FREQUENTLY ASKED QUESTIONS ON L/C's (LETTER OF CREDIT)
An L/C is issued
by a bank at the rqst. of the buyer. This payment instrument sets forth
specific conditions the exporter must meet to rcv. payment. Any
misunderstanding in the terms of the L/ C will result in serious financial
prblms. for the exporter.
Q: What is an IRREVOCABLE L/C?
buyer cannot cancel the L/C for any reason whatsoever if shipment is made PRIOR
to EXPIRATION and ALL CONDITIONS met. A REVOCABLE L/C can be modified by the
buyer without any consideration of the exporter's wishes.
Q: How does a
REVOLVING L/C work?
A: Specific amounts are paid to the exporter at
specific intervals as shipments are made, however pre agreed shipping deadlines
are established. If those dates are not met, that portion of the L/C is null
& voided. The L/C automatically re-opens each time a shipment is made.
Q: What is TENOR?
A: Refers to DRAFT payments. On a SPECIFIC DATE
a payment when must be made is defined as the: TENOR of the payment.
What is difference between DATE & SIGHT DRAFTS?
A: SIGHT is payable on
demand when presented to the buyers bank by the exporter. DATE stipulates
agreement between the buyer and exporter on a date in the future when payment is
to be made. CAUTION: This method of receiving your funds is pre requisite
you have checked the buyers credit worthiness. You are urged to contact the
writer for more details.
Q: What is an ADVISING bank?
A: The bank
informs you that an L/C is open in your favor. Generally it will be your bank
or the buyers U.S. partner.
Q: What is diff. between ISSUING bank and
A: The ISSUING bank is generally the customer's bank who
opens the L/C. The CONFIRMING bank generally is the U.S. bank
you they are pledged irrevocably to pay you IF IF IF you meet the conditions of
the L/C. CAUTION: The reader is urged to contact the writer for full
Q: What is a TRUST RECEIPT?
A; A document signed by the
buyer on strength of which a bank will retain title to the goods and has the
obligation to release the merchandise only when the buyer makes the funds
available. It is a form of financing the purchase with payment after arrival
rather than pre-payment through an IRREVOCABLE L/C.
Q: What is STEAMSHIP
A: In the case that a B/L (Bill of Lading) is lost, the bank
will provide back up funding to cover the cost of freight & mdse.
What is EX-DOCK?
A: This is a unique TERMS OF SALE concept. The selling
price includes all shipping costs, insurance, including IMPORT DUTY to the
importers personal warehouse dock. CAUTION: Very complicated and not
Q: What is TRANSSHIPMEMT?
A If the buyer is in a
different location than the destination of the steamship company. Exmpl:
Shipment to a customer in Macao but no cargo carrier goes there. Shipment in
that case is made to Hong Kong and TRANSSHIPPED TO Macao. Such arrangements are
stipulated in the L/C. Must be pre-arranged and specified as a condition of
Q; What is difference between "ON DECK" & "ON BOARD"
ON Deck means on top of the ship. ON BOARD means inside the hold. Not an
issue with container cargo. Only prblm. arises if goods are loose-crated.
The L/C will stipulate what is acceptable. The L/C should state BOTH!
The writer urges the reader to exercise extreme caution when selling
overseas. You are invited to contact us for one-on-one discussion regarding
any of above, We are prepared to hand-hold you as you enter the global
SCORE South Fl
Boca Raton FL
visit us at: www.scoresouthflorida.net