Export L/C refers to a package of service the beneficiary’s bank provides to the beneficiary upon receipt of the letter of credit from the issuing bank. The service includes L/C advising, receipt, examination, delivery, collection, etc.
Export L/C business contains:
Examine and verify the authenticity of the L/C and any amendment, and advise the domestic exporter.
L/C documents examination.
External inquiry, collection, recovery of payment and interest, and sending documents.
Evaluate the credit information of the exporter.
SRCB provides trade finance service under export L/C, which include export bill purchase, packing loan, etc.
Features
Transaction safety. Since importer’s commercial credit is replaced with issuing bank’s credit, once the exporter has prepared the stock and presented the commercial documents complying with the terms of L/C, it can collect the payment in time so that export collection risk is mitigated.
Expand market. In the case that the exporter has few knowledge of the importer’s creditworthiness, the choice of export L/C can ensure collection, as well as expanding in new market and developing business opportunities.
Taking the initiatives. One feature of L/C is that the bank only reviews the document but not the goods. So long as the exporter can ensure the conformity of the documents, it can get issuing bank’s payment commitment.
Applicable situations
1. For exporters who have no or few knowledge of the importers, and require importers’ bank to provide with extra undertaking.
2. For exporters who need export packing loan from the bank for preparing the goods.
3. For importers who are located in foreign exchange controlled countries, whereby L/C issuance can serve as the permission from local authorities.
Kind reminders
When the exporters are negotiating with importers, it would be better to avoid using L/C with “soft clauses”; meanwhile, exporters have to determine safe and convenient collection routes to ensure secured collection.
During the document examination, exporters are required to present with the following documents:
1. Full set of trade documents as specified in the L/C;
2. Original copy of the L/C and amendment (if any).
