QUESTIONS?
Roy Becker
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November 5, 2018
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Export Finance
For those of you who have worked with letters of credit in your export business, you know how complicated these transactions can sometimes become. However, if done the right way, getting paid this way has numerous advantages.
You could easily get frustrated if your letter of credit is delayed or not paid for any number of reasons. To help you avoid future frustrations and ensure a smoother process, follow these eight tips for using a letter of credit:
Roy Becker
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October 1, 2018
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Export Finance
A documentary collection works well for many export transactions and provides a measure of security for both importers and exporters.
It provides security to buyers since they do not have to pay until they have documents, which provide proof of shipment. It also provides security to sellers since the buyer cannot receive the goods until he pays for them. Therefore, title to the goods remains with the seller until the buyer pays.
Roy Becker
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September 4, 2018
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Export Finance
The International rules for letters of credit, known as the Uniform Customs and Practice for Documentary Credits (UCP), state, “A credit must state an expiry date for presentation” (Article 6d). It is relatively easy to find the expiry date in the letter of credit.
However, another date equal in importance is referred to as the last date for presentation. The presentation period—the window of time in which the exporter must present documents—is tied to the ship date as indicated in the original transport document.
Roy Becker
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August 6, 2018
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Export Finance
One of the core tenets of an export transaction is that your documents must comply with the terms specified in the bank’s letter of credit. Even one small discrepancy can give the buyer license to delay or refuse payment—even if the goods meet specifications. These are the rules detailed in the Articles of the Uniform Customs and Practice (UCP).
Here’s a true story of how a buyer of pool cues gamed the system to delay payments to the manufacturer in Taiwan. But it was the factory that got the last laugh when it shipped the late-paying buyer a box of tree branches instead of cues!
Roy Becker
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June 4, 2018
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Export Finance
Too often exporters receive a letter of credit and then become frustrated with the terms the issuing bank has provided.
They ask, “Why would a bank issue a letter of credit with terms and conditions like this?” The issuing bank does not arbitrarily set the terms.
Roy Becker
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April 30, 2018
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Export Finance
Importers and exporters often ask, "What is the best method of payment for international shipments?
Many bankers answer, "Letters of credit." This is a self-serving answer. Of all the methods, letters of credit generate the most fee income for a bank.
Roy Becker
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April 2, 2018
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Export Finance
During my first few months on the job in the international department of a bank, the department had open positions due to an unmanageable workload as a result of the conclusion of a U.S. West Coast dock strike.
The release of pent-up shipments resulted in daily deliveries of mail and couriered packages containing shipping documents for processing for payment against letters of credit.
Roy Becker
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February 5, 2018
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Export Finance
An exporter in Denver sold goods to a distributor in Brazil (and many other countries). After a long and satisfactory relationship with their Brazilian distributor, they agreed on payment terms of 150 days on an accepted draft basis.
After shipment, the exporter's bank sent the documents to a bank in Brazil with instructions to release the documents after the buyer accepted the 150-day draft thereby obligating themselves to pay it at maturity. Some traders refer to this method of payment as a documentary collection with a time draft, sometimes as Documents Against Acceptance, abbreviated DAA or D/A.
For years this relationship worked well and the distributor always met their obligations.
Roy Becker
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December 4, 2017
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Export Basics
My business dinner guest sat on the board of directors for a company preparing for their first export sale. This new venture thrilled the gentleman as he anticipated the prospect of the company’s initial entry into Mexico.
We discussed the benefits of the sale and examined some of the logistical details. Since he understood many of the twists and turns, he surprised me when he posed a basic question: "If we put the sale together, how will we get paid?"
Roy Becker
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November 6, 2017
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Export Basics
Companies often make emotional decisions without thinking through the details.
A company received an inquiry from a potential Mexican buyer. As interest developed, the management team scheduled a trip to visit the buyer. They decided to invite their banker as an afterthought.