the documents are in conformity with the terms of the credit and (b) pays or reimburses the advising/confirming bank as previously agreed (in the documentary credit). 6. Sends the document package by mail or courier to the buyer.
BUYER
7. The buyer pays or reimburses the issuing bank as previously agreed.
