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Letter of credit

Letter of credit

Letter of credit transaction decrease the risks of both parties

  • The buyer can apply for financing
  • Handling according to international rules

A letter of credit (L/C) is the obligation of the buyer (i.e. the person opening the letter of credit) to pay the seller (i.e. the receiver of the letter of credit) the amount of the L/C if the seller fulfils the conditions fixed with the L/C.

Banks process documentary credits in accordance with International Chamber of Commerce publication no 600 "Uniform Customs and Practice for Documentary Credits", Paris 2007.

Advantages of letters of credit if you are a seller

  • You will receive the payment for goods on time. Upon submitting to the bank documents meeting the conditions of the letter of credit, the buyer’s bank will definitely pay the amount specified in your letter of credit. The seller is not depended on the buyer's economic situation or the political situation in the buyer's country of location, but only on that of the bank.
  • Cash flow can be managed better with letters of credit. It is possible to give the buyer a longer payment term on the basis of a confirmed letter of credit and also discount payment at any time suitable for you. 

Advantages of letters of credit if you are a buyer

  • Possibility to avoid advance payments.
  • You get the goods at the promised time and the seller must fulfil also all other contractual conditions in order to get the money.
  • If you use a letter of credit for payment, you can apply for a loan from the bank.

Confirmed letter of credit
If the bank of the letter of credit recipient adds its confirmation to the letter of credit, it means that the bank assumes an obligation similar to the bank of the letter of credit opener to pay the seller if they fulfil the conditions of the letter of credit.

Letter of credit payable at sight
The seller receives the money after the confirming bank (upon its absence, the bank of the opener) has checked the submitted documents, found them to be in conformity with the conditions of the letter of credit and transferred the amount of the letter of credit to the notifying bank.

Deferred payment letter of credit
A deferred payment letter of credit enables the buyer to pay for the goods after an agreed period has passed from the submission of documents or issuance of transport documents.

Transferrable letter of credit
A transferrable letter of credit can be transferred by the recipient in favour of another recipient. This type of letter of credit is used if the first recipient is an intermediary.

Revolving letter of credit
A revolving letter of credit does not become invalid after its conditions are fulfilled, but it is renewed during a period fixed in the letter of credit and it can be used for regular purchase and sales transactions. The obligation amount of a revolving letter of credit is the maximum amount of the letter of credit.

Standby letter of credit
A standby letter of credit is a letter of guarantee issued in the form of a letter of credit upon following the internationally acknowledged rules of letters of credit. A standby letter of credit, similarly to a letter of guarantee, is not a means of payment, but guarantees that the recipient receives the payment if the buyer does not fulfil the obligation fixed in the letter of credit. SEB treats a standby letter of credit as a guarantee.

  1. The buyer and the seller enter into a purchase and sales agreement, in which they agree that the payment is done with a letter of credit.
  2. The buyer submits an application to their bank for opening a letter of credit according to the conditions agreed with the seller. The conditions include the trade name, price, payment term and documents to be submitted by the seller.
  3. The buyer’s bank will makes decision on opening a letter credit on the basis of the buyer's reliability.
  4. Upon a positive decision, the bank opens a letter of credit and forwards it to the bank requested by the seller.
  5. The seller’s bank informs the seller of the opening of the letter of credit and the seller checks whether the conditions of the letter of credit meet the purchase and sales agreement. If the letter of credit does not meet the conditions of the agreement, the seller may ask the conditions to be changed. As the letter of credit is irrevocable, it can be changed or cancelled only by agreement of both parties.
  6. The seller dispatches the goods according to the agreed conditions. Then the seller submits to the bank the document required in the letter of credit.
  7. If the documents comply with the conditions of the letter of credit, the bank will send them to the buyer's bank and the latter will make the payment after receiving the documents.
  8. The buyer will then pay their bank and receive the documents and access to the goods.

Before you apply for a letter of credit, we recommend that you agree on the terms of the transaction with the seller, including the terms and time of delivery, terms and deadline of payment, quantity of goods and their cost.

Several options for submitting an application

Complete an application via the Internet Bank or on the PDF form.

E-mail the PDF file of the application along with the other required documents to .

If you would like a consulation at the branch, kindly contact our corporate client executive or e-mail us at .

The opening of a letter of credit may be sought for a one-off transaction or the approval of the limit on the letter of credit for recurring transactions. Collateral for transactions involving letters of credit my include real estate, movable property, a cash deposit or the like.

Documents required for applying:

  • application on the SEB form
  • copy of the contract of purchase and sale or of an invoice

Amendment of a letter of credit
To amend a letter of credit already opened, kindly complete an application for the amendment via the Internet Bank or on the PDF Form. E-mail the PDF file of the application along with the other required documents to .

Presentation of documents under export letter of credit
Upon presenting original documents to the bank, please attach the filled, printed and signed pdf application.

Import letter of credit  
1. Agreement conclusion and/or amendment as agreed
2. Fee for issuing a documentary credit and/or a deferred payment with cash deposit 1% of the amount of documentary credit per year, min. EUR 95 
3. Fee for issuing a documentary credit and/or a deferred payment without cash deposit determined individually for each applicant, min. EUR 95 per month or a part thereof
4. Handling of documents or their drafts (calculated for each set of documents presented) 0,15% of the amount of documents, min. EUR 95
5. Preparation of a draft of a documentary credit or an amendment EUR 70
6. Amendment fee EUR 70
7. Increasing the amount and extending the validity of a documentary credit issuance and deferred payment fee
8. Discrepancy fee (for presenting discrepant documents; normally paid by the beneficiary) EUR 95
9. Information processing and forwarding fee depending on costs, min. EUR 10
10. Making a payment to another bank (normally paid by the beneficiary) EUR 32
11. Default interest (calculated on any debt from the due date until the actual date of payment) 0,5% per day
Export letter of credit  
1. Advising fee EUR 70
2. Confirmation fee depending on the risk of the opening bank, min. EUR 95
3. Preparation of a draft of a documentary credit or an amendment depending on costs, min. EUR 70
4. Handling of documents or their drafts (calculated each time a set of documents is verified) 0,15% of the amount of documents, min. EUR 95
5. Payment fee upon payment of the amount of documents before the payment date of the documentary credit 0,1% on the amount of payment, min. EUR 70
6. Deferred payment fee EUR 70
7. Assignment of proceeds EUR 150
8. Interest (calculated on the amount of documents paid to the client from the date the payment was made to the client until the date the payment made by the opening bank is received by AS SEB Pank, for a minimum of 10 calendar days) defined separately for each client
9. Amendment advice EUR 70
10. Fee for refusal and/or cancellation EUR 70
11. Transfer fee (the client must also pay all other fees according to the export documentary credit price list) 0.25% of transferred documentary credit amount, min. EUR 95
12. Information processing and forwarding fee depending on costs, min. EUR 10
13. Default interest (calculated on any debt from due date until actual date of payment) 0,5% per day

Documentary Credits are governed by the Uniform Customs and Practice for Documentary Credits, Pub. No 600, issued by the International Chamber of Commerce, Paris 2007.
NB! The services charges of another bank may be added if another bank is used. AS SEB Pank reserves the right to charge for additional services and/or time-consuming transactions in addition to the price list.

Base rates

Valid as 15.08.2019
1-month EURIBOR® -0,4040
3-month EURIBOR® -0,4040
6-month EURIBOR® -0,4090
12-month EURIBOR® -0,3530
EONIA® -0,3620
Bank's base interest 0,0000
EURIBOR® historical data
EONIA® historical data

 

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