View Full Version : payment via bank using L/C (Letter of credit)
evolution9
9th March 2009, 16:24
Hi All
Im looking to pay a supplier via the bank using L/C (letter or credit) as i have been reading up about it and seems to be the best way to pay an exporter or is there a better and securer way?
Anyway my question is the exporter states the payment terms are L/C, at sight. I have read up about L/C and someone mentioned when you recieve the products you give the bank the go ahead to finalise payment but when i read my banks conditions it didnt sound like that it said...
"sIGHT’ MEANS THAT THE BENEFICIARY OBTAINS PAYMENT AS SOON
AS A COMPLIANT SET OF DOCUMENTS IS PRESENTED TO THE PAYING BANK.
what does that exactly mean?
Thank you.
Richard
Exactly what the bank says. If your L/C states that the documents required are.. for example.. 2 copies of invoice, 1 copy of packing list, cert of origin, Bill of lading showing freight prepaid and shipment to Southampton, etc.etc. As soon as the exporter ships the goods and presents the documents as per the L/C to the Bank, he will receive the money and you will be debited immediately.
HTH
Mister B
9th March 2009, 19:38
Exactly what the bank says. If your L/C states that the documents required are.. for example.. 2 copies of invoice, 1 copy of packing list, cert of origin, Bill of lading showing freight prepaid and shipment to Southampton, etc.etc. As soon as the exporter ships the goods and presents the documents as per the L/C to the Bank, he will receive the money and you will be debited immediately.
HTH
But, the bank, who are acting to protect your investment, (which is probably theirs as well:D) will also check to make sure that all of the documentation matches in detail to the checklist which will have been stipulated on the LC. Any discrepancies will naturally have to be signed off by your goodself.
Mister B
But, the bank, who are acting to protect your investment, (which is probably theirs as well:D) will also check to make sure that all of the documentation matches in detail to the checklist which will have been stipulated on the LC. Any discrepancies will naturally have to be signed off by your goodself.
Mister B
Thats what I said.. its obvious if there any discrepancies in the documents stipulated on the L/C they dont pay and its referred to the originating bank and subsequently the L/C opener. In the meantime the original documents are in limbo and the exporter craps himself ( depending on the size of the shipment)
frauke
9th March 2009, 23:31
The only time I heard about a L/C that did not work was due to the goods that were shipped were a 50cc item instead of a 500cc item and of course all the paperwork was correct so the Bank paid out. The supplier was a new one that won the contract by tendering way less than anyone else. The supplier then withdrew the cash from the Bank and closed the bank account.
If its a new supplier that's not generally known, you should get a reference from one of their other customers. Or you can also ask for a document to cover you, like a signed confirmation on delivery from you (depending on the method of shipment).
Wavecrest Ltd
10th March 2009, 10:10
Hi - a letter of credit is a secure method of payment (assuming it's opened through a blue chip bank - if such a thing exists nowadays....). I have been in the shipping and forwarding business for many years and will be happy to advise you. Please feel free to PM me any time if you have any questions.
Best regards
Glen
Wavecrest Ltd, Gravesend, UK
consultant
10th March 2009, 11:49
Richard,
welcome to the forum.
Bottom line is the money is paid over whe you 'see' (receive/take possesion), hence sight, of the goods.
'You' means personally or your shipper/agent. This islalso tied into your payment terms. Sight for FOB is different to CFR or DDP!
The documents bit is clear, but can nclude things like inpection certificates, licenses, reports etc.
Before you raise the l/c, make sure you agree the contents with the supplier, as any changes will cost a few quid.
Tej
10th March 2009, 16:36
Richard,
welcome to the forum.
Bottom line is the money is paid over whe you 'see' (receive/take possesion), hence sight, of the goods.
'You' means personally or your shipper/agent. This islalso tied into your payment terms. Sight for FOB is different to CFR or DDP!
The documents bit is clear, but can nclude things like inpection certificates, licenses, reports etc.
Before you raise the l/c, make sure you agree the contents with the supplier, as any changes will cost a few quid.
Wrong, wrong, wrong!!!
Think you should really check out what L/C at sight means!!!.. before you make comments like this. have you ever opened an L/C?
FOB, CIF, C&F makes no difference.. Those are instructions and terms of the purchase and stipulated on the L/C
Consultant? Banking?
lol