When is a Letter of Credit not a Letter of Credit?

Let's paint a brief picture....

An engineering company has received a letter of credit in their favour for a high value piece of machinery.

The credit  has been issued by a little-known bank in an emerging market, but has been confirmed by a first class European bank.

A delay in receipt of a vital component of the finished goods means that shipment will be effected 5 days after the Latest Shipment Date specified in the credit.

The applicant is desperate to receive the goods and undertakes to the beneficiary by email to accept the discrepancy of 'late shipment' when documents are presented to the bank.

Sound familiar? What would you do.......?

Having come across this scenario several times recently, it is worrying that exporting companies suddenly become complacent just because they have obtained a 'confirmed' letter of credit and will suddenly lose track of rational thought when something goes wrong.

It is absolutely vital to understand that you MUST comply with ALL terms and conditions of the credit in order for the bank to honour its obligation as issuing or confirming bank.

Once a bank identifies discrepancies in documents, it is no longer obligated to honour or negotiate.

The mere 'promise' of the applicant to honour discrepancies in the case as described, should not be taken lightly as the exporter would effectively be instructing the bank to handle documents on a 'collection' basis only.

What if the applicant changes his mind?

Remember why you requested a letter of credit in the first place!

If in any doubt, insist on an amendment to the credit before shipping the goods.

Book Letter of Credit Training  

Free Letter of Credit Review

Are you or your clients.....

....regularly receiving Letters of Credit?
....constantly requesting amendments?

....struggling with adminstration of the paperwork?
....paying unacceptably high bank charges?

....finding the banks unhelpful?

For a limited period (and subject to availability) , MJ Hayward Associates Ltd is pleased to offer UK based exporting companies a free consultation to help you identify key problem areas and make suggestions to save time and costs, ie: make the job easier and more profitable for you and your colleagues!

If your company or any of your clients regularly receive Letters of Credit and would like to benefit from this independent review, please contact Mark Hayward on 0800 043 4052 or email us for further information: info@mjhayward.co.uk

Import Letter of Credit - is your bank giving you a fair deal?

Richard Casburn, Training Partner of MJ Hayward Associates, answers a recent question raised by a bank client seeking a facility to issue Letters of Credit to overseas suppliers:

Q. 

"We are an established company and we import a variety of finished goods from suppliers in China, India and Vietnam. In most instances our suppliers require settlement by Letters of Credit payable at Sight. We have an Import Letter of Credit facility with our bank which works reasonably well. However, on speaking to a competitor at a recent networking event, I was advised that his bank are prepared to "risk weight" his Letter of Credit facility. He explained that this meant that his bank are prepared to actually take into account the value and nature of the goods when deciding on the level of security they  need to support the facility. Our bank requires us to cover 100% of the value of the facility with tangible security.

Is this usual and could I negotiate a better deal in terms of securing my facility with my bank?" 

A. 

An Import Letter of Credit constitutes a definite obligation for the issuing bank to pay against presentation of compliant documents regardless of whether it is able to reimburse itself from the applicant. So the majority of Banks will see this as a commitment which represents a 100% risk, and they will therefore require security/collateral which will equate to that value.

In the scenario in the question, it would be reasonable to ask the customer's bank to consider risk weighting the facility. In simple terms this means that the bank would give consideration to the nature of the goods, and most importantly that the bank will have control of the goods during the course of the Import Letter of Credit transaction.         

A bank will always look "worst case", and this would involve taking delivery of the goods and appointing a third party to realise some value in a forced sale situation. Therefore there are many considerations for the importer's bank to evaluate including;     

• Obsolescence - What is the likelihood of the goods becoming obsolete and therefore very difficult to sell, unless they are imported and sold quickly?

• Perishability - Does the product set have a shelf life? Food or fresh flowers for example would not be attractive goods for a bank to consider risk weighting in a Letter of Credit facility.

• Packing - Is special packing required?, e.g. refrigerated container

• Marketability - Is there a strong demand for the products. The bank is thinking that in a worst case scenario how easy would it be to sell these items?  

• Does the Letter of Credit call for a full set of Bills of Lading, and if so, can they be consigned to the issuing bank which will provide extra control over the transaction. If goods are shipped by air, the airway bill will almost certainly be required to be consigned to the issuing bank.

• What is the margin of profit on the goods and are the goods presold against confirmed orders?

• What are the Incoterms - are goods adequately insured? In some instances a bank may insist on holding the original insurance policy as a security item.

• Speculation/overtrading - Does the Letter of Credit facility requested reflect the customer's normal trading patterns? The bank may be concerned that a customer is attempting to stockpile goods to take advantage of price fluctuations which could potentially have serious implications for the business if the market for the products crashed. 

• Storage - is there appropriate and sufficient storage for the goods when they arrive in the UK? Who owns the warehouse? Is insurance adequate? In some instances a representative of the bank may actually inspect the warehouse to ensure that it meets with the bank's expectation in terms of security etc.

• Import License - Certain goods may require the issue of an import license and the bank may required confirmation of this prior to the approval of a Letter of Credit facility.

• Fluctuating price - a long delivery cycle increases the risk that a sudden fall in price may render the goods undesirable or worst case loss making.

If all these considerations and risks can be considered and mitigated then a number of UK banks will be prepared to offer an Import Letter of Credit facility which is "risk weighted" and does take into account the above mentioned factors. The weighting will reflect the potential loss the bank would suffer upon default after recovering funds from selling the goods. Therefore a 20% risk weighting, which is in most instances the very best that any UK bank would consider, implies that the bank would recover £0.80 for each £1 of value of goods. In reality this is very rarely the case in a forced sale situation. It is more likely that a 50% - 75% weighting may be applied, but clearly this would be assessed on a case by case basis, as the factors are varied and open to interpretation by the bank's Trade Finance representative. The bank may require the customer to sign what is called a General Pledge. This is an undertaking whereby the customer acknowledges that the goods and or documents of title to the goods will be in pledge to the bank.

In summary it is well worth asking your bank whether they would be willing to consider this, as most will allocate a 100% risk weighting, which is in effect an easy option for the bank, and does not accurately reflect the actual risk.     

Import Letter of Credit Training 

   

Financing the Trade Cycle

As an international trader (importing, exporting or both), is your bank offering you finance which matches your trade cycle?

Over the past few years regulations have dictated that banks have to lodge more funds centrally if they provide their customers with facilities, notably overdrafts. Unsurprisingly, banks are therefore seeking to provide alternative financing structures which attract less centrally held funds.

This can work well for a bank's customers too, and Trade Loans can be structured to match with funding gaps for importers and exporters. This type of facility can be used in conjunction with traditional trade solutions such as Letters of Credit or Documents and Bills for Collection, or (given the right circumstances) in support of open account transactions.

Best advice is to ensure that your bank's international trade manager fully understands your trade cycle/s and recommends a loan facility to match with that funding gap. You should seek an improved lending margin other than that traditionally charged for an overdraft, as the bank is benefiting as mentioned previously. 

Most banks will require you to establish these loans with their Trade Services Centres, so again, you should be compensated (by a better borrowing rate) for this extra administration. The overall benefit for a bank's customers being funded in this way is a reduced cost to borrow, with facilities that accurately match their funding needs. The banks benefit as they will understand exactly what their lending is funding (i.e. the goods) and they will need to deposit less funds centrally.         

Transferable Letter of Credit

A Transferable Letter of Credit is used in cases where there are three parties to a transaction; an Importer (Buyer), Exporter (Supplier), and an intermediary party, such as a broker, who is responsible for arranging the sale.

In such a transaction, the intermediary party requests a Letter of Credit from the Importer as protection against non-payment. 

The Exporter, in turn, wants assurance from the intermediary party that payment will be made, and will also request a Letter of Credit. 

It may be the case, however, that the intermediary party has little working capital or does not have access to a line of credit with its bank to issue a separate Letter of Credit to the Exporter. As an alternative, the intermediary party may provide such assurance to the Exporter by transferring over a portion of the Letter of Credit it received from the Importer. This is termed a Transferable Letter of Credit.

To be able to transfer a Letter of Credit, the intermediary party must specifically request a Transferable Letter of Credit from the Importer.

The Letter of Credit must nominate a bank, generally the Advising Bank, who is authorized to effect a transfer.

The intermediary party would be the Beneficiary of the Letter of Credit and, in a Transferable Letter of Credit transaction, is referred to as the First Beneficiary. The First Beneficiary would then ask the Transferring Bank to transfer, in part or in full, its rights under the Letter of Credit to the manufacturer of the goods, who is referred to as the Second Beneficiary.

A Transferable Letter of Credit may be transferred only once; therefore, a Second Beneficiary is unable to transfer a portion of a Transferable Letter of Credit to a third beneficiary. It may, however, be transferred to more than one Second Beneficiary, in which case the L/C must state that partial shipments are allowed.

The following is a simplified example of a Transferable Letter of Credit transaction:

Importer: ABC Buyer, Hong Kong

Intermediary Party (Middleman): UK Trading Company Ltd

Supplier: XYZ Supplier Company Ltd, UK

Issuing Bank: WorldWide Bank

Transferring Bank: Big Bank UK PLC

As per ABC Buyer’s instructions, WorldWide Bank issued a Transferable Letter of Credit in favour of UK Trading Company Ltd who is acting as the intermediary party in the trade transaction. This Transferable Letter of Credit is in the amount of USD $100,000 and Big Bank UK is authorized and willing to do the transfer.

The description of goods is 5,000 pairs of shoes at USD $20 per pair. Once UK Trading Company Ltd as the First Beneficiary receives the Letter of Credit, it requests Big Bank UK to transfer USD $75,000 to XYZ Supplier Company, stating the same quantity of goods, 5,000 pairs of shoes, but at USD $15 per pair.

Big Bank UK advises the transfer has been made to XYZ Supplier Company Ltd, who now becomes the Secondary Beneficiary of the Letter of Credit.

Once XYZ Supplier Company Ltd has shipped the goods, it presents documents in accordance with the Transferable Letter of Credit, along with its draft for USD $75,000, to Big Bank UK. Big Bank UK then notifies UK Trading Company Ltd of the presentation.

UK Trading Company Ltd will present its own invoice and draft showing a value of USD $100,000 in order to comply with the original Letter of Credit. Big Bank UK checks the documents  then (if all in order) substitutes these documents for those presented by XYZ Supplier Company Ltd and forwards the documents to WorldWide Bank. 

Assuming all documents comply with the L/C terms, Big Bank UK receives USD$100,000 and pays USD $75,000 to XYZ Supplier Company Ltd and USD $25,000 to UK Trading Company Ltd.

Note:

  

It is advisable to request expert advice when requesting a Transferable Letter of Credit, particularly if you do not wish to run the risk of disclosure of names or values to the end buyer and supplier. It is possible to request that the L/C terms stipulate that documents are to be drawn up in such a way that this risk is minimised.

Banks will not however bear any responsibility for inadvertent disclosure within documentation once issued.

Transferable Credits are subject to UCP 600 Article 38.

A Guide to Profitable Importing

To remain competitive and profitable, many companies source raw materials, components and even finished goods from overseas suppliers. There are many reasons why a business may decide to import. Typical examples are:

• Lower labour costs
• Relative strength of the home currency against the supplier’s preferred / local currency.
• Access to skills and materials not available / scarce in the domestic market

Whilst suppliers will be more concerned with securing payment, importing businesses need to ensure that goods will arrive as ordered and in a timely manner. You should consider the following issues:

1. Locating suitable suppliers.  

Whilst lower costs may be a major factor in sourcing from overseas, the appointment of a reputable and experienced supplier will ensure that your reputation with your own customers will not be at risk. Factors to consider are:

• Where is the supplier located?
• Do they have a strong track record regarding quality (eg: meeting British / European standards)?
• Do they deliver on time every time?
• Do you need to appoint a local agent (eg: for regular quality inspection of goods)?
• Are goods presold or held in stock?

2. Transportation and logistics.

• How will the goods be transported - sea, air or road?
• How long will it take for goods to arrive?
• Who bears responsibility for transit risk, cost and other obligations as defined in Incoterms® 2010 (eg: FCA, FOB, CPT, CIP, CFR, CIF, DAP)?
• Have you researched Customs duties / licenses etc? Don’t be caught out with an unexpected bill once the goods arrive in the UK. Research the tariff code applicable to your product. Information can be obtained from HM Revenue & Customs.

3. What payment terms will the supplier offer?

• Payment in advance or on very short credit terms will have a negative impact on your cash flow.
• Consider the transit time of the goods and subsequent stocking times and credit terms given to your own customers.

4. Methods of Payment

• By offering secure / guaranteed payment to your suppliers can you secure longer credit terms?
• Do you need to issue Documentary Letters of Credit to suppliers?
• What will the impact be on your banking facilities?
• Are Letter of Credit terms and conditions favourable to you as well as your supplier?
• What additional costs will you incur?
• What administrative impact will additional banking paperwork create?
• How much is your bank charging you to remit international payments? Are you using the most cost effective payment channels?
• Should you consider an alternative Foreign Exchange / Payment provider who may be able to offer an online more cost effective solution than your bank?

5. Financing Imports.

• What support does your bank provide?
• Are you provided finance that meets your needs / matches your trade cycle?

6. Supply Chain Management.

• How do you manage your physical and financial 'supply chains'?
• Do you work closely with freight forwarders and your bank to optimise delivery of stock and shipping documents / effect timely and cost effective payments?

Import Letters of Credit & Risk Management Training

Trading with China by Letter of Credit

A warm welcome to Richard Casburn who has recently joined MJ Hayward Associates from HSBC as our new Training Partner.  He brings a wealth of experience in Trade Finance having worked in international banking for more than 30 years.

Richard provides some current thoughts on developments in the way Chinese banks handle Letters of Credit:

"One of the most significant developments relating to Export Letters of Credit over the past few years is the way that many banks in China have changed their interpretation in the way that L/Cs are handled. 

As China becomes more westernised with English being commonly spoken, many banks are adopting a much more sensible approach when they examine documents under L/C presentations.

Chinese banks historically had a reputation for scrutinising every word in every document, and in many cases rejecting documents if a word was incorrectly spelt, even by one letter. 

Clearly, in certain instances such as descriptions of goods etc, spellings must be exact. However this old practice of letter by letter scrutiny in every document has largely ceased, and also UCP 600 which was not always widely recognised in China, is now accepted and embraced by the majority of banks.

A really significant change is that some major banks such as Bank of China will, when issuing L/Cs, now be prepared to ask another bank to add its confirmation. This was almost unheard of until recently, however some of the smaller, local Chinese banks will still adhere to the old perception that it is not honourable to ask another bank to add its name to an L/C. In these cases, silent confirmations and commitments to negotiate remain relevant."         

Financing Transactions with Letters of Credit

A Letter of Credit is an excellent tool in terms of providing payment security to the seller and more certainty of shipment of the goods / provision of services to the buyer. It can also be very useful for improving cash flow for both parties. This factor is rarely considered by sales or purchasing managers when negotiating contracts with overseas trading partners.

I have spoken with several exporting companies recently, who have turned away potentially lucrative contracts due to the buyer requesting unacceptable credit terms, often well in excess of the seller's normal terms of payment.

There is however, absolutely no reason why a seller should not accept such terms provided that the Letter of Credit gives the appropriate level of security.

If the Credit is available with an approved nominated bank in the seller's country and such bank has given a clear commitment or a confirmation to the seller, it is possible to receive funds immediately following presentation of complying documents, ie: at 'sight', even though the Credit may be available by acceptance or deferred payment (eg: 90, 120, 180 days etc).

Under such terms, the nominated bank may be prepared to prepay the seller by way of 'discounting' the draft (Bill of Exchange) presented with the documents, or to 'negotiate' the documents, either with or without recourse to the seller, deducting interest for the duration of the credit period.

In the case of confirmed Letters of Credit, such discounting or negotiation will usually be made without recourse, thus providing the seller with financing that is normally viewed as 'off-balance sheet'.

By engaging with the nominated bank at the earliest opportunity, sellers can establish the cost of financing (often at lower rates than borrowing on overdraft for the period), and factor into the price. 

Buyers can use Letters of Credit as a means of obtaining longer periods of credit in the knowledge that the supplier can still obtain payment at an early stage. In the Far East and Asia, it is common for suppliers to view Letters of Credit issued by major banks as a tool for obtaining pre-shipment finance. I have come across many instances where UK or European buyers have been able to obtain significant discounts on the price of goods purchased, by issuing Letters of Credit instead of trading on open account terms.

Are your Letter of Credit documents 'strictly compliant'?

When working with clients, I regularly receive feedback that the banks are 'picky' when checking documents.

You've no doubt heard the term 'dotting the i's and crossing the t's'.

Despite the repeated assertions of the major banks that they exercise common sense when checking documents, we are hearing that checkers repeatedly raise spurious discrepancies such as slight typographical errors, titles of documents and issues with regard to beneficiaries' or applicants' addresses (despite the provisions of UCP 600 article 14j).

Another common issue is the apparent inconsistency, not only between the banks, but also between individual document checkers at the same bank! I have been told many times of instances where documents drawn in respect of a partial shipment have been presented and found to be clean, only for an identical presentation under a subsequent partial shipment to be rejected due to discrepancies.

Such issues continue to be a source of great frustration and represent a constant challenge for exporters shipping against Letters of Credit, therefore we suggest that you follow the mantra I preach throughout my training sessions:

"Don't give the bank document checker a reason to think about whether to pay you!"

In other words, don't leave any room for ambiguity when preparing your documents:

1. Documents to the Letter of Credit - word for word.

2. Documents to each other - keep data consistent.

It is vitally important that your key staff are equipped with the skills and knowledge to handle Letters of Credit, from the point of sales negotiations with buyers through to preparation and presentation of documents to the bank.

It is also necessary for staff to have an appreciation of the provisions of UCP 600 (the L/C 'rules') in order to understand what banks are looking for in terms of data content, signing of documents, interpretations etc.,

Call us on 0800 043 4052 or email us: info@mjhayward.co.uk to see how we can help you minimise risks, cost and hassle when handling Letters of Credit.

In-Company Letter of Credit Training

Libya Update

We have received the following update via the Midlands World Trade Forum (MWTF) with regard to the current situation in Libya:

"It is believed that Tripoli port has closed and that Lloyds of London, the insurers are looking at the cost and type of cover that will be made available for freight. The Libyan Embassy in London are not taking phone calls and legalised documents are not being issued.

Most Letters of credit issued by Libyan Banks require documents to be legalised by the Libyan Embassy therefore most presentations will have discrepancies. It will therefore be difficult for the paying Bank to contact banks in Libya and also the buyers of the goods for them to agree the discrepancies.

Exporters should exercise extreme caution before shipping, it is therefore suggested that goods are only shipped once legalised documents have been received.

Alternative solutions are being looked and will keep you updated as we receive them."

A Letter of Credit Success Story

Last night I attended the North West branch meeting of the Institute of Export (IoE International Trade). We received several fascinating presentations on a range of exporting topics, but one in particular given by the host organisation, Innospec, grabbed my attention.

Regular readers of this blog will be familiar with my mantra of effective management of Letters of Credit from sale negotiations through to document presentation. Innospec's Group Assistant Credit Manager told us that like many companies, Letters of Credit have been increasingly used to mitigate the risks associated with new or challenging markets.... and like many companies they were experiencing huge problems with presenting complying documents and incurring very high bank charges.

Upon initial assessment it was found that only 46% of presentations made to the bank under Letters of Credit were compliant.

The company decided to put in place a range of processes, tools and education to equip all relevant company personnel with the skills to effectively and efficiently manage Letters of Credit, thereby significantly reducing the number of discrepancies and amendments.

The result? 

Innospec now have an enviable success rate of 98% compliant presentations to the banks and have seen a massive reduction in associated bank charges.

The message here is not to underestimate the benefit of reviewing your Letter of Credit processes and undertaking a tailored programme of training for your key people. 

It DOES work!

Book Letter of Credit Training Now! 

Letters of Credit - The Top 5 Problems

It is estimated that 70 - 80 % of Letter of Credit documents contain discrepancies upon first presentation to the bank.

This statistic is quite staggering and has hardly changed in all the 17 years I have been training companies on the subject of Letters of Credit. So what are the main reasons for failure?

1. Export Sales Managers often agree to accept Letters of Credit from buyers without understanding the risk and cost implications to the business. Unsatisfactory or unworkable terms and conditions can lead to delays and additional costs either through the requirement for amendments or the resulting presentation of discrepant documents.

2. Export Administrators, Shipping or Finance staff may be guilty of paying insufficient attention to detail when preparing documents. Remember that accuracy in Letter of Credit documentation as well as an understanding of and adherence to the provisions of UCP 600 is critical in order to get paid by the bank!

3. Lack of communication both internally and with third parties such as freight forwarders, insurance companies and even the banks themselves. Make sure that information is shared, with copies of the credit given to all people involved in the process. If any ambiguous clauses are contained within Letters of Credit, do not be afraid to pick up the phone to the advising bank to seek clarification.

4.  Dealing with a bank in the country of export, with whom you have no relationship. This may be the local office or a correspondent of the issuing bank who has no knowledge of your business and therefore has little incentive to assist the beneficiary. Working with many of the main UK and European banks, I am aware that Export Letter of Credit business represents a healthy income stream and if you are an exporter regularly receiving Letters of Credit, there will be a strong appetite for your business. Look out for banks with a local document checking service as well as international trade specialists who may be prepared to invest in time to understand your business.

5. Sadly, there has been an increasing trend for the banks to become more 'picky' when checking documents presented under Letters of Credit. If you feel strongly that a bank document checker has been over zealous and that a discrepancy is unjustified or not in accordance with the UCP 600 rules, don't be afraid to challenge them. I have heard of many cases of late where inexperienced document checkers have raised invalid discrepancies and have subsequently been overruled by senior bank staff when challenged by the beneficiary.

So how do we ensure that your documents stand a chance of being in the top 20% of compliant presentations?

The key solution lies in the regular training of all key staff involved with Letters of Credit as well as ensuring that you work with banks and freight forwarders who understand your business and are prepared to work with, rather than against you.

Book Letter of Credit Training Now! 

Letter of Credit Checklist for Sales Managers

When delivering in-company Letter of Credit training to export managers and finance teams, I consistently receive feedback along the lines of:  

"Our sales people would really benefit from a guide to requesting Letters of Credit as we never seem to receive them in an acceptable format or through a preferred bank."

I strongly recommend that as export sales play as important a role as anyone in the Letter of Credit process, it is absolutely vital that they fully understand the considerable risks and costs associated with getting things wrong!

With this in mind, here is an initial guide aimed at your key sales people:

Prior to the issuance of a Letter of Credit, an exporter should consider the following:

- Do I want or need a Letter of Credit? The importer may not be willing to issue a Letter of Credit if he has a good payment track record and can obtain similar quality goods from other suppliers on cheaper or more favourable terms (ie: Documentary Collection or Open Account).

- Will the Letter of Credit be issued by a known bank? If not, I should contact my own bank to check the standing of the Issuing Bank. If there remain any concerns regarding the quality of the Issuing Bank, should I request that the Letter of Credit is confirmed by a major bank in my own country?

- In which country is my customer (the importer) located? If I have any concerns over the political or economic situation which may prevent payment being made, should I request that the Letter of Credit is confirmed by a major bank in my own country?

- Have I included ALL the Letter of Credit costs in my price? Such costs are not limited to bank charges, but will also relate to documentation fees (eg: Third Party documents, Certificates of Origin, Legalised Invoices etc).

- What terms and conditions will be stipulated within the Letter of Credit? Do they accurately reflect the underlying sales contract? To ensure that I am able to comply with the terms, have I discussed with the importer the following:

o   The advising / confirming bank in my own country? The Issuing Bank will usually advise the Letter of Credit through a correspondent bank. Will this bank be acceptable to the exporter, particularly if the Letter of Credit is to be confirmed? If we cannot obtain a Letter of Credit through our preferred bank, can it be made 'available with any bank by negotiation'?

o   The latest date of shipment: will I have sufficient time to manufacture / source raw materials in time for shipment?
 
o   The period for presentation of documents to the bank: although under UCP 600, the ‘acceptable’ presentation period (unless otherwise stated in the Letter of Credit) is stated as 21 days, the importer may demand that documents are presented as soon as possible from / after shipment (eg: 7, 10, 14 days). Will I have sufficient time to prepare / obtain documents? Bear in mind that I may be reliant upon third parties to provide transport documents, certificates etc.,
 
o   Payment terms. Will I be paid at sight or at a future date? Is the Letter of Credit payable in my country? In the case of deferred payment / acceptance will the bank be prepared to negotiate or discount?
 
o   Who will pay the bank charges?

o   Will partial shipments be allowed?

o   From which port / airport / other location are goods to be shipped / despatched?

o   Where is the destination of the goods?

Incoterms® 2010

o   Am I delivering EXW*, FCA or FOB?  The buyer’s agent will be controlling the production of certain documents required to be presented to the bank. What if these documents fail to arrive in time or contain discrepancies? (*Note: it is strongly recommended by the ICC that EXW is not used for international shipments).
 
o   It may be more beneficial to consider terms such as CPT / CIP, CFR** / CIF**  whereby I, as exporter, will be engaging the services of a carrier or freight forwarder acting on my behalf. This will provide me with greater control over timing and production of Letter of Credit documents to the bank. (**The ICC recommend that CFR and CIF are appropriate for sea shipments only - non-containerised cargo. If goods are containerised traders are advised to use CPT or CIP, which are appropriate for any mode of transport, including multimodal shipments where main carriage is by sea.)

This list is not exhaustive but should provide some food for thought when negotiating the terms of your next Letter of Credit.


Letter of Credit Training for Export Sales Managers