Trade Finance
Article Index
Trade Finance
Import, Export and Guarantee
Import and Export

Import by LC

A letter of credit is a very common and familiar instrument in settling trade between nations Buyers and sellers negotiate for purchase and sale of goods, sellers demanding cash or the buyer’s banker’s letter of credit as guarantee for payment before they undertake shipment.  A letter of credit reinforces the buyer’s integrity by adding to it his banker’s undertaking.  In Nepal, letter of credit is a widely used instrument in the field of international trade.  Import by LC in Nepal is regulated by many directives and rules of Nepal Rastra Bank, and other Nepal Government Agencies.  As per rules and regulations of NRB and other restrictions, L/C can be opened only for unrestricted buyer & unrestricted seller for import of unrestricted type of goods and or services.  However, import by any other mode than LC is also allowed, which are dealt separately.

Export by LC

Except export to India, the most commonly used mode of export is “Export by Letter of Credit”.  An import LC opened by an importer is known as an export LC in for the exporter.  When an import LC is established for a particular deal, there is no separate letter of credit established for the export for the same deal.

An exporter makes shipment of merchandise spelled in the LC once the LC is received by it.  The entire process of export follows the same process as it is in the import.  Please refer “2.5 Standard Process of LC Transaction” and it’s Flow Chart”

A letter of credit is normally opened by the bank of the importer and not the exporter, hence it is known as import letter of credit.  However, the same import L/C is known as export L/C for the bank of exporter and the exporter himself.  This should be understood that importer as well exporter both do not open separate L/Cs for the trade of same commodity under one transaction.  For more details click here


A guarantee is an irrevocable promise made in writing by one person  (guarantor or surety ) to another party( the beneficiary) to answer for the debt or default of a third party (principal debtor).

Guarantee may be issued, if it is customary to do so, on behalf of customers with approval guarantees lines. Guarantee issued on a one-off basis will need the specific approval of the lending authority concerned. Commission will be charged on guarantees issued in terms of the schedule of charges. Commission will be charged for the full period of validity plus the period during which claims may be made at the time of issue of the guarantee. All commissions charged will be credited to “commission and fee income- Guarantees”.


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