Unit 3: Meaning and importance of letter of credit

Meaning of Letter of Credit (L/C)

A Letter of Credit (L/C) is a written assurance given by a bank on behalf of the buyer (importer) to the seller (exporter) that payment will be made for goods/services, provided all terms and conditions mentioned in the L/C are fulfilled and proper documents are submitted.

Importance of Letter of Credit in Export

Documentation Papers Required for L/C

Export Incentives

Export incentives are financial or non-financial benefits given by the government to promote exports.

Risk in Export and Insurance

Summary

Benefits of Exports

Excise Clearance Benefit / Rebate

It was a tax on manufacture/production of goods in India (now replaced by GST, but still applicable for certain goods like petroleum, tobacco, etc.).

Export Clearance under Excise Laws

Income Tax Benefits for Exporters

IPRS (Import Policy Rebate Scheme) – Discontinued

Summary Table

Shipment & Transport Modes in Export

Exports involve the physical movement of goods from the seller (exporter) to the buyer (importer) through different modes of transport based on the product type, cost, speed, and destination.

Transport Modes Overview

Role of Overseas Agent in Export

An overseas agent is a representative of the exporter in a foreign country who helps promote and sell the exporter’s products in return for a commission.

Key Functions of Overseas Agent

Remittance of Commission to Overseas Agent

Commission Remittance means sending commission payment from India to the overseas agent.

Key Points in Commission Remittance

Summary Table