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 Export
Letter of Credit
WHAT---What is export letter of credit?
 A series
of service provided to the exporter by the bank in exporter's
country after it received L/C from issuing bank, including
advising L/C, taking up and examining documents, presentation,
reimbursement etc.
The contents
of export L/C include checking up the authenticity of export
L/C and amendment of L/C, advising the domestic exporter;
transfer L/C, examining transport documents surrendered by
the exporter and presentation of documents ; deal with trade
financing such as negotiating, bill purchase, discounting
on the request of clients; forward-sold of exchange in RMB;
inquiry, urging, recourse short payment and interest, by-sending
documents; check the credit of importer.
WHY---Why to choose export letter of
credit?
Lower risks
- bank credit of the issuing bank replaces commercial credit
of the importer, the issuing bank provides undertaking of
conditional payment to exporter;
High initiative
- exporter will obtain the undertaking of unconditional payment
from the issuing bank as long as the exporter can guarantee
the quality of documents which is completely under control
of the exporter;
Fee transfer
- banking charges such as opening L/C etc. are usually for
the importer's account.
WHEN---When to choose export letter
of credit?
The exporter
has no awareness of or confidence in the credit status of
the importer and needs additional undertaking from the importer's
bank;
Needs to
apply to the local bank for packing loans, so as to finance
preparing for the goods to be exported.
HOW---How to handle export letter of
credit operation?
The Operation
flow
Attentions:
1. When discussing business terms with importer, "soft
clauses" L/C should be avoided. At the same time a safe
and convenient way of reimbursement should be confirmed to
guarantee a safe collection of payment;
2. Before the negotiating bank examines documents, the exporter
needs to present: a. full set of documents stipulated in L/C;
b. Origin of L/C;
3. If insisting on sending documents with discrepancies, it
is difficult to handle trade financing;
4. The bank will deal with operations such as collection of
payment, settlement of payment, credit account according to
the state regulations concerning foreign exchange control;
5. If exporter wants to withdraw L/C, he needs to present:
a. trust instrument in written form; b. full set of original
L/C.
Import
Letter of Credit
WHAT---What is Import Letter of Credit?
Letter of
credit is an undertaking of a bank for account of the importer
to pay the foreign exporter the value of the goods provided
the required documents are submitted and the terms of the
credit are complied with.
Innless
scope----1. Issuing different types of L/Cs such as: Sight
Payment Credits, Deferred Payment Credits, Acceptance Credits,
Negotiation Credits, Transferable Credits, Confirmed Credits,
Revolving Credits, Reciprocal Credits. 2. Provide such transactions
as issue L/C, amend L/C, receive and examine documents, make
payment, acceptance or dishonor, assist the importer in investigate
the exporter抯 credit status, preparation of goods and liner
inquiry.
WHY---Why to choose Import Letter of
Credit?
Improve negotiating status - issuing of L/C means that importer
provides the exporter with conditional payment commitment
of the bank in addition to commercial credit. It improves
credit and negotiating status of the importer, so may be able
to negotiate for a lower purchase price and better terms ;
Ensure goods
- ensure that the goods supplied are the goods ordered.
Reduce
occupied capital - if issuing a L/C outward upon given credit,
importer needn't spend self-owned capital in stages of opening
L/C in the opening bank, exporter's preparation of goods,
and delivery;
WHEN---When to use Import Letter of
Credit?
Bank's
guarantee is needed to provide a sense of comfort to the importer
and the exporter in the trade transaction with payments made
upon receipt of the right set of documents including the title
of goods;
The imported
commodities is in the seller's market, and the exporter insists
on payment on L/C;
Current
capital is not sufficient and the importer intends to make
use of convenience of trade finance.
HOW---How to handle Import Letter
of Credit operation?
The Operation
flow
Attentions:
1. The followings should be surrendered when issuing a L/C:
application form; the contract; import permit (e.g., import
registration form of mechanical and electrical products, etc.);
various files as per the foreign exchange control regulation
(e.g., application form of purchase exchange, the verification
certificate of import payment in foreign exchange, record
form of import exchange payment, etc.).
2. The followings should also be surrendered when issuing
a L/C for the first time: the business license of enterprises;
import agency agreement (if needed); other certificates (if
needed).
3. When issuing an import L/C, the importer provide the exporter
with extra guarantee on payment in cost of more bank charge
born by it, so the importer had better ask exporter for preferential
prices during the commercial negotiation concerning this point.
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