Trade Finance Solutions – For all your international trade requirements
Brief: Trade Finance Solutions can support any firm's international trade finance
requirements by providing the necessary documentary Letter of Credit to help the corporate cash movement provision. We as a company can open the required letters of credit to achieve inventory financing requirements for any large or small procurement order through our procurement order financing arrangements, and to give an additional boost to present banking arrangements. By working with our clients / customers we can provide the right trade instruments like Letter of Credit, performance guarantee requirements, cash against document request and others which can be used by our extensive global banking facilities.About us: Trade Finance Solution (TFS) issues Letter of Credit to client/customer businesses and commercials. TFS provides and manages the system of opening and providing the Letter of Credit by representing its clientele, and proceeds with the ongoing management of the Letter of Credit process throughout the term for which the transaction may occur. Several American and European banks services are used by TFS and it is a representative for two special purpose banks. Since the organization's firm banking relationships, it is targeted to give a flexible and quick service to its customers or clients. Due to the flexibility of the organization, a particular security deposit is not required. TFS also does not essentially become a creditor to its client firms. TFS gives an additional boost to the banking or the lending facilities which may be presently given by other institutions. An excellent relationship that was built between TFS and their overseas suppliers was due to the good service which was offered and facilitated well, hence allowing the positive tread of the business segments to be built well which the organizations otherwise would not have the ability to pursue. With our strong banking relationships, we work across the global banking institutions in conjunction with TFS's expert staff. Our firm allows itself of the foremost experts in the World of Trade Finance. With the standards set in UCP600** for documentary LC's and ISP98 for standby Letter of Credit. An opportunity for growth and profitability of the client organizations is created through these alliances. All kinds of commodity goods to apparel and textiles, and electronic components to consumer appliances and specialty products are helped in importing by the TFS clients. We issue Letters of Credit to all our suppliers across the world. If your company is looking for a strategy to finance goods to fill your orders, or simply to support growth, you can CONTACT US NOW. Details are provided below. The operation of Letters of Credit is governed by Uniform Customs and Practice which is the latest version of **UCP 600
Letters of Credit: The Basics:
Definition: An importer/buyer (Applicant) may open a letter of credit if they wish to ensure that the exporter/seller (Beneficiary) has performed those requirements as per the underlying sales contract, by making the documentation requested conditions of the credit. (N.B. The sales contract is not an inherent part of the letter of credit, although the letter of credit may contain a reference to such contract).
Buyer: Because the documentary credit is a conditional undertaking, payment is made on behalf of the buyer against documents, which may represent the goods and give the buyer rights to them.
Seller or Beneficiary: A "beneficiary" in the broadest sense is a natural person or other legal entity who receives money or other benefits from a benefactor. Exporters will need to be certain that it is necessary to use a letter of credit which includes a few typical considerations like: Is it a legal requirement in the importing country? What is the country risk of the importing country? Would a confirmed letter of credit be more suitable? What is the usual practice in trading with that country and in that particular commodity? What is the value of the order? Will the bank charges be out of proportion to the value? What is the importer's credit rating? Are they a new customer or has a trading relationship already been established? What is the standing of the Issuing bank? Would a confirmed letter of credit be more suitable? Recommendation by banks who may advise that the best method of payment is a "confirmed irrevocable letter of credit" irrespective of the country, strength of issuing bank and without much regard to the value of the consignment Insistence by a Credit Insurer to trade on letter of credit terms with buyers in certain markets. Are there any other measures that could be taken to protect the exporter - e.g. credit insurance? Strategic decision made by the exporter - this strategy should be flexible to adapt to the changing risk profile of both the country and the buyer "Always traded this way" The reasons for requesting this method of payment should be periodically re-assessed
Summary: Documentary credits therefore: - Are arrangements that are made by banks for settling international commercial transactions? - Provide a form of security to the parties who are involved. - Ensure payment, provided that the terms and conditions of the Letter of Credit have been fulfilled. - Mean that payment by such means is based on documents only, and not on merchandise or services involved.
Types of Letters of Credit: Irrevocable: - It can be neither amended nor cancelled without the agreement of all the parties to the credit - The Issuing bank gives a binding undertaking to the Beneficiary provided all the credit terms and conditions are fulfilled - Under UCP 600 all letters of credit are irrevocable
Unconfirmed: - A letter of credit forwarded by the Advising bank directly to the exporter without adding its own undertaking to make payment or accept responsibility for payment at a future date, but confirming its authenticity
Confirmed: - Where a bank usually in the Beneficiary's country, adds its own undertaking confirming that payment will be made as long as compliant documents are presented - This commitment holds even if the Issuing bank or the Applicant fails to make payment - Confirmation gives the exporter added security, particularly if the standing of the Issuing bank is unknown or the current political and economic state of the importer's country is uncertain Note: Banks may not wish to confirm letters of credit issued in certain countries - A bank will make an additional charge for confirming a letter of credit Confirmation costs will vary according to the country involved, but for many countries considered a high risk it will be between 2%-8%
Standby letter of credit: - A secondary payment mechanism used as support where an alternative, less secure, method of payment has been agreed The parties involved with the transaction do not expect that the letter of credit will ever be drawn upon They are also used in the United States of America in place of bank guarantees - Often used to guarantee performance or to strengthen the credit-worthiness of a customer - Should the exporter fail to receive payment from the importer he may claim under the standby letter of credit. - Certain documents are likely to be required to obtain payment including: The standby letter of credit itself; Sight draft for the amount due; Copy of the unpaid invoice; Proof of dispatch; and A signed declaration from the Beneficiary stating that payment has not been received by the due date and therefore reimbursement is claimed by letter of credit - The International Chamber of Commerce rules for operating standby letters of credit are UCP600 and ISP98 International Standby Practices
Revolving letter of credit: - Used for regular shipments of the same commodity between the same exporter and importer. - The credit must state that it is a revolving letter of credit. It may revolve either automatically or subject to certain provisions - Avoids the need for repetitious arrangements for opening or amending letters of credit - Can revolve in relation to time or value If the credit is time revolving once utilized it is re-instated for further regular shipments until the credit is fully drawn If the credit revolves in relation to value once utilized and paid the value can be reinstated for further drawings
Transferable letter of credit: - The exporter has the right to request the paying or negotiating bank to make part (or all) of the credit value available to third parties Useful for those acting as middlemen, especially where there is a need to finance purchases from third party suppliers - At the request of the (first) Beneficiary, it may be made available in whole or in part to another (second) Beneficiary A credit may be transferred in part to more than one second Beneficiary
Back to back letter of credit: - Can be used as an alternative to the transferable letter of credit - A letter of credit is used as security to establish a second letter of credit issued by the Advising Bank in favor of the exporter's merchandise supplier rather than transferring the original letter of credit to the supplier - Many banks are reluctant to issue back to back letters of credit due to the level of risk to which they are exposed, whereas a transferable credit will not expose them to risk higher than that under the original credit
Step by step LC procedures
1. The company applying for a Letter of Credit submits preliminary application and two other documents: pro-forma invoice from supplier to applicant, and purchase order from applicant to supplier (please seeTFS Checklist on the Downloads page of this website).
2. We provide a draft LC based on the submitted application, as well as a request for further compliance documentation.
3. Applicant shows draft to his supplier for approval.
4. Once supplier has approved, applicant notifies us of that approval and sends in funds to take care of the LC opening fees.
5. Once funds are received by LC provider and all documentation is complete, the LC is generally issued within 72 business hours and sent by SWIFT to the beneficiary's bank.
6. Beneficiary ships goods and sends the shipping documents to the bank that issued the LC.
7. We notify applicant that goods have been shipped, and where requested, provide copies (but not originals) of shipping documents to the applicant. We also give applicant a target date by which he should have sent in the funds due to the supplier. Funds to be passed on to the supplier are expected in within three weeks of receipt of the shipping documents. Note that timing of funds due in order to pay your supplier and get the documents released are based on when goods are shipped, which may be much earlier than the expiration date of your LC.
8. Applicant wires in money to satisfy amount due the supplier.
9. Bank releases documents to the applicant, who now unloads his goods.
Contact us:
Tripura / Thrinath Trade Finance Solutions
Suite 109, Viglen House
Alperton Lane
Wembley Middlesex HA0 1HD
UNITED KINGDOM
Tel: +44 (0) 20 8998 0417
Fax: +44 (0) 20 8991 0662
Email:tripura.tradefinancesolutions@gmail.com or info@trade-financesolutions.com
Web:www.trade-financesolutions.com Blog:http://trade-financesolutions.blogspot.com/
Trade Finance Solutions For all your international trade requirements
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