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    1. EnternationalTrader is offline

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      Letter of Credit L/C Knowledge

      When handling quotations from prospects, exporters should remember that banks pay the amount mentioned in the letter of credit - even if other charges for insurance, shipping, or more are incurred and documented.

      Upon receiving the L/C, the exporter should compare it against the terms of their pro forma quotation. This step is significant, because the terms must be met or the L/C may be invalid and the exporter may not be compensated. If any incorrect information or even a typo is spotted, the exporter should contact the customer right away and ask for a correction.

      The exporter should offer documentation showing the order was shipped on X date in the L/C or the exporter may not be compensated. Exporters should check with their forwarding company to guarantee there are no unknown conditions that may arise that would slow shipment.

      Documents should be presented on or before the date specific for the L/C to be paid. Exporters should check with their bankers to make sure there will be enough time to present the L/C for payment.

      Exporters can request that the L/C state the partial shipments and transshipments will be approved. Stating what is approved will lower any last minute obstacles.
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    2. Thank you for this post:

      WholesaleForum (18 Jul 2010)

    3. ebaytrader is offline

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      #2
      expiration date in a L/C is very important
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    4. WholesaleForum's Avatar
      WholesaleForum is offline

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      #3
      Thanks for sharing your knowledge EnternationalTrader.

    5. Graham57 is offline

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      #4
      Letters of credit are OK for established customers but remember the stats are that 60 to 80% of LCs can't be negotiated due to some error, usually a small error. The critical point is that to modify the LC to make it fit the facts requires the agreement of the buyer. If the buyer sees lots of profit and happiness he will agree to corrections without a thought.

      If times have changed and his market has collapsed or a competitor has introduced a cheaper product or your buyer has found a cheaper source then an error will allow him to walk away and leave you with a container sitting on a wharf at the other side of the world incurring wharf storage charges and huge container detention fees. You then have to find another buyer, turn the goods around and bring them home or send them to a dump. You must act quickly and usually take a loss.

      LCs are risky. Before you ship get at least a cash deposit and get cash before the goods are handed over. A deposit of 30% should be the nminimum. If a buyer refuses then don't deal with them. If most buyers refuse find another product that people really want or need.

      TT with the order should be the rule. Invite the buyer to come and watch the container loaded and shipped. Air fares are not very high compared to the value of a container of almost anything. For a first deal offer to pay their fare in the form of a discount.

    6. Thank you for this post:

      WholesaleForum (12 Oct 2011)

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