Letters of Credit (LC’S) and Exporting

 

The mere mention of the term ‘Letter of Credit’ is enough to strike fear into the eyes of some exporters. There are many woeful tales that can be found online of exporters getting tied up in knots and finding the whole process extremely frustrating and stressful.

However, here at Carry Cargo International Ltd we have a team of LC experts waiting to help you at every stage, making it as simple and transparent as possible. We can give guidance prior to issuance of the Letter of Credit to avoid unnecessary amendments, costs and delays and from there we can assist all the way through to presentation of the documents to the bank.

We offer a full LC documentation service with the ability to accurately prepare all of the required documents. Our team’s experience and knowledge in this field is second to none. This has been gained over many years both from a freight forwarding perspective, and perhaps more beneficially, gained directly from working within the banking system.

What is a letter of Credit?
A written commitment to pay, given by the buyer’s or importer’s bank (called the issuing bank) to the seller’s or exporter’s bank (called the accepting bank, negotiating bank, or paying bank).
A letter of credit guarantees payment to the exporter of a specified sum in a specified currency, provided the seller meets precisely-defined conditions and submits the prescribed documents within a fixed timeframe.
Letters of credit are formal trade instruments and are used usually where the seller is unwilling to extend credit to the buyer. In effect, a letter of credit substitutes the creditworthiness of a bank for the creditworthiness of the buyer. Thus, the international banking system acts as an intermediary between far flung exporters and importers.
However, the banking system does not take on any responsibility for the quality of goods, genuineness of documents, or any other provision in the contract of sale.
The above is very important to note i.e. if documents are presented that are in strict compliance with the Letter of Credit terms then payment will be made to the exporter REGARDLESS of the nature or state of the goods.
The International Chamber Of Commerce (ICC) has issued specific rules and guidance regarding Letters of Credit which are universally accepted and used (currently called UCP 600.)

So, if as an exporter (or importer) you require any information or assistance with Letters of Credit then please do not hesitate to give Carry Cargo International a call on 0113 271 1555

 

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