Letter of Credit Thirty-Three Questions and Answers
01
Question: There are discrepancies in our list every time, which cannot be avoided. People at the bank told me that if there are discrepancies, it is up to the customer, and the risk is transformed into the relationship between us and the customer. The customer pays, and we can’t do anything without it. Is that the case?
Answer: If there are discrepancies, then the bank has reason to refuse to pay. Because the bank assumes the responsibility strictly in accordance with the documents. In the case of discrepancies, either modify the documents, or communicate with your customer to change the certificate, or let the customer confirm to the bank to confirm the discrepancy and submit the bill and promise to pay. The risk is indeed that you and the customer.
02
Question: I have a question to ask. I have a ticket and open a letter of credit, but I have loaded a small container and a little bulk. The small container and the bulk go on two ships, but the shipping schedule is the same day. Does this count as partial shipment? How to prepare the documents when the bank submits the documents?
Answer: These are two batches of goods. First, you need to communicate with the customer whether you approve this method. If approved, find the forwarder to see if you can issue a document that matches the letter of credit. Then negotiate with the bank. In a situation like yours, you must communicate well with your customers. The customer agrees. Or deceive the customer.
03
Question: When the payment method is selected as BY PAYMENT, can the bank choose any bank? Thank you!
Answer: The negotiating bank can choose any bank.
04
Question: A customer said that it is a foreign purchasing office in China that requires a letter of credit, but the amount is only three or four thousand dollars. Can it be done?
Answer: The amount can be large or small, like Bangladesh can only do letter of credit, no matter how much the amount is, you have to do letter of credit. It's just that the amount is small, and the cost of doing a letter of credit is high for both buyers and sellers.
05
Question: I have a Sri Lankan client who wants to do a forward L/C with us for 120 days. He only operated the spot L/C before and was a little worried. Look carefully at his DEAFT, there is one item in the billing documents, and all the billing documents should be COPY faxed to the customer within seven days after the ship date, and then the receipt from the other party will be received. This violates the second principle of verification written by the original poster. Is this acceptable?
Answer: It is necessary to fax all the documents COPY to the customer within seven days after the sailing date, and then get the receipt from the other party. Then, is the receipt also a document required for negotiation? If it is, then such a clause cannot be accepted.
06
Q: I recently received an inquiry from Turkey. The other party requested that the payment method be an irrevocable documentary letter of credit, with a total amount of approximately US$240,000. Our company has always paid 30% T/T in advance, and has never operated a letter of credit, and I heard that Turkey’s customs regulations are very strict. If the goods are not picked up within 2 months of arrival at the port, they will be auctioned at a low price, and the original purchaser has the highest priority. I would like to ask, in this case, is there any risk in accepting the counterparty's LC payment method? Is there any way to avoid risks? thank you very much!
Answer: You can accept payment from the other party's LC, because the bank guarantees the payment as long as the documents match, and it has nothing to do with whether the foreigner picks up the goods. And the spot credit can be paid about 15 days after shipment.
07
Question: I encountered a problem. Recently I was talking about a relatively large customer. I used to do T/T. Then the order amount is relatively large. The customer wants a 60-day billing period. We can give him a credit of up to usd 500,000. , That is, if the order exceeds usd50, other expenses must be paid. May I ask what is the difference between the current situation and the letter of credit.
Answer: In your case, the customer is doing credit sales based on his own business reputation, which is OA 60 days. The letter of credit is based on the creditworthiness of the bank to do business, and the difference is still very big. For a list like this, you can first go to CITIC Insurance to do a foreigner's credit investigation, and then CITIC Insurance will grant the customer a credit line. Once this line is available, the risk and capital pressure can be passed on to the bank or One Access. The factory can easily take such orders.
08
Question: I would like to ask whether the L/C for partial shipments must be presented in batches? Is there a fee every time a bill is submitted?
Answer: The documents are submitted in batches, and the fee will be charged every time the documents are submitted. But the notice fee will be paid the first time.
09
Question: We are a small company. We have never done a letter of credit before. I don’t know what documents we need to issue if we accept a letter of credit for payment from foreign customers.
Answer: If you do the letter of credit yourself, the most important thing is to have professional knowledge to examine the letter and make the documents. The best way is to ask the export company to do it for you. If you see too much, you will learn it. You can consider doing it yourself in the future. You can ask Alibaba One to help you make the letter of credit.
10
Question: I would like to ask, is there any difference between accepting FOB terms and CIF or CFR in the case of spot letter of credit?
Answer: The difference is not big. After the normal shipment, the full payment will be negotiated and collected from the bank, FOB. The foreigner will arrange the shipping and underwriting. The beneficiary of the insurance is naturally the foreigner. If it is CIF or CFR, it will only be shipped by sea. The fee is paid by the factory. Under the letter of credit, the CIF insurance beneficiary and the claim location will generally be transferred to the foreigner. Therefore, even if there is an accident at sea, the foreigner will handle it with the insurance company.
11
Question: Is it possible to do a letter of credit in Iraq?
Answer: Iraq is mainly subject to sanctions. We may not be able to receive the money if the money in other countries is paid out, so now the Iraqi letter of credit is not accepted.
12
Q: Can letters of credit in Haiti and Sri Lanka be done?
Answer: I have done this before, but the credit of the issuing bank will be reviewed and the risks will be indicated.
13
Question: What is the difference in risk between a forward letter of credit and a spot letter of credit? I haven't figured it out all the time. For a forward letter of credit, after the document is presented, should the issuing bank issue a payment guarantee or an acceptance guarantee to the negotiating bank? Can you give me some guidance?
Answer: There is no difference in the risk of a sight letter of credit and a forward letter of credit, except that it takes longer for the forward payment to be collected. When the forward letter of credit is negotiated, the bank accepts it.
14
Question: Our company wants to import materials from India. Can it be operated through One Access? I have negotiated with the supplier in India. When does the 30-day L/C 30 DAYS start?
Answer: Yes, if our country issues a certificate to foreigners, you need to pay a 110% deposit to the bank in order to issue a 100% letter of credit. The date is generally calculated from the date of the bill of lading.
15
Q: What should I pay attention to in Russian letter of credit?
Answer: I haven't heard of any special requirements for the Russian letter of credit.
16
Question: Tell us more about the common sense of credit sales! I have an Indian customer here who needs OA for 90 days, can it only be through CITIC Insurance?
Answer: Our country has only CITIC Insurance, the only policy export credit insurance company, and it can only pass it. For such customers who sell on credit, Alibaba now has corresponding services. Let me introduce to you and see if I can help you. First, make a credit investigation on the foreigner. It takes 800 RMB, which takes nearly a month. If the customer has been investigated before, it only takes one week. After the investigation, CITIC Insurance will grant the customer a credit limit, within the limit, and then after the order is shipped through Alibaba, Alibaba can advance 80% of the payment to the factory about 3 working days after the bill of lading date, etc. After the customer pays the money, the balance is settled to the factory, so that the factory can avoid at least 80% of the risk and financial pressure. Hope it helps you.
17
Question: I have a customer from the United Arab Emirates. The products I want are very scattered and the quantity is very small. There are only 2-4 for each of dozens of varieties. In this case, a letter of credit is required. Is our factory suitable for doing it? Will it be too risky for us? I am worried that there are more styles and fewer quantities, and the documents are prone to errors. Ask the master.
Answer: It is certainly possible to do it, and it is enough to ship the goods in accordance with the documents and terms required on the letter of credit. What needs to be reminded is that if the amount is small, then the cost of the letter of credit needs to be accounted for. Otherwise, it won't be a good deal.
18
Question: At sight letter of credit, how long does it take for the customer's bank to release the money to the manufacturer after receiving the bill? Going to Algeria, I waited for 3 months. Does this violate the regulations of the letter of credit? How to deal with it?
Answer: For students who do business with Algeria, I am here to share a case on the FOB forum. It is estimated that it will be very helpful for everyone to understand Algeria's banks, customs regulations, and foreign exchange.
We are a foreign trade export company in Hubei. On June 19, 2008, we signed a contract with Malaysia's Asia Business Integrated Sdn. Bhd. (they have another company) named Worldwide univasal company for welded pipes with a contract value of more than 2 million US dollars. Contract with the export of galvanized pipes to the port of Oran in Algeria. Signed the terms of the letter of credit. CIQ and SGS will be shipped after passing the inspection.
19
Question: One of our customers is a Wal-Mart supplier and wants to make a letter of credit at sight with us, but their letter of credit was issued to them by Wal-Mart, and he transferred it to us. What should I pay attention to for such a letter of credit?
Answer: Dear, here is a post about the need to pay attention to the negotiable letter of credit. Look carefully. http://baike.china.alibaba.com/doc/view-d1233872.html I hope it helps you.
20
Q: If the goods are not picked up within the delivery date of the L/C, isn't the responsibility all on the buyer? How could it cause document discrepancies?
Answer: The delivery date, usually also called the shipping date, is for the supplier. Under the letter of credit, the supplier must ship before the latest shipping date. Otherwise, it will cause major discrepancies, and the bank can refuse to pay for the goods.
twenty one
Question: My current distress is that I am currently negotiating with a Nigerian. The total amount is about 50,000 USD. Except for the PAYMENT clause: I require a 20% deposit and the balance is paid before shipment (because you also know that there are many scammers in Nigeria). Everything else has been discussed. Now customers must insist on L/C, and L/C is drawn from Nigeria. We disagree. There are many scammers in Nigeria. It is said that many Nigerian businessmen collude with banks to defraud. And he asked me to select one of the three banks in Nigeria as the L/C issuing bank, namely GT BANK, ACCESS BANK, and WEMA BANK. Do you know the credit of these three banks? Should I insist on 100% T/T, or do 100% L/C according to him? Or 30% T/T deposit, the balance is L/C? Last year, I did a small business with him, about 15,000 USD, T/T 100% HK remitted at that time. Please analyze or suggest, what should I do?
Answer: I don’t know the credit of the three banks you mentioned, because Nigeria is indeed very risky, and we are not sure that all Nigerian letters of credit can be accepted. We need customers to open drafts and review the terms and creditworthiness of the bank. Picked up. Start talking with 100% TT, and secondly, 30% deposit, 70% of well-known international banks open letters of credit. It is generally not recommended to accept letters of credit issued by local banks.
twenty two
Question: A friend of mine shipped 38 boxes of cassava from Malaysia. At that time, he opened an irrevocable letter of credit. But when the goods arrived at the terminal, they found that the cassava had become moldy during the transportation. But the bank had already paid for it and they processed it. 2 More than a month.
Is there any good way to avoid risks for such special goods?
Answer: This is for imported goods. A letter of credit is issued to the customer. For this kind of special goods, there is no special method, only corresponding special packaging must be required on the letter of credit. In fact, it can also be seen that for exporters, the risk of loss of goods can be avoided by doing a letter of credit.
twenty three
Question: How are the bank charges for opening a letter of credit and the bill presentation fee calculated? ?
Answer: Dear, do you need to issue certificates for imported goods to foreigners?
If you want to know the cost that a foreigner needs to pay when he issues a letter of credit to our supplier, then I can’t tell you clearly, because the follow-up financial service capabilities are different in different countries, and the issuance fees and costs in different regions are different. of. For example, our country needs to pay 110% of the deposit to the bank to open a 100% letter of credit, while some countries only need to pay 10% or even no deposit to open a 100% letter of credit.
twenty four
Question: I'm currently handling the shipment of a letter of credit, and it's time to submit the bill. Inv and packing list must be the same as the beneficiary of the letter of credit? Because we did not export this cargo by ourselves, it was exported through others. Can someone else’s company raise the head first, and then my company’s head up? Due to a barge error, we can only delay the one-water vessel. Does this have anything to do with the letter of credit?
Answer: The information given to the bank must be consistent with the beneficiary on the letter of credit. As for whether to ship by yourself, what is the bill at the customs? That's fine. Because the documents to the bank and the documents to the customs are two separate sets of documents. It can be different. You said that a ship was delayed, then you need to see if it is the latest delivery date stated on the letter of credit. If it exceeds, you can consider discussing with the freight forwarder to let him back-sign the bill of lading for you. But it's best to communicate this with your customers in advance. Otherwise, there is a problem of deceiving customers.
25
Q: I always feel that the letter of credit is very troublesome, is it not good to TT directly?
Answer: The key is that making a letter of credit is of great help to foreigners, and it can also avoid corresponding risks for the factory. So foreigners like it. Foreigners have this requirement.
26
Q: Can EXW terms be used for LC? I was worried that I could not get the bill of lading, but the customer said that I was a SHIPPER , he would definitely get the bill of lading. Is that the case?
Answer: In theory, any method of delivery can be used as a letter of credit, and only the corresponding responsibilities and documents need to be clarified. If it is an EXW transaction method, the buyer is responsible for the subsequent customs declaration and shipping. If the letter of credit requires that you need a bill of lading to be able to negotiate, then this violates the second principle of the letter of credit that I said. After the issuance of the letter, you can collect and process the documents unilaterally without relying on the customer. This is very risky. So everyone always keeps in mind the two principles of making a letter of credit, and many problems are easy to judge.
27
Question: What I want to ask is, is it acceptable for Iran to issue a letter of credit under the current situation? There is also a customer in Tunisia requesting a letter of credit. What conditions should I put forward?
Answer: Iran is now a sanctioned country, and its risk is that the money paid by Iranian banks may not be received. So now we don’t operate Iran’s letter of credit or receive foreign exchange directly from Iran. The risk is relatively high.
Tunisian customers do L/C. I haven't done it before, but I haven't heard of any special problems. Normal operation is fine, or it can be done by us, there is no problem.
28
Q: May I ask the letter of credit in Bangladesh, can it be cancelled if the customer says it is cancelled? That way the factory won't be pitted badly.
Answer: Now we generally only accept irrevocable letters of credit. For irrevocable letters of credit, the issuing party cannot unilaterally cancel the letter of credit, and can only be cancelled with the consent of the beneficiary. Unless you are receiving a revocable letter of credit, there will be a risk that the foreigner unilaterally cancels the letter of credit.
29
Question: Ask the next French customer who wants to make CITIC O/A 60-day bill of lading payment. Is there anything to pay attention to?
Answer: France has an A2 level of credibility, and the premium for OA 60 days is around 0.5%. It's still very good. You can do a normal customer credit investigation and buy insurance. If you need to collect payment after shipment, you can ask us to do it for you.
30
Question: There is an Italian client who is the first to cooperate and request a letter of credit. However, there is a clause involved: the original inspection certificate is issued by the customer. Do we need a third party guarantee? How should I negotiate with the client?
Answer: If the customer requires the inspection certificate to be issued by the customer, and the inspection certificate is a necessary document for negotiation with the bank on the letter of credit, we will treat such clauses as soft clauses that need to be modified or deleted by the customer. Because it violates the second principle of the letter of credit: the supplier can unilaterally collect all documents.
31
Question: There is a question. For example, L/C stipulates that the latest shipment date is March 30, and the expiration date of the letter of credit is May 5, and the location is the country of the issuing bank (overseas). If I submit the bill to the bank on the 20th day of the shipping date (around April 20), then the bank submits the bill to the issuing bank. During this period, from April 21 to May 5, if there are unexpected circumstances, time may not be enough. Will we fail to receive the payment, the expiry date will arrive. How to avoid it? Is it a bit of a trick for the customer to set the time like this?
Answer: If the beneficiary of the letter of credit submits the documents later than the expiry date specified in the letter of credit, the bank has the right to refuse the payment, and the beneficiary must submit the documents on or before the expiry date. After submitting the documents, the bank must give a reply within 7 working days. Enough time
32
Question: Last year, a customer made several orders and kept doing TT. It went well. Of Pakistan.
At the end of last year, the customer said that this year's plan is to do LC 120days. We think it's too long. And I haven't done it before, for fear of risk.
We have an agency company ourselves. I remember that in the terms of the letter of credit, 100% compliance is impossible, even if there is a little discrepancy in the punctuation, the customer can refuse to pay. Will there be customers in this situation? Of course, this is a relatively rogue behavior-the customer refuses for abnormal reasons.
For another 120 days, does the agency have to receive the payment after 120 days? We have been doing TT. After the client's amount is paid in and the order goes out, the agency will pay us. Quickly, easy to circulate. So if it is LC120 days, is it because the funds are stuck for a long time? ?
Answer: It takes about 120 days after you ship the LC120 to receive the payment. It is estimated that the factory will have financial pressure. If you need to collect the payment after the shipment, you can contact me.
33
Question: By the way, we also asked the agency company to conduct a credit investigation through channels. If the amount is not particularly large, this guest can do it. Isn’t it insured now? If there is a real problem, then the loss can be compensated for?
Answer: If you invest in CITIC Insurance, you can get a claim after the loss is determined, but the cycle of claim settlement is relatively long, and it is normal for more than half a year.