Third Country Export - Letter of Credit !

[Arunan TS]

WE ARE A STAR EXPORT HOUSE BASED AT CHENNAI ENGAGED IN THE EXPORT OF CONSTRUCTION MATERIALS FROM INDIA TO MALDIVES. OUR CARGO IS CURRENTLY RESTRICTED BY THE GOVT. OF INDIA. WE ARE PLANNING TO SUPPLY THE SAME TO OUR BUYERS FRM A THIRD COUNTRY.  WE HAD SOURCED THE PRODUCT FROM A THIRD COUNTRY AND SHALL LOAD THE CARGO FROM THAT THIRD COUNTRY TO MALDIVES IN THE VESSEL. THE VESSEL SHALL GO DIRECTLY FROM THE LOAD PORT TO DISCHARGE PORT WITHOUT COMING TO INDIA. WE ARE BUYING THE CARGO IN FOB BASIS AND SELLING IT IN CIF TERMS AS WE SHALL BE PAYING THE VSL FRT. WE SHALL RCV THE PAYMENT FROM OUR BUYERS BY TT UPON COMPLETION OF SHIPMENT.

FOR THE PURCHASE OF CARGO FROM THE THIRD COUNTRY, WE NEED TO OPEN A LETTER OF CREDIT TO THE SUPPLIER/SHIPPER. AS WE HAD APPROACHED OUR BANKERS TO ISSUE THE L/C BUT WE WERE BEEN INFORMED THE FLWG BY OUR BANKERS 

'With reference to the request made by you for opening LC for Construction Materials from a third country, our Treasury department has clarified that  export to Maldives is banned at present. On the same lines, merchant export  to Maldives is also deemed to be exports to Maldives. Hence, LC cannot be issued for  purchase of cargo  to Maldives though it is directly exported from the third country'

KINDLY, CLARIFY WHETHER WE CAN OPEN A L/C TO OUR BUYER OR NOT. DOES THE RESTRICTION OF EXPORTS BY THE GOVT.  RESTRICTS THE EXPORTS FROM THIRD COUNTRY ALSO ?

[Arunan TS]

WITH REF. TO THE ABV QUERY, THE L/C TO BE OPENED IS IN FAVOR OF OUR SELLER FROM THIRD COUNTRY.

AI Summary

Export restriction: bank refuses letter of credit for third-country procurement when goods are destined for a banned market. An Indian exporter sourcing construction materials from a third country to be shipped directly to the Maldives cannot obtain a letter of credit because its bank treats the government ban on exports to the Maldives as extending to merchant-export transactions by the Indian exporter, and therefore declines to issue the L/C in favour of the third-country seller.