In the last few years, banking regulations have tightened around the world as banks have put in place \u201cKnow Your Customer\u201d requirements in an effort to combat fraudulent transactions.\u00a0 While this affects many aspects of banking and payment methods, it is very noticeable when opening and issuing Letters of Credit (L\/C\u2019s).<\/p>\n
For international customers, L\/C\u2019s are a useful tool to finance equipment.\u00a0 L\/C\u2019s have a reputation for being a complicated and expensive means of payment, but they provide many protections for the buyer and the seller.<\/p>\n
For every Letter of Credit shipment, Insta-Pro will send order-specific instructions for the customer to provide to their bank prior to issuing the L\/C.\u00a0 Some of the key information included are the following:<\/p>\n
Latest Ship Date:<\/u>\u00a0<\/span><\/strong> Banks charge fees based on how long an L\/C is going to be open so a customer may look at the date on our instructions and ask that it be shortened.\u00a0 However, there are multiple items that factor into that date.\u00a0 The first is based on the Dispatch Date as indicated on the Insta-Pro Purchase Agreement.\u00a0 If we quoted 6-10 weeks, we would start the calculation at 10 weeks.\u00a0 We then add 3 weeks to allow the shipment to make its way from our factory in Iowa to the US or Canadian port.\u00a0 Finally, we add 2-4 weeks providing the customer time to work with their bank to open the L\/C.<\/p>\n Confirmation<\/u>:<\/span><\/strong> We require a confirmed Letter of Credit so that the US bank agrees to pay the LC amount in case the foreign bank defaults.\u00a0 Many country changes can occur in the 3-4 months that an L\/C is typically open for and we want to be able to supply the order without any disruptions. The US bank should be unrelated to the issuing bank. Contact us with the US bank information in advance as we can then review whether we have an existing relationship with them.\u00a0 Because of the new regulations, many banks will refuse to advise or confirm the Letter of Credit if they don\u2019t know all the parties in the transaction.<\/p>\n Partial Shipments<\/u>:<\/span><\/strong> We ask that partial shipment are \u201cAllowed\u201d.\u00a0 The main reason we ask for the \u201cAllowed\u201d partial shipment is when the order requires more than one container.\u00a0 This allows the containers to travel on different vessels if necessary.<\/p>\n We ask to see a draft version of the L\/C before the bank issues it.\u00a0 Along with our bank and freight forwarder, we review it to ensure we can comply with all the requirements.\u00a0 This process goes much more smoothly if the initiating bank has followed the instructions we provided in advance.\u00a0 If changes are required, it is easier to make them at this stage of the process.\u00a0 Once the LC is issued, any changes require an amendment and each bank will charge an amendment fee which is an added expense for the buyer and seller.<\/p>\n Once the confirmed, accepted Letter of Credit is in place, the customer\u2019s work is done.\u00a0 Insta-Pro will initiate the customer order and start building!<\/p>\n As you can see, International Letters of Credit are an involved, but sometimes a necessary process.\u00a0 Our experienced International shipping team can provide you with valuable advice to help guide you step by step.<\/p>\n","protected":false},"excerpt":{"rendered":" In the last few years, banking regulations have tightened around the world as banks have put in place \u201cKnow Your Customer\u201d requirements in an effort to combat fraudulent transactions.\u00a0 While this affects many aspects of banking and payment methods, it is very noticeable when opening and issuing Letters of Credit (L\/C\u2019s). For international customers, L\/C\u2019s […]<\/p>\n","protected":false},"author":28,"featured_media":4026,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[31],"tags":[8778],"class_list":["post-14790","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-businessstrategyandfinance","tag-financing"],"acf":[],"yoast_head":"\n