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Letter of Credit
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Are your exports paid for by Letter of Credit?
Exporters often adopt a method which
will enable payment to be received promptly and with the minimum of risk.
A letter of credit may be revocable or irrevocable - a document, consisting of specific
instructions by a buyer of goods, that is issued by a bank to the seller who is
authorized to draw a specified sum of money under certain conditions, i.e., the
receipt by the bank of certain documents within a given time. An irrevocable L/C provides guarantee by the issuing bank in the event that all terms and conditions
are met by the buyer (or drawer). A revocable
L/C can be canceled or altered by
the drawer after it has been issued by drawer's bank. A confirmed L/C is one issued
by a foreign
bank which is validated or guaranteed by a Indian bank for a Indian
exporter in the case of default by the foreign buyer or bank.
How many of the following problems apply to your Export
L/C shipments ?
Late presentation of documents to the bank
Delays in payment
Discrepant documents and associated fees
Too much time spent dealing with documentation
Inconsistent service/information
Although a Letter of Credit remains the safest method of export payment, preparation
of shipping documents covered under this system requires great care and attention
to detail, not to mention shipping and banking expertise.
Many companies have not identified their current payment cycle for shipments made
on a Letter
of Credit basis. Almost without exception, those who have carried out
this exercise have been stunned at the length of time from shipment date to payment
date.
Furthermore, because exporters often find it difficult to comply with the terms
and conditions of
the credit, most document presentations are initially rejected
by the bank, resulting in high fees
and worrying delays, and even non-payment .
The Solution
Excellency Services, the India's leading export documentation provider, can check speeds the process through for exporters by taking an d checking the L/C, producing all the necessary documents (except transport documentation) and presenting the documents to the bank on behalf of the exporter.
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