Scenario - Export Involving a Letter of Credit (SAP Library

Scenario - Export Involving a Letter of Credit

Purpose

This scenario describes the process of exporting goods and receiving payment using a letter of credit.

This graphic is explained in the accompanying text

Process

The importer requests a quote for the merchandise.

You (the exporter) provide a quote for the merchandise to the importer.

The importer sends you a purchase order based on your offer.

You issue a sales order based on the purchase order and send it along with an invoice to the importer.

(Optional) You send an advanced shipping notification to inform the importer of the exact date and quantities of merchandise to be delivered.

The importer opens a letter of credit with the opening bank in the country of import.

The letter of credit stipulates in detail which documents are required by customs and by any other agency regulating your commodity. These may include

Bills of lading
Commercial invoice
Export packing list
Shipper's export declaration (SED) (Required in the USA for goods valued at $2501 or more)
Shipper's Letter of Instructions (SLI) (applies only to the USA)
Single Administrative Document (SAD) (applies only to the EU)
Certificate of origin
Insurance certificates
Licenses (when necessary)

Note

With the exception of the insurance certificates, you can create the above documents using the SAP Foreign Trade (FT) application.

The opening bank sends the letter of credit to the advising bank in your country.
The advising bank advises you that a letter of credit has been opened in your favor.
You ship the merchandise in accordance with the terms stipulated in the letter of credit.
You give the documents proving that the shipment was made in conformance with the letter of credit to the advising bank in your country.
The advising bank pays you for the merchandise based on the documents received.
The advising bank transfers the documents to the opening bank and receives payment from the customer.
The importer receives the merchandise, files an import declaration and pays customs duties to the responsible authorities.
You file a customs declaration for the merchandise exported.