Put Letter of credit settlement back in order

THE DRILL AS TEXT

1. In Letter of credit settlement, what happens first, and what follows?
   • The importer asks Bank Alfa to issue a credit — Demo Trading applies to its bank to open a letter of credit in favour of the exporter, setting out the amount, the documents required, and the shipment terms. The bank is being asked to lend its promise, so it assesses the importer's credit first.
   • Bank Alfa issues the credit to Meridian — Bank Alfa issues the documentary credit to the exporter's bank as an MT700. From this point the issuing bank — not the importer — carries the promise to pay against compliant documents.
   • Meridian advises the exporter — Meridian authenticates the credit and advises it to Example Supplies, so the exporter can rely on it and knows exactly which documents it must present to be paid. As nominated bank, Meridian is authorised to examine documents and pay.
   • The exporter ships and presents documents — Example Supplies ships the goods and presents the required documents — typically including the bill of lading, invoice, and insurance — to Meridian. The banks deal only in these documents, never in the goods themselves.
   • Meridian checks and forwards the documents to Bank Alfa — Meridian carries out its own first check of the presentation, then forwards the full document set to Bank Alfa, the issuing bank, for examination against the credit.
   • Bank Alfa examines the documents — Bank Alfa examines the presentation against the credit's terms. Payment is triggered only if the documents comply on their face — a wrong date or a missing endorsement can break it.