Letters of Credit

A letter of credit (LC) is a tool an importer uses to reassure the supplier: the bank undertakes to pay the supplier the shipment's value once they present shipping documents matching the terms. Like a letter of guarantee, an LC reserves part of your facility limit and charges you fees, and it's tracked as a master file with a succession of opening, amendment and closing documents, keeping the two snapshots of initial values and current values. Its structure is very close to that of Letters of Guarantee.

Required license

Letters of credit are part of the accounting-blc license.

The LC's lifecycle

Every screen hangs off the Banks > Bank LC root:

1. Bank LC Request — documenting the LC request before opening it (no accounting effect).
2. Bank LC — the master file in its initial status "Initial".
3. Bank LC Opening — the moment the bank actually opens the LC (it posts to the ledger, reserves the facility, and the status flips to "Issued").
4. Bank LC Changing — changing the value, term or fees (updates the current values).
5. Bank LC Closing — closing the LC and releasing the reserved facility.

The LC's master file

On the Bank LC screen (Banks > Bank LC > Bank LC) the LC's data is defined:

• Basic information: the bank and bank account, linking the LC to the LC request, facility limit and project contract (and project contract extract) when needed, and the LC type.
• Initial BLC values: a snapshot of the opening terms — the LC amount and currency, from date / to date, the covered amount (covered in cash) and its percentage, the facilities (reserved portion) and its percentage, the issue fees and change fees.
• Current values: the values in force after any amendment, plus the status.

LC statuses

The LC moves through the same statuses as a letter of guarantee: Initial → Issued → (Received / Totally Delivered) → Finished / Canceled / Liquidated.

Opening and reserving the facility

When a Bank LC Opening (Banks > Bank LC > Bank LC Opening) is recorded the accounting effect posts and the facility portion is reserved. The opening term covers the sides: LC amount debit/credit, facilities amount debit/credit, fees debit/credit (with tax fees 1 and 2), and the covering side. (Where the accounts come from is in the Document terms reference.)

Facility-limit check

At opening, the system checks that the total reserved doesn't exceed the facility limit linked to the LC, blocking the opening if it does. Details in Credit Facilities.

Amendment and closing

Changing is used to raise or lower the LC value or extend its term — it updates the current values while keeping the initial values for comparison, and records the change fees. Closing closes the LC and releases the reserved facility.

Reports

Report	Answers
Raw-material prices by initial LC invoices (SYSR-LCD001)	Linking imported-material cost to the LC's initial invoices.
Analysis of costly LCs (SYSR-LCD002)	The highest-cost LCs for comparison and analysis.

Banking or Import? — How It Differs from the Supply-Chain LC

Nama has two letters of credit that share a name but serve different purposes:

• The Bank LC (this page) is a treasury/banking instrument: it cares about your commitment to the bank — how much of your facility limit it reserves, the opening and amendment fees, and the ledger postings. It tracks no shipments, no proforma invoices, no goods, and never touches inventory.
• The Supply-Chain LC (LC > Master Files > Letter of Credit) is an import/procurement process: it manages the supplier, the shipments (containers, bills of lading, customs), and the proforma invoices, and accumulates insurance, freight, and customs charges onto the goods to reach the true landed cost, then receives them into inventory.

In short: the Bank LC answers "what does this LC do to my facility and my ledger?", while the Supply-Chain LC answers "how do I run this import shipment and its costs all the way into the warehouse?" They are two independent features — different entities and licenses — not two views of one document.

Imports and shipment management

For the full import cycle — shipments, proforma invoices, additional costs, and landed cost — see Letters of Credit in Supply Chain.

For Support

• "Couldn't open the LC — limit exceeded" — the reserved amount exceeds the linked facility limit; see Credit Facilities.
• "What's the difference between initial and current values?" — the initial ones are a snapshot of the opening terms, and the current ones reflect the latest amendment.
• "Where do the amount, facility and fee accounts come from?" — from the Bank LC Opening term; see Document terms.
• The accounting-processing mechanism is in How documents are processed into accounting effects.