Understanding the Transaction

  1. LC Arrangement Process: If any importer or client requests Ametheus to arrange a Letter of Credit (LC), we can facilitate this under specific terms and conditions. The LC applicant will open the LC on behalf of the importer (consignee) in favour of the exporter/shipper (LC beneficiary). After shipment and submission of documents, the LC applicant will provide acceptance as per the LC terms.
  2. LC Tenor and Validity:
    • Usance LCs can be issued with 60 days usance and 30 days validity, or 90 days usance and 180 days validity.
    • At-sight LCs can be issued with 90 days or 180 days validity.
  3. The beneficiary (exporter) will complete the shipment.
  4. The beneficiary (exporter) will submit the required documents to their bank.
  5. The beneficiary’s bank will forward the documents to the LC applicant’s bank for acceptance.
  6. The LC applicant will issue acceptance for payment at sight, or provide acceptance that payment will be made on the maturity date (last day of the usance period) by the LC issuing bank.
  7. The LC applicant will forward the documents to the consignee’s bank, requesting acceptance or payment.
  8. The consignee’s bank will either make at-sight payment to the LC applicant’s bank against the documents, or provide acceptance that payment will be made on the maturity date. Once accepted, the consignee’s bank will release the documents to the importer (consignee).

Key Benefits:

  • Importers can import goods without utilising Fixed Deposit Receipts (FDR) or their own credit limits.
  • Exporters can recommend this LC facility to their importers.
  1. Important Note: Ametheus is not a lender and does not provide credit facilities. In case the consignee fails to make payment upon arrival of the cargo at the port, the LC applicant must arrange for the sale of the imported goods to another buyer.
  2. The LC applicant may hold the stock for a maximum of 60 days in a bonded warehouse at the port, at their own cost and under their custody. Partial payments and partial deliveries are permitted. All warehousing charges will be borne by the consignee on an actual basis. The LC applicant will charge a separate monthly fee (distinct from LC issuance charges). The goods may remain in the custody of a third-party logistics company in a Free Trade Zone or a bonded warehouse nominated by the LC applicant. However, all associated costs and expenses will be on the account of the LC beneficiary or the consignee at the destination port.

Roles of the Parties: 11. LC Applicant (1st Party): The financier and first notify party, who works with Ametheus to issue the LC. 12. Shipper (2nd Party / LC Beneficiary): The exporter, responsible for shipment and ensuring document compliance. 13. Consignee (3rd Party): The ultimate importer, responsible for making payment (typically 7–14 days before vessel arrival) and bearing all warehousing costs.

Additional Terms and Conditions: 14. The price of the goods must be based on prevailing market price indices. Overpricing will not be acceptable. 15. Quality inspection must be conducted by an independent third-party surveyor (e.g., SGS, Bureau Veritas, Cotecna, etc.). 16. Banks deal only with documents and not with the goods (as per UCP 600, Article 5). 17. Ametheus may require insurance coverage through reputable providers such as Allianz Trade, Coface, or ECGC to mitigate risks.

Payment Terms of the Transaction:

  1. Ametheus (our firm) prepares a draft and issues a Proforma Invoice (PI) for the service charge for the client’s review and approval.
  2. The client reviews, signs the draft, wires the issuance fees, and submits the required due diligence documents.
  3. On behalf of the LC applicant, Ametheus will sign a purchase contract with the LC beneficiary and a sales contract with the consignee.
  4. The client submits a Proforma Invoice (PI) as per the prevailing market index rate for the underlying deal.
  5. Ametheus releases the instrument to the bank for issuance.
  6. Assuming no queries from the bank, the LC is issued via SWIFT within a maximum of 5–15 working days.
  7. Ametheus emails a copy of the SWIFT message to the client. The client can then track the message through their bank and collect the authenticated Letter of Credit (LC).
  8. Containers will arrive at the port with 14 to 30 days of free detention. The containers will be booked by the exporter (LC Beneficiary) or shipper.
  9. Shipment documents will be sent to the importer’s or consignee’s bank on a 45 to 60 days DA (Documents against Acceptance) basis, depending on the usance period and validity of the LC. The ultimate importer can then collect/retire the documents from the bank and release the containers.

LC Issuance Procedure

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). In this structure, Ametheus Holdings Pvt Ltd acts as the facilitator (1st Party), the Shipper/Exporter serves as the LC Beneficiary (2nd Party), and the Consignee acts as the ultimate importer (3rd Party).

The procedure incorporates Ametheus’s trade finance processes for commodities priced against market-based indices (e.g., scrap, metals, coal, building materials, chemicals, agri commodities, and petroleum products). It ensures a secure, UCP 600-compliant transaction while leveraging Ametheus’s facilitation for efficient commodity import financing.

1. Agreement on Commercial Terms and Submission of Proforma Invoice (PI)

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

B. The LC Beneficiary (2nd Party) submits a Proforma Invoice (PI) to Ametheus containing the following details:

  • LC type: At-sight (validity 90/180 days) or Usance (e.g., 60 days usance with 30 days validity, or 90 days usance with 180 days validity).
  • Transferable or non-transferable LC.
  • LC Beneficiary Company Name.
  • Beneficiary Bank Name (Name of the LC receiving bank).
  • Loading Port Name.
  • Unloading Port Name.
  • Consignee Company Name and Address.
  • Consignee Bank SWIFT Code and coordinates.
  • Description of the commodity (e.g., coal, metals).
  • Harmonized System (HS) Code.
  • Product specifications (quality, grade, etc.).
  • Unit Rate (per Piece/Kg/MT).
  • Total Quantity.
  • Total Amount of LC (transaction value with ±5% tolerance; final LC amount calculated on +5%).
  • Expiry date and place of presentation (subject to discussion).
  • Latest Date of Shipment (subject to discussion).
  • Partial shipments: Allowed / Not Allowed.
  • Transshipment: Allowed / Not Allowed.
  • Quality inspection agency (e.g., SGS, Bureau Veritas, Cotecna) – required or not required.

C. Ametheus prepares a draft Proforma Invoice for its service charge and shares it with the client for review.

D. The client (Consignee or its representative) reviews and signs the draft, remits the issuance fees, and submits the required due diligence documents.

E. 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. Submission of LC Application to the Bank

  • The LC Applicant, on behalf of Ametheus Holdings Pvt Ltd (1st Party), submits the LC application to the Issuing Bank in favour of the Shipper (2nd Party / LC Beneficiary) for a minimum value of USD 200,000, incorporating all PI details.
  • The client deposits a refundable or adjustable margin (as per commodity) and pays the non-refundable service fee (varies by LC amount and tenure).
  • The application is prepared in full compliance with UCP 600 and the PI/sales contract to minimise discrepancies.

3. Issuance of Letter of Credit

  • The Issuing Bank issues the LC in favour of the Shipper (2nd Party / LC Beneficiary) in accordance with UCP 600 (Article 2).
  • Ametheus releases the instrument, and the Issuing Bank transmits the SWIFT MT700 to the Advising Bank (usually the Shipper’s bank) within 5–15 banking days.
  • The Advising Bank verifies the LC’s authenticity (UCP 600, Article 9) and advises it to the Shipper.
  • Ametheus emails a copy of the SWIFT message to the client for tracking. The Shipper can then collect the authenticated LC from its bank.

4. Shipper’s Review of the Letter of Credit

The Shipper (2nd Party / LC Beneficiary) reviews the LC to ensure it conforms to the PI and sales contract, particularly regarding:

  • Beneficiary details (Shipper’s company and bank).
  • LC amount (with ±5% tolerance).
  • Required documents (UCP 600, Articles 18–28).
  • Expiry date and presentation period (UCP 600, Article 6).
  • Loading/unloading ports and Consignee details.

If any discrepancies are found, the Shipper requests amendments through Ametheus.

5. Shipment of Goods

  • Upon receipt and acceptance of the LC, the Shipper prepares the goods for shipment from the designated loading port to the unloading port as per the PI and LC.
  • The Shipper arranges container booking (with 10–14 days free detention) and quality inspection by SGS, Bureau Veritas, Cotecna, or another approved agency, if required.
  • The Shipper prepares the following documents:
    • Commercial Invoice: Based on the PI, detailing commodity, HS code, specifications, unit rate, quantity, and total amount. It names the Consignee (3rd Party) if stipulated (UCP 600, Article 18).
    • Transport Document (e.g., Bill of Lading): Names the Consignee (3rd Party) as the recipient at the unloading port (UCP 600, Articles 19–25).
    • Inspection Certificate: Issued by the approved agency, naming the Consignee if required.
    • Certificate of Origin: Consistent with the PI.
    • Other documents as stipulated in the LC.

6. Presentation of Documents

The Shipper (LC Beneficiary) submits the documents to the Nominated Bank (usually the Advising Bank) within the allowed presentation period and before the LC expiry (UCP 600, Article 6). All documents must strictly comply with the LC terms and PI details (UCP 600, Article 14).

7. Document Examination and Acceptance

  • The Nominated Bank examines the documents within five banking days (UCP 600, Article 14(b)) to verify compliance with the LC terms, UCP 600 rules, and International Standard Banking Practice (ISBP).
  • If compliant, the documents are forwarded to the Issuing Bank.
  • The Issuing Bank notifies the LC Applicant (1st Party):
    • At-sight LC: Payment is made immediately.
    • Usance LC: Acceptance is issued for payment at maturity (e.g., 60/90 days from shipment or document date).
  • In case of discrepancies, the Nominated Bank may request corrections from the Shipper or seek approval from the Issuing Bank (via Ametheus) to accept the documents.

8. Payment to the Shipper

Upon receipt of compliant documents, the Issuing Bank honours payment to the Shipper (UCP 600, Article 7):

  • At-sight LC: Payment at sight.
  • Usance LC: Payment at maturity (typically 30/60/90/120 days).

Payment is made via SWIFT to the Shipper’s bank, accounting for the ±5% tolerance. For usance LCs, the Shipper may opt for discounting to receive early payment.

9. Delivery of Documents to the Consignee

  • After acceptance/payment, the Issuing Bank forwards the documents to the LC Applicant’s bank (1st Party).
  • Ametheus facilitates transfer of documents to the Consignee’s bank on a Documents Against Acceptance (DA) basis (typically 45–60 days, aligned with LC terms).
  • The Consignee’s bank issues acceptance and agrees to pay at sight or maturity (usually 7–14 days before vessel arrival).
  • Upon acceptance/payment, the Consignee’s bank releases the documents (including the Bill of Lading) to the Consignee (3rd Party) for cargo clearance.
  • If the Consignee fails to honour payment, Ametheus (as LC Applicant) may store the goods in a bonded warehouse (up to 90 days at the Consignee’s cost) and arrange resale to another buyer. Partial payment and delivery options may be considered.

10. Transfer of Cargo Title

Upon full payment and release of documents, title to the goods transfers to the Consignee (3rd Party) as per the sales contract, PI, and applicable Incoterms. The Consignee handles customs clearance at the unloading port and bears all warehousing and related charges on an actual basis, plus any applicable Ametheus monthly storage fees (separate from LC issuance charges).

FAQ

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.

Email: [email protected] | Phone: +91-9999999538, Whatsapp: +91-9999099538
Disclaimer: Ametheus Holdings Pvt Ltd (1st Party) is a facilitator, not a lender, arranging LCs for international trading of commodities.

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