Domestic letter of credit ("L/C")

Product Overview

The domestic L/C refers to a kind of settlement method with which the L/C-opening bank, at the request of the customer, issues the written payment commitment to the seller and pay to the seller upon receipt of documents that comply with domestic provisions on L/C in domestic trade.

Features and advantages

The domestic L/C uses the proven and complete practices of the international L/C and helps you to turn the commercial credit into the bank credit to handle the domestic trading with ease. Meanwhile, it reduces fund occupation for both the buyer and the seller and is an easy and convenient settlement method

1.          Improving the buyer's credit: After the domestic L/C is opened, the bank assumes the first liability for payment. The payment commitment made by the buyer is improved from the common commercial credit to the bank credit. Therefore, the buyer may take the initiative in business negotiations and obtain reasonable goods prices or other preferential conditions.

2.          With the local L/C, several financing transactions can be handled according to requirements of the buyer and the seller, including reducing or exemption of the deposit for opening a local L/C, payment financing, loan package, negotiation, and document dispatch financing.


When the applicant needs to use the L/C, it entrusts its account opening bank to open the L/C. The issuing bank determines whether to open the L/C or not based on the Application for L/C, Letter of Commitment of L/C Applicant and Purchase Contract. If the issuing bank decides to accept such entrustment, it shall charge the applicant the deposit margins which is not less than 20% of the amount of the L/C and may, based on the credit status of the applicant, ask the applicant to provide the collateral or pledge, or require the guarantee letter from other financial institutions. After receiving the L/C, the advising bank shall verify it. If the L/C is correct, the advising bank shall prepare the L/C advice and delivers it together with the L/C to the beneficiary. The beneficiary may present the documents, original of the L/C and the L/C advice to the negation bank and prepare the application for L/C negotiation/consignment collection and the negotiation documents to apply for negotiation. The negotiation bank makes the payment.


Our commitment

1.          We have the advanced and highly efficient document center. After your application for L/C opening passes our out-account review and clause verification, we promise to issue the L/C within a working day.

2.          There are a group of L/C experts who have obtained the international certification in our document center. They can evaluate the L/C clauses and the document risks, make the trading settlement process better comply with the international practices and domestic rules, and minimize the risk of credit fraud..

3.          We can customize the credit-granting solution for you based on your transaction flow and features. In case the goods comply with our pledge conditions, the documents for the goods’ ownership and the goods under the L/C can be pledged to our bank, or the account receivables for the goods under the L/C can be pledged to our bank. In this way, the deposit margins for opening L/C can be reduced for the buyer and the subsequent payment financing service can be provided to the buyer, and no other pledge or guarantee needs to be provided..

Kind Reminders

1.          The L/C is mutually independent of the sales contract or other contracts which may act as its basis of issuance. What the bank processes are the documents instead of the goods, services or performance that the documents may involve. Therefore, the L/C itself can not guarantee the authenticity of the transaction and can not completely avoid the risk of the document fraud;

2.          The design of the L/C clauses is an important step that involves the transaction safety and avoids transaction disputes. It is recommended that you contact our customer manager when you sign the contract and design the L/C clauses so that our L/C experts will provide you with their professional comments.