Letters of Credit
1. Receiving payment from your overseas customer
Many people dread dealing with Documentary Letters of Credit (L/C). Quite understandable as they can prove tricky and their arrival is generally heralded throughout the Company with senior management issuing dire warnings of 100% compliance. You may only see one a year or you have just been given this particular hot potato to deal with for the first time.
Help is at hand. We have 30 years of experience dealing with Letters of Credit and offer free guidance to our customers to help get presentation of documents right first time.
These financial instruments can be both costly and risky to deal with so to avoid most issues simply get your customer to send us a draft of the L/C BEFORE it has been issued by the foreign bank.
Most commercial letters of credit are governed by rules, which are referred to as Uniform Customs and Practice for Documentary Credits (UCP). The current version of the rules is UCP 600, which came into effect on 1 July 2007. Knowledge of these rules is essential when preparing documents against an L/C. Just pass a copy set of documents to us before presenting them to the bank and we can advise if there appear to be any compliance issues. You are taking an unnecessary risk if you go it alone.
2. Making payment to your overseas supplier
Suppliers may prefer you to use a documentary letter of credit. This payment method is a guarantee from your bank that they will pay the money owed to the supplier on the production of specified documents. This can be complex and care should be taken in using them. We can advise and hold your hand through the whole process.
Naturally, this method of payment is usually only required when you are entering a new supplier relationship. You may be concerned that you receive the goods you ordered and be uncertain which documents to stipulate in the L/C, how, when and who should issue them and what to do with them afterwards. We can advise you every step of the way.
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