A letter of credit (L/C) is opened at the request and on the instructions of the applicant. The applicant files an L/C application with his/her bank. The application forms contain all the necessary information required of an L/C to the beneficiary.

The L/C application in some countries must be accompanied by a pro forma invoice (the sales confirmation) and the importer may be required to deposit 20% to 100% of the invoice value in local or foreign currency, which is a form of non-tariff barrier. The deposits, plus other fees and charges, can be expensive and may discourage importers from using the L/C in payment.

Importers unable to open the letter of credit on time as promised is not uncommon. The delay, and perhaps even the order cancellation, is often attributed to the barriers in the importing country and/or bureaucracy in the company. The buyer's delay in opening the L/C after an order is placed can occur in such circumstances as:

• The delay in issuing the import permit.
  
  
• The shortage in the foreign exchange reserves.
  
  
• The buyer who places the order is not in charge or does not have the authority to open the L/C. This is often the case in a large company like chain store, in which the Finance Department, not the Import Department, is in charge of the L/C applications.
  
  
• The importer is in a tight financial position.
  
  
• The domestic selling price of the import goods drops.
  
  
• The currency of the importing country devalues.
  
  
• The buyer who books the order is laid off. The buyer with whom the exporter deals today can be laid off the next day without advance notice or warning.
  
  
• The company is being acquired or is merging with another company.

In times of the devaluation or falling market price in the importing country, quite often the importer will request discounts before opening the L/C.

During good economic times, the importer may also request discounts after an order is placed by using age-old tactics. The modus operandi of the importer is to convince the exporter to produce the goods and, knowing that they are ready, the importer then would give all sorts of reasons and bargain for discounts before opening the L/C. The exporter may be forced to sell the goods at a lower price to generate cash.

A letter of credit can be opened at the request of the applicant by means of airmail, short cable (partial text cable) and full text cable.

Amendments may be necessary when the stipulation of the credit does not comply to the sales contract, or when there is a need to modify the stipulations of the credit or the wording in the credit, for example typographical error which may affect the exportation and importation of the goods.

The letter of credit (L/C) is often amended by means of a full text cable. The L/C amendment is advised through the same advising bank that advised the credit. Nevertheless, the advising bank that has confirmed the L/C may not add its confirmation to the amendment of the L/C.

The advising bank mails the amendment advice to the beneficiary. The beneficiary pays an amendment fee to claim the L/C amendment from the advising bank.

In the event of an amendment, the beneficiary must give notification of acceptance or rejection of the amendment to the advising bank. If the beneficiary fails to notify the advising bank, it is deemed that the beneficiary has accepted the amendment.

In the case of a transferable letter of credit that is transferred to more than one second beneficiaries, if one or more second beneficiaries reject the amendment, the L/C remains unamended with respect to those who rejected the amendment. Nevertheless, with respect to the other second beneficiary(ies) who accepted the amendment, the L/C is amended accordingly.