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Refer to the diagram above for each numbered step: Seller 1. The seller (beneficiary) ships the goods to the buyer and obtains a negotiable transport document (negotiable bill of lading) from the shipping firm/agent. 2. The seller prepares and presents a document package to his bank (the advising bank) consisting of (a) the negotiable transport document, and (b) other documents (e.g., commercial invoice, insurance document, certificate of origin, inspection certificate, etc.) as required by the buyer in the documentary credit. Advising Bank 3. The advising bank (a) reviews the document package making certain the documents are in conformity with the terms of the credit and (b) pays the seller (based upon the terms of the credit). 4. The advising bank sends the documentation package by mail or by courier to the issuing bank. Issuing Bank 5. The issuing bank (a) reviews the document package making certain the documents are in conformity with the terms of the credit, (b) pays the advising bank (based upon the terms of the credit), and (c) advises the buyer that the documents have arrived. Buyer 6. The buyer (a) reviews the document package making certain the documents are in conformity with the terms of the credit, and (b) makes a cash payment (signs a sight draft) to the issuing bank, or if the collection order allows, signs an acceptance (promise to pay at a future date). Issuing Bank 7. The issuing bank sends the document package by mail or courier to the buyer who then takes possession of the shipment.
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