LC issuance procedures:

Trade Finance Procedure Aligned with UCP 600 (Ametheus Holdings Pvt Ltd)

This procedure outlines the steps for a trade transaction facilitated by an Irrevocable Letter of Credit (LC) under the Uniform Customs and Practice for Documentary Credits (UCP 600), with Ametheus Holdings Pvt Ltd as the facilitator (part of 1st Party), the Shipper/Exporter as the LC Beneficiary (2nd Party), and the Consignee as the ultimate importer (3rd Party). It incorporates Ametheus’s trade finance processes for commodities with market-based price indices (e.g., scrap, metals, coal, building materials, chemicals, agri commodities, petroleum oil).

1. Agreement on Commercial Terms and Submission of Proforma Invoice

  • The Consignee (3rd Party) and Shipper (2nd Party, LC Beneficiary) negotiate and agree on the terms of the sale, including price, quantity, delivery terms (per Incoterms 2020), and payment via an LC facilitated by Ametheus Holdings Pvt Ltd (1st Party).

  • The Shipper (2nd Party) submits a Proforma Invoice (PI) or Application Form to the Consignee and/or Ametheus, including:

    • LC Beneficiary Company Name: Full legal name of the Shipper.

    • Beneficiary Bank Name: Name of the Shipper’s bank.

    • Loading Port Name: Port from which goods will be shipped.

    • Unloading Port Name: Port where goods will be delivered.

    • Consignee Company Name and Address: Full legal name and complete address of the Consignee.

    • Consignee Bank SWIFT Code and Coordinates: SWIFT code and full banking details of the Consignee’s bank.

    • Product Name: Description of the commodity (e.g., coal, metals).

    • HS Code of Product: Harmonized System code for the commodity.

    • Specification of the Product: Detailed specifications (e.g., quality, grade).

    • Unit Rate: Price per unit of the commodity.

    • Total Quantity of Product: Total quantity to be supplied.

    • Total Amount of LC: Total transaction value, with a 5% plus/minus tolerance (LC amount calculated including a 5% increase).

  • Ametheus creates a draft and issues a PI for its service charge for client review.

  • The client (Consignee or representative) signs the draft, wires issuance fees, and submits due diligence documents.

  • Ametheus, on behalf of the LC Applicant (1st Party), signs a purchase contract with the Shipper (2nd Party) and a sales contract with the Consignee (3rd Party).

2. LC Applicant Facilitates Letter of Credit Application

  • The LC Applicant, acting on behalf of Ametheus Holdings Pvt Ltd (1st Party), submits an LC application to the Issuing Bank in favor of the Shipper (2nd Party, LC Beneficiary) for a minimum LC amount of USD 200,000, incorporating PI details:

    • Beneficiary details (Shipper’s company and bank).

    • LC amount (including 5% tolerance).

    • Expiry date and place of presentation.

    • Commodity details (product name, HS code, specifications, quantity, unit rate).

    • Loading and unloading port names.

    • Consignee details (company name, address, bank SWIFT code).

    • LC type: At-sight (90/180 days validity) or usance (60 days usance with 30 days validity, or 90 days usance with 180 days validity).

    • Conditions (e.g., partial shipments, transshipment).

  • The client deposits a refundable or adjustable margin (based on commodity) and pays a non-refundable service fee (varies by LC amount and tenure).

  • The application aligns with UCP 600 and the PI/sales contract to avoid discrepancies.

3. Issuance of Letter of Credit

  • The Issuing Bank issues the LC in favor of the Shipper (2nd Party, LC Beneficiary), compliant with UCP 600 (Article 2: Definition of Credit).

  • Ametheus releases the instrument to the Issuing Bank, which issues the SWIFT (MT700) within 5–15 days to the Advising Bank (typically the Shipper’s bank).

  • The Advising Bank verifies the LC’s authenticity (UCP 600, Article 9) and advises it to the Shipper.

  • Ametheus emails a SWIFT copy to the client for tracking, allowing the Shipper to collect the authenticated LC from their bank.

4. Shipper Reviews Letter of Credit

  • The Shipper (2nd Party, LC Beneficiary) reviews the LC to ensure it matches the PI and sales contract, including:

    • Beneficiary details (Shipper’s company and bank).

    • LC amount (with 5% tolerance).

    • Document requirements (UCP 600, Articles 18–28).

    • Expiry date and presentation period (UCP 600, Article 6).

    • Loading/unloading ports and Consignee details.

  • If discrepancies are found, the Shipper requests amendments via Ametheus (1st Party) or the Consignee (3rd Party).

5. Shipment of Goods

  • Upon LC confirmation, the Shipper (2nd Party, LC Beneficiary) prepares and prepares the goods (commodities with market-based price indices) for shipment from the specified loading port to the unloading port, as agreed in the PI, LC.

  • The Shipper books containers (with 14–30 days free detention) and arranges quality inspection by SGS, Bureau Veritas, or Cotecna if required.

  • The Shipper prepares documents:

    • Commercial Invoice: Reflects PI (commodity details, HS code, specifications, unit rate, quantity, total amount) and names the Consignee (3rd Party) if stipulated (UCP 600, Article 18).

    • Transport Document: (e.g., Bill of Lading), names Consignee (3rd Party) as recipient at unloading port (UCP 600, Articles 19–25).

    • Inspection Certificate: Issued by SGS or equivalent, naming Consignee if required.

    • Certificate of Origin: Consistent with PI.

    • Other documents: As stipulated in the LC.

6. Presentation of Documents

  • The Shipper (2nd Party, LC Beneficiary) submits documents to the Nominated Bank (e.g., Advising Bank) within the presentation period and before LC expiry (UCP 600, Article 6).

  • Documents must comply with LC terms and PI details to avoid discrepancies (UCP 600, Article 14).

7. Document Examination and Acceptance

  • The Nominated Bank examines documents within five banking days (UCP 600, Article 14b), verifying compliance with:

    • LC terms (including PI details like commodity HS code, specifications, ports, consignee).

    • UCP 600 standards.

    • International Standard Banking Practice (ISBP).

  • If compliant, the Nominated Bank sends documents to the Issuing Bank for acceptance.

  • The Issuing Bank notifies the LC Applicant (1st Party) for acceptance:

    • For at-sight LC: Payment is due immediately.

    • For usance LC: Acceptance is issued for payment at maturity (e.g., 60/90 days from shipment).

  • If discrepant, the Nominated Bank may contact the Shipper for corrections or seek Issuing Bank approval (via Ametheus) to accept discrepant documents.

8. Payment to Shipper

  • Upon compliant documents, the Issuing Bank honors payment to the Shipper (2nd Party, LC Beneficiary) (UCP 600, Article 7):

    • At-sight LC: Payment at sight.

    • Usance LC: Payment at maturity (30/60/90/120 days from document submission).

  • Payment accounts for the 5% tolerance and is made via SWIFT to the Shipper’s bank.

  • The Nominated Bank, if negotiated/confirmed, pays the Shipper and seeks reimbursement (UCP 600, Article 12).

  • The Shipper may opt for LC discounting for usance LCs to receive early payment.

9. Document Delivery to Consignee

  • The Issuing Bank sends documents to the LC Applicant’s bank (1st Party) post-acceptance/payment.

  • Ametheus facilitates document transfer to the Consignee’s bank on a Documents Against Acceptance (DA) basis (45–60 days, depending on LC terms).

  • The Consignee’s bank issues acceptance to the LC Applicant’s bank, agreeing to pay at sight or maturity (7–14 days before shipment arrival).

  • Upon acceptance/payment, the Consignee’s bank releases documents (e.g., Bill of Lading) to the Consignee (3rd Party) to retrieve containers.

  • If the Consignee fails to pay, the LC Applicant may store goods in a bonded warehouse (up to 90 days at Consignee’s cost) and sell to another buyer, with partial payment/delivery possible.

10. Cargo Title Transfer

  • Upon payment and document release, the title of goods transfers to the Consignee (3rd Party) per the sales contract, PI, and Incoterms.

  • The Consignee clears cargo at the unloading port, covering all warehousing charges on an actual basis, plus Ametheus’s monthly storage fee (separate from LC issuance charges).

Important Notes

  • Ametheus Holdings Pvt Ltd (1st Party) is a facilitator, not a lender, arranging LCs for commodities with stable, index-based prices.

  • The LC Applicant (1st Party) is the financier and notify party, working with Ametheus to issue the LC.

  • The Shipper (2nd Party, LC Beneficiary) is the exporter, responsible for shipment and document compliance.

  • The Consignee (3rd Party) is the ultimate importer, responsible for payment (7–14 days before shipment arrival) and warehousing costs.

  • Documents must align with LC and PI terms to avoid delays (UCP 600, Article 14).

  • Quality inspections (SGS, Bureau Veritas, Cotecna) must name the Consignee if required.

  • The LC is irrevocable unless stated as transferable (UCP 600, Article 10).

  • Banks deal with documents, not goods (UCP 600, Article 5).

  • Additional charges include negligible money movement costs and upfront LC issuance fees.

  • Security: The consignment is in the Consignee’s name, with optional insurance via Allianz Trade or Coface through Ametheus.

This procedure ensures a secure, UCP 600-compliant trade transaction, leveraging Ametheus’s facilitation for efficient commodity import financing.

Terms of LC arrangement: 

1. If any importer or client request for arrangement of lC to Ametheus then we can arrange the LC for the client under ceratin terms. LC applicant will open LC on behalf of importer ( consignee) to the exporter (LC Beneficiary) or shipper. After shipment against documents LC applicant will issue acceptance as per the LC terms.
2. Usance LC can be issued with the 60 days Usance with 30 days validity or 90 days usance with 180 days validity. At sight LC can be issued with 90 days/180 days validity.
3. Beneficiary of LC or exporter will make shipment.
4. Beneficiary or exporter will submit documents in his bank .
5. Beneficiary bank will send documents to LC applicant’s bank for acceptance against documents.
6 LC applicant will issue acceptance of payment at sight or will give acceptance that on the maturity date (last date of the usance period) LC issuing bank will pay .
7. LC applicant will send documents to the consignee’s bank asking for acceptance / payment .
8. Consignee’s bank will issue at sight payment to LC applicant’s bank against the documents or they will also send acceptance of payment to LC applicant’s bank that on the maturity date (last date of the usance period) they will pay LC applicant’s bank and then importer’s/ consignee’s bank will finally release the documents to consignee.
Benefit: Importers can import without engaging FDR or limit. Exporters can recommend importer to utilize this LC facility.
9. Please note that we are not a lender so we cant provide credite facility. On arrival of cargo at port if consignee does not pay then LC applicant has to sell out the imported goods to other buyer.
10. LC applicant can keep the stock maximum 60 days at the bonded warehouse in the port at their cost under LC applicant’s custody. Partial payment and partial delivery is possible. All warehousing charges are on the consignee on actual basis. LC applicant will charge a fees per month basis which is seperate than the LC issuing charges.

Payment Terms and Procedure:

1. Ametheus (our firm) creates a draft and issue PI for the service charge for client’s review.
2. Client signs the draft, wires issuance fees, and submits due diligence documents.
3. On behalf of the LC applicant Ametheus will sign a purchase contract with the LC beneficiary and will sign a sales contract with the consignee.

4. Client submits a proforma invoice (PI) or Application Form for the underlying deal. The PI must include following data:

    • LC beneficiary company name
    • Beneficiary bank name
    • Loading port name
    • Unloading port name
    • Consignee company name, complete address . Consignee bank Swift code, full coordinates.
    • Product name
    • HS code of product.
    • Specification of the product.
    • Unit rate.
    • Total quantity of product.
    • Total amount of lc.
    • If the tolerance limit is 5% plus minus, then the lc amount will be calculated adding 5% plus.

5. Ametheus releases the instrument to Bank for issuance.
6. Assuming no questions, Bank issues SWIFT within 5-15 Days maximum.
7. Ametheus emails a copy of SWIFT to client so client can track the SWIFT message from their bank and can collect the authenticated Letter of credit (LC) from their bank.

8. Containers will arrive in port with 14 days to 30 days free detention. Containers will be booked by the exporter (LC Beneficiary) or shipper.

9. Shipment Documents will be sent to the importers or consignee’s bank on 45 to 60 days DA basis depending on the usance period and validity of the LC. So, the ultimate importer can collect/retire documents from bank and can release containers.

Q: How to share preliminary data with LC applicant?
Ans: 12 main points to be shared with LC applicant:

    • LC beneficiary company name
    • Beneficiary bank name
    • Loading port name
    • Unloading port name
    • Consignee company name, complete address . Consignee bank Swift code, full coordinates.
    • Product name
    • HS code of product.
    • Specification of the product.
    • Unit rate.
    • Total quantity of product.
    • Total amount of lc.
    • If the tolerance limit is 5% plus minus, then the lc amount will be calculated adding 5% plus.

FAQ: 

Q: How will the importer get the product and how will the importer pay back to you?
Ans: DA means documents against acceptance. So, when the importer’s bank will receive documents, they must issue acceptance to LC applicant’s bank to release the BL copy from the bank to release the containers. In that way LC issuing bank will get payment from the importer’s bank against the acceptance they gave to retire the documents.

Q: What is the security of the importer?
Ans: Consignment is coming in the name of importer or consignee, so the transaction is secured. Additionally, importers can take business insurance coverage from Allianz Trade (Euler Hermes) or Coface through us.

Q: What volume can you do?
Ans: Minimum 200,000 USD to any amount of LC we can arrange.

Q: Any Hidden Charges?
Ans: Only one hidden charge is money movement charges which is negligible and on actual cost basis.

Q: Who will do the quality inspection?
Ans: SGS, Bureau Veritas, Cotecna etc.

Q: Who are the parties here?
Ans: LC applicant is financier and notify party. Exporter or shipper is LC beneficiary. Consignee is the ultimate importer. Ametheus Fintech & Offshore logistics Pvt Ltd is the facilitator of this entire transaction.

Q: Are there any upfront charges?
Ans: Client must pay LC issuing charges upfront.

Q: Which products are allowed to do?
Ans: Commodities and other non-perishable items which has index basis price indication and less price fluctuation in the market.

Q: How long may a Usance letter of credit start opening?
Ans: Usance LCs often offer a repayment grace period of 1,2,3, or 4 months. A period LC or a promissory note LC are other names for a usance LC.

Q: Can LC from a user be forwarded?
Ans: Only when it is mentioned explicitly in the LC that the LC is transferable then LC can be transferred by 1st beneficiary to 2nd beneficiary.

Q: Can we reduce the usance of LC?
Ans: The exporter is given the option of a Letter of Credit Discounting for the Usance LCs. In a typical business transaction, the buyer requests a credit term while the seller requests prompt repayment. To resolve this conflict, the bank assists the export using LC discounts.

Q: What does LC payable at Sight mean?
Ans: Usance Credit Current liabilities at Sight is a type of L/C in which the exporters perform sight collections from the cheque drawer, which handles the discounted, and the importation pays advanced payments to the financial institution, which provides financing for the importation.

Q: On some exchange bills for usance, who is responsible?
Ans: A usance bill of exchange needs to be paid in the future, such as in a few days, weeks, months, or years, such as “3 months sight.” To hold the payee accountable for the payment, he must accept it. By stamping on the front of the bills, the payee acknowledges it and swears to pay it when it matures.

Q: Why LC issuing bank issue acceptance to seller?
Ans: LC acts as an irrevocable guarantee, If the buyer is unable to make a payment, the bank covers the full or the remaining amount on behalf of the buyer. The Issuing bank has to confirm to the negotiating bank about the acceptance / payment of the documents for reinstatement of the amount in the LC.

Q: Can sight LC be discounted?
Ans: Sight letters of credit should not require any discount mechanism as issuing banks or confirming banks must honour at sight credits as soon as they determine that the beneficiary’s presentation is complying.

Q: What is the maturity date for Sight LC?
Ans: Sight LC matures on the date on which the documents are submitted to the bank by the beneficiary.

Q: What is the maturity date for Usance LC?
Ans: Usance LC matures on 30, 60, 90, 120 days from the date on which the documents are submitted to the bank by the beneficiary.

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