Import section of any bank deals with L/C opening and post import financing i. e. LIM & LTR. Now the procedure from opening L/C to disbursement against L/C is given below. APPLICATION FOR OPENING L/C: At first, an importer will request banker to open L/C along with the following documents. 1. An application 2. Indent or Performa Invoice 3. Import Registration Certificate (IRC) 4. Taxpayer Identification Number (TIN) 5. Insurance cover note with money receipt 6. A bank account. 7. Membership of chamber of commerceIndent or Performa Invoice: Indent or Performa invoice is the sale contract between seller and buyer in import-export business. There is slight difference between indent and Performa invoice. The sales contract, which is direct correspondence between importer and exporter, is called Performa invoice. There is no intermediary between them. On the other hand, there may be an agent of exporter in importer’s country. In this regard, if the sale contract is occurred between the agent of exporter and importer then it is called indent. DELIVERED FORMS BY BANKER TO IMPORTER:After scrutinizing above-mentioned documents carefully, officer delivers the following forms to be filled up by importer and banker should check: Whether the goods to be imported is permissible or not. Whether the goods to be imported is demandable or not. The forms are: • Import Merchandised Permit Form (IMP). • L/C Application Form (L/CAF). • L/C Authorization Form (L/CAF). PREPARATION OF L/C BY BANKER: Bank’s officer prepares L/C when above mentioned forms are to be submitted by customer or importer. Before preparing L/C SIBL officer scrutinizes the application in the following manner. The terms and conditions of the L/C must be complied with UCPDC 500 and Exchange Control & Import Trade Regulation. ? Eligibility of the goods to be imported. ? The L/C must not be opened in favor of the importer. ? Radioactivity report in case of food item. Survey reports or certificate in case of old machinery is required. Bank of the importer is called ‘L/C Issuing Bank’. Then issuing bank inform it’s corresponding bank, called “Advising Bank’ or ‘Confirming Bank” located in exporter’s country to advice and the credit forward to the exporter and simultaneously officer makes L/C opening vouchers.Desk Work: ? One debit voucher to be passed. ? Corresponding credit voucher to be passed (Margin, commission, postage, stamp, F. F. C. and others). ? Liability voucher to be passed. Accounting Treatment: L/C Applicants A/C or Customer’s A/C| Dr. | Margin A/C| Cr. | Commission A/C| Cr. | Postage A/C| Cr. | Stamp A/C| Cr. | F. FC. (foreign corresponding charge) A/C| Cr. | Telex charge A/C| Cr. | Other A/C| Cr. | Customer’s liability A/C| Dr. | Banker’s liability A/C| Cr. | FORWARDING DOCUMENTARY CREDIT BY ADVISING OR CONFIRMING BANK: There are usually two banks involved in a documentary credit operation.The issuing bank and the 2nd bank, the advising bank, is usually a bank in the seller’s country. The issuing bank asks another bank to advise or confirm the credit. If the 2nd bank is simply “advice or credit”, it will mention that when it forwards the credit to seller, such a bank is under no commitment or obligation to pay the seller. If the advising bank is also “confirming the credit”, this mention that the confirming bank, regardless of any other consideration, must pay accept or negotiate without recourse to seller. Then the bank is confirming bank.SUBMISSION OF NECESSARY DOCUMENTS BY EXPORTER TO THE NEGOTIATIONG BANK: As soon as the seller / exporter receives the credit and is satisfied that he can meet its terms and conditions, he is in position to load the goods and dispatch them. The seller then sends the documents evidencing the shipment to the bank. Exporter will submit those documents in accordance with the terms and conditions as mentioned in L/C. Generally the documents observed by me in the foreign exchange department are: o Bill of exchange o Commercial invoice o Bill of lading o Certificate of origin o Packing list Clean report of finding (CRF) o Weight list o Insurance cover note o Pre-shipment certificate SOME DEFINITIONS Bill of Exchange: According to the section 05, Negotiable Instruments (NI) Act unconditional order signed by the maker, directing a certain person to pay [on or to the order of a certain person or to the bearer of the instrument. It may be either at sight or certain day sight. At sight means making payment whenever documents will reach in the issuing bank. Commercial Invoice: Commercial Invoice issued by exporter is the accounting document by which the seller charges the goods to buyer. Bill of lading:A bill of lading is a document usually stipulated in a credit when exporter dispatches the goods. It is an evidence of a contract of carriage, is a receipt for the goods and is a document of title to goods. It also constitutes a document that is or may be, needed to support an insurance claim. THE DOCUMENTS SENT TO THE ISSUING BANK THROUGH THE NEGOTIATING BANK: The negotiating bank carefully checks the documents provided by the exporter against the credit, and if the documents meet all the requirement of the credit, the bank will pay, accept, or negotiate in accordance with the terms and conditions of the credit.Then the bank sends the documents to the L/C opening bank. MAKING THE PAYMENT OF FOREIGN BILL THROUGH THE REIMBURSING BANK: The L/C issuing bank getting the documents checks immediately and if they are in order and meet the credit requirements; it will arrange to make payment against L/C through reimbursement bank and will send the importer the document arrival notice. But if there is any discrepancy in the documents, the L/C issuing bank send message to the negotiating bank to rectify it under its risks and responsibilities. POST-IMPORT FINANCING:If there is no available in cash in importer’s hand, he can request the bank to grant loan against the documents for the purpose of post import finance. There are two following forms of post import finance available in MTBL Dilkusha Branch. * LIM (Loan against imported merchandise). * LTR (Loan against trust receipt). On the arrival of goods and lodgment of import documents, importer may request the bank for clearance of goods from the port (custom) and keep the same to bank godown. Proper sanction from the competent authority is to be obtained before clearance of consignment.For giving these types of loan, officer makes loan proposal and sends it to H/O for approval. After getting approval from H/O, bank grants loan in the form of either LTR or LIM. Accounting Treatment: LIM/LTR creation: LTR/LIM (Importer) A/C | Dr. | PAD A/C| Cr. | After payment of the loan or delivery of goods: Party’s A/C | Dr. | LTR/LIM A/C| Cr. | Interest A/C| Cr. | By and large, it is mentioned herewith that bank only deals with the documents, not with goods & services in case of foreign exchange business.