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Sample billing statement letter for services rendered for Export

foreign this is Krista Glenn director of marketing at ABC Omega ABC Omega is a buffalo new york-based Global organization specializing in multinational credit and collections since 1929 we have been making good on promises for commercial clients around the world providing a full array of credit to cash Solutions including first and third-party collections credit and education services thank you for attending today's webinar export letter of credit process and documentation this is the ninth program in our 2020 webinar series welcome back for those of you who have attended any of our webinars earlier this year and for those of you who are joining us for the first time we hope you enjoyed today's presentation handouts for the program are available in the control panel under the handouts tab on the right side of your screen today's presenters are Deborah Montgomery and Tammy Gabor of Laura and Associates LLC Deborah has more than 20 years of international letter of credit preparation and processing experience starting as a one-person self-employed small business 21 years ago the company now has seven offices with highly qualified processors Lauren Associates assist exporting companies from start to finish streamlining their letter of credit process by presenting clean LC documents to the bank resulting in Swift payments Tammy began preparing letters of credit more than 35 years ago in the manufacturing environment for radiation medical technology company she joined Lara and Associates in 1996 as a self-employed contractor and helped Deborah to grow the business Cami works with companies around the globe from companies just entering the exporting field to experienced companies continuing to streamline their procedures and keep up to date with the ever-changing regulations of the letter of credit process I'd like to turn things over to Debra to get us started today thank you so much Krista and thank you for the wonderful Folks at ABC Omega for this opportunity to present with you today and welcome everyone I want to thank you for your time to be able to go through this presentation with us and as Kristen mentioned if you've got any questions or need any clarification make sure make a note of that and at the end we can be able to address that so as Krista mentioned I'm Deborah Montgomery president of Laura and Associates and with us is Vice President Tammy Gaber and just to give you a little bit of background about us I opened up the business after I saw a great needs for export companies to better understand and streamline the LC process what I did was sat down with Bankers from several major Banks to discuss with them exactly what they were looking for in letter of credit documentation and ever since then we've been helping to get the word out to better improve the letter of credit process for exporters many companies shy away from letters of credit because they have a reputation to be cumbersome and nearly impossible to present documents with this without discrepancies and we get that but when exporters develop their International policy for handling letters of credit and educate their overseas customers on the benefits of sticking to the 14 major points within the LC this makes the process much more manageable any company that plans to sell overseas should have the basic idea of what a letter of credit is and have a system in place to be ready to accept this type of payment method from their overseas customers we have found that U.S companies who open who are open to negotiate the international payments through a letter of credit they're actually opening up their customer base since these customers now can Finance the sales through a letter of credit with their Bank given today's climate with a coveted situation in volatile markets it's more important than ever to be able to secure your International payments and one way to accomplish this is by updating your International policy for letters of credit and Tammy go ahead and say hello sorry no that's okay hi everyone um thanks for joining us and I look forward to uh helping and answering any questions you might have and uh it's a it's a lot but it's fun to do and we look forward to sharing our experiences with you definitely So today we're going to discuss discussing the presentation topics of knowing your risks International payment methods we're going to be talking about commercial letters of credit specifically the definitions explanations and we're going to give you examples of those amendments to letters of credit anchor terms the brief definition of those and then how to overcome risk when dealing with them so the world of exporting is very exciting and there is never a dull moment if you've ever been in this Arena the next step is to recognize how to make these Ventures a success and more important is understanding the issues that surround you for receiving your payments these are the payment term considerations credit and other risks that may impact your decision to ship internationally we have country or political risk customer or commercial risk foreign Bank risk and shipping issues when we talk about the country risks we're referring to the stability of the export country you want to find out are there any sanctions associated with this country you want to check that the country list to ensure your country of export is not found on a negative or Blacklist also how does that country rate when it comes to fraud and next I mentioned three different websites you could visit that are out there to help exporters and these are all free for you to be able to to go to and find out more information the first is our U.S commercial service office in the Cleveland area and these U.S commercial offices are located all over the U.S but they're an organization that is specifically designed out there to support corporations with their exports and all levels next is the ofac and that stands for the office of foreign assets control which is a part of the U.S Department of Treasury what they do is administer and enforce economic and trade sanctions based on U.S foreign policy and National Security goals and then the bis list that stands for the Bureau of industry and security under the U.S Department of Commerce so there is a wealth of free information here for exporters to be able to go to to find out more information they've got questions foreign next we're talking about the customer risk so you know when doing business with any customer you know the importance of researching that customer and the same is true with when you're dealing with International you want to make sure to check that they are legitimate kyc know your customer you're going to be wanting to check to make sure they're financially sound and you can do this by pulling up Financial reports credit reports there's trade references out there Bank references I listed both of those lists the ofac and bis list that you can go on to and specifically search for certain customers on there but of course you know the most important is uh item is developing a relationship with that customer to get to know them next we talk about the foreign Bank risk so when dealing with letters of credit there is an overseas bank that's going to be involved and you want to find out all you can with regard to that foreign Bank you want to be checking their stability their size their integrity again I've mentioned the olfact and bis list here but you'll also want to be working very closely with your International Bank relationship manager because they're going to have the most up-to-date information regarding that bank next to move into shipping issues to consider so these are a list of items you want to think about when it comes to shipping your product for the actual physical products how are the goods going to be moving out by Ocean Air or trucks who will be the freight forward that's going to be used is that going to be yours or your buyers Freight forwarder what are the expert regulations to be aware of in that export country are there specifics on how the goods need to be packaged or labeled are there special foreign country requirements to ship to that country your Freight forwarder is going to be the most excellent resource that's going to be able to help out with this you want to make sure that you're working with an international Freight forwarder that has experience in letters of credit specifically there's also a set of export documentation that's going to be needed that the freight border is going to need to help get their export documents in order to be able to help clear those goods through customs and you as a company want to decide who's going to be responsible for in logistics is that going to be your Logistics team that's going to be communicating with that Freight forwarder to be able to get the necessary documents on file with them then you want to consider also inco terms wedding concerns have you agreed to that will impact your shipping costs that's something else to think about and then who will cover your insurance of the good so next to move into the international payment methods and these are the most commonly used methods we start with the very bottom the lower risk with CIA which is Cash in advance this is what of course payment is made prior to shipping Goods and then we move up the line to a confirmed letter of credit and what that means a confirm letter of credit is a bank that has added a layer of protection as long as the LCD terms are met and documents are presented clean and on time and then we move up the splatter here to an unconfirmed letter of credit and this is where payment is made based on the terms of the LC and documents submitted a little bit more riskier is moving into what's called site collection this is also known as your cash against documents documents against payments draft collections this is where your U.S and foreign Banks they're still involved in the transaction but they're going to have limited abilities to help you collect moving up the ladder there is term collection this is the same idea as your Spike collection only there's going to be terms associated with the payment such as 30 60 or 90 days from that shipment date and finally highest risk of course is open account this is your lease protection where you're shipping the goods out and you invoice a customer and you hope that they pay on this next slide I added on here what determines your choice of payment of method so at the very top we've got those payment methods cash in advance letter of credit documentary collection and open account and then on the left hand margin here this is our criteria you want to use to base your payment method decision so we talked about relationship what's your relationship with that customer if it is a new relationship LCS are a great way to go for that what about your types of goods are these custom made or are these stock items if it is custom made LCS are another good choice how about the political or economic climate if it is unstable in the country you're shipping to elsies are a good idea to use for that and then if you're concerned about the timing of your cash flow LCS are a certain method of payment because you're going to be able to know exactly when that payment is going to be coming in you'll have a set date day number um of outstanding as to when the payment will arrive at the bank and then timing of delivery it's going to be reliable to use a letter of credit because you're going to be able to understand and know from the transport document that that shipment is moving out with you'll be able to know when exactly the goods will be delivered foreign so what is a letter of credit so the formal definition is an LC is a contractual agreement whereby a bank in the buyer's country known as the issuing Bank acting on behalf of its customer the buyer or importer authorizes a bank in a seller's country known as the advising Bank to make payment to the beneficiary a seller or exporter against the receipt of stipulated documents the letter of credit is a separate contract from the sales contract in which it stays so therefore the bank is not going to be concerned whether each party fulfills the terms of your sales contract the bank's obligation to pay is solely conditional upon the seller's compliance with the terms and conditions of the letter of credit so in LC transactions the banks are only dealing in the documents and not in the goods so for commercial letters of credit if there is a sales transaction that is taking place in exchange of the goods and services for payment the shipment of goods takes place there's documents that are required to prove that the Good Ship so I'm here I'm showing of course an ocean vessel and under a letter of credit you will see an ocean bill of lighting that will be needed to be provided to prove that the goods went out or if it's going by air and air shipment then there's also truck bills of lighting and Order cargo receipts as other transport documents that we commonly see in letters of credit but the banks definitely want to make sure that there are Goods that have shipped out and they want to see proof of that so letters of credit are among the most secure instruments available to International Traders and LC is a commitment by a bank on behalf of a buyer the payment will be made to the beneficiary provided the terms and conditions have been met it's verified through the presentation of all required documents so commercial letters of credit are applicable recommended for use in New Or Less established trade relationships especially when you're not satisfied or when you are satisfied with the creditworthiness of that buyer's bank so if that buyer's bank is strong it's going to be a great um method of payment your risk is evenly spread between the seller and the buyer provided all the terms and conditions are adhered to so it's going to be really important to be able to make sure you're reading through all the language within that letter of credit and making sure you can comply with the terms and conditions and then there are Pros yes a note there too that in some countries just because you work with one branch of a bank that is solid doesn't mean another branch of the bank in that country would be like example India a a State Bank in in Mumbai may not be the same as a State Bank in um um and I'm just drawing a blank here on another height and another height of our bed right thank you hydration right India so just and here JP Morgan Chase is JP Morgan Chase wherever you go that's not the case in some of the other countries I just want to point that out so you want to know the bank specifically in some of those countries even the branches right and there again like your International Banker will be able to have that most updated information since that can fluctuate you want to make sure you're checking in with them yep good point good point Tammy and then the pros are there's payment after shipment and a variety of payment financing and risk mitigation options so what that means is you can get very very creative with the language in the letter of credit as long as you and your customer are going to agree to this and then of course the bank's going to be reviewing that as well for compliance regulations but just know there's nothing that's really set in stone you know whatever works for you and your buyer is basically what what makes an LC up but just another reminder remember that the banks are dealing in the documents only they don't have anything to do with the goods they don't know anything about the services or the performance is done or with any other sales contracts so they're only dealing with the documents that we present but commercial letters of credit they're issues for all kinds of different reasons so when the seller feels insecure with the buyer and his abilities to make the payment or the buyer may want the LC so he can Finance against it in his country were there certain countries that may control movement of funds with letters of credit and it just might be a standard way of doing business in that certain country of export so what we've mentioned here are the commonly interchangeable terms a commercial letter transaction these are all synonymous we've got letter of credit also referred to as the documentary credit LC loc we've seen it as an operative instrument or actual LC so all this language that you see on this slide we've seen within various letters of credit just to give you a better understanding and we've got the buyer who's also referred to as sometimes the Importer the applicant the accounting or account party the seller it's also known as the exporter or beneficiary the issuing bank is also known as opening Bank then we've got the draft which is a bill of Exchange the checklight paper that's presented for payment and or we have also seen it word in the letter of credit as a demand for payment that there's a drawer and that's the payee that's the person who signs the draft and there's a draw e that's the payer that's the party who must pay the draft shipper is also known as the company and receiver is known as the company that just gives you a little bit more vocab that we see throughout LLC so for commercial letters of credit there's advantages for you the seller first of all it provides an independent credit backing with a clear-cut promise to pay upon certain conditions it substitutes the bank's credit standing for the applicants payment is assured if the terms of the LC are met and there is protection from order cancellation there's also advantages for your buyer for commercial letters of credit it assures that the shipment was made ing to the terms of the LC and on time it assures that the documents requested in the LC are provided otherwise the seller is not in compliance with the letter of credit the payment is not made until goods are shipped and compliant documents are presented or the buyer approves discrepancies okay and the next slide here shows the parties involved in a commercial letter of credit so we've got the issuing bank which is your customers Bank overseas the beneficiary would be the exporter confirming Bank sometimes we've got a bank that we'll confirm the letter of credit the applicant is also known as the customer there is an advising Bank who's going to pull together the the LC that's coming in from the overseas bank and they're going to be part of um putting their cover letter on in the letter of credit and making sure that they're checking everything through the terms and conditions of the LC with their compliance regulations there's a negotiating bank and a remitting bank so sometimes these Banks play the same role One bank will play like multiple roles within the letter of credit and then we're talking about irrevocable credits so with an irrevocable credit means it is it cannot be rescinded recalled or canceled and all credits are issued as irrevocable the only way they can be is canceled is it's a beneficiary request for cancellation and then yeah then and then and there's beneficiary and the applicant both right agree to right then the applicant has to agree to it but that way you can't ship your goods and then halfway across the water the the applicant says oh I don't want to do this anymore is that can't happen right so for confirm letters of credit when you see that language in an LC this is where it adds security of payment from the issuing Bank by a second bank usually in the seller's country for the exporters can now look to the confirming banks for their money rather than issuing Bank and confirmations are not necessary or all letters of credit we typically see those in markets where it's a little bit more volatile and there's a higher risk and a higher fee yes I agree with that exactly so this is the actual what the letter credit cycle looks like it's a simplified version sometimes there's multiple Banks involved in this but this kind of gives you the general idea of what actually happens with a letter of credit we start out at the left side here with the buyer and what they're going to do is fill out an application to send to their buyers bank to open the LC with and this is when we tell our customers it's really important to get involved in the process at this point in this stage because what you can do as an exporter is you can send over to them your terms and conditions of the letter of credit and how you want to see that else be worded and then they can go ahead and take that the buyer can take that and apply that in their letter of credit to the buyer's Bank once the buyer's Bank generates the letter of credit they're going to go ahead and send that over to the advising Bank this is where the advising make is then going to go ahead and add their advice cover letter they're going to be scrutinizing that letter of credit going through regulations to make sure that it is compliant um and then they're going to send that over to you the seller and this is where it's really important for you the seller to be able to review that LLC again because you want to make sure that all those terms and conditions that you would agree to with the the preliminary copy is is exactly how you wanted that to be loaded every once in a while we do see where we've got an LC at the final stages and it's already been submitted to you folks and then they change up a couple of the different terms and conditions and you want to make sure you're looking out for that to make sure hey can we comply with that because this is the part this is the time when you will want to make those changes to that LC prior to releasing those goods so that's really important to note but once you get the letter credit that looks good and you're in agreement with the terms and conditions you go ahead and contact these Freight forwarder to get the Good Ship and then that's when documents are created and submitted to the bank and payments takes place so a lot of credit replaces the risk of the buyer with the risk of their issuing Bank and it assures the seller that he will be paid provided the documents presented comply with its terms and conditions and a confirmed letter of credit is the undertaking of two Banks the issuing bank and the confirming bank and both are equally liable to pay the beneficiary okay and then this is the site that shows the elements that are necessary to every commercial letter of credit so you in every LC you will see a unique number that's associated to that um it's the LC number you're going to also see an applicant name and address mentioned then a fishery name and address you'll see the payment terms mentioned in the LC there will be an expiration date in place the latest ship date sometimes that latest ship date is not mentioned every once in a while but for the most part you'll see a latest ship date is a presentation time that's going to be included in every LC and what that means is that the number of days that we have to get documents to presented to the bank on time the shipment from and shipment two those are going to be your ports or your airports that will indicate where the goods are going to be coming from going into next is the encode term and that's going to be able to tell us if the freight is prepaid or collect how is it going to be sold and then there's going to be a section that's the description of goods and this is where we tell our customers you want to make sure you try to keep that as basic as you can maybe only several lines that are going to identify the commodity of the goods sometimes that's where the equal terms are also included but what we want to try to avoid is a page list of line items that shows that description because the more complex that description is the greater risk the banks are going to be able to cite a discrepancy because they have to scrutinize every single character every single word they if there's any type of calculation in that description they have to make sure that that all matches and they are having to look through everything so in order to avoid any possible hiccups or type errors it's best to keep that description as brief as possible then there'll be a section in the letter of credit that's going to be the documents required section and that'll list all the documents that are needed then there's additional conditions and this area is important because this is the area where sometimes you will see other comments that they will add into the letter of credit you want to just make sure you're reviewing that to be make sure you're in agreement and that you can comply with what they're saying in additional conditions then there's remittance instructions that tells what bank is going to be responsible for payments and then finally we're looking for the wording that says the LC is issued per UCP 600 and exactly what is that I'm showing this on the next Slide the UCP 600 is what governs letters of credit so think of it think of it as a set of rules that govern the documentary credits their issuance their verbiage their interpretation and negotiation it was developed back in 1933 by the international Chamber of Commerce Commission on banking technique and practice and it was revised in 1951 1962 74 93 and 2007. so it's an article it goes article by article on what is acceptable when it comes to examining and interpreting letters of credit and the documentation the UCP also has a companion known as the international standard banking practice for the examination of documents and under documentary credits also known as isp98 ICC publication so what this does is it helps banks around the globe be able to look at the documentation with reference to something they can resource to be able to better interpret if the documents are compliant probably the best way to to um explain that one if you ever have problems sleeping UCP is wonderful it's got article upon articles that would recently goes into great depth um and all of our staff members have this readily available as well as the ISP 98 because we do reference this many times quite often yes okay so I'm gonna let Tammy take it from here to show you the actual examples of several different letters of credits she can walk through okay hello um Deb has mouth control so she's going to follow Lawn Care um at the top you'll see the transaction information and transaction type sending Bank this is basically the information provided um by the issuing Bank where this information is coming from and then you drop down to the receiving bank that's the bank that they are communicating the copy or the Swift of the letter of credit to um in the U.S or in some cases other countries that advising Bank um mostly in the U.S would be your U.S advising Bank um the the International Bank that you do most business with um thanks can advise through another bank um if say example if you do your business through JP Morgan but the customer says why don't our bank doesn't have a relationship with JP Morgan we they have a relationship with Wells Fargo we're going to advise through Wells Fargo that's something you need to work out in negotiation you can communicate with your um Bank to see if they can set up a relationship with the issuing bank or you can just merely choose to say okay we'll accept another bank as our advising Bank um dropping down then into 40a you'll see where that states that um the form this form of the documentary credit is an irrevocable letter of credit you do want to try and see irrevocable letters of credit that's that's important um the next 20 is your documentary credit number your letter Credit Credit number um the date of issue is 31c that's the date in which the issuing bank has accepted the credit and has opened the letter of credit for your customer those two things most often are required on all documents so those dates are important um you you can see where the applicable rules and 40e are UCP and they just merely say the latest version um 31 D is your date and place of expiry um it always if you were in the United States it should always be your a bank in the United States you do not want your documents or your letter of credit to expire if you're doing business in India you don't want it to expire in India because that means that your documents have to be at the issuing Bank theft in India or in this case in Hong Kong if if it expires over there not only do you have to get the documents that you have prepared to the um advising bank here in the United States in this case in Minneapolis they have to examine them and then they have to forward them on over to the bank in um Hong Kong it takes not only Transit time which is one to two days it also you have to remember these documents have to clear Customs on the other side normally they clear in a day to two days but I've seen them get stuck in customs so you're already at four days and then also your bank here in the United States has up to five days to examine and hold documents so it normally they turn around overnight but it could be up to nine days and if you present close to your expiry deadline you have to add nine days to get those documents over to the issuing bank if it expires here in the United States they have to be at the bank within that time frame of that expiry date um provided your latest ship days are good also you then have control over them if the documents are sent overseas to be final examined and if you made a simple mistake you would have to read do that document and send it all the way over to seize to get it accepted and your Communications back and forth could take days because it's overseas so always have that expiry date be United States um line 50 is your applicant that is the your customer's name and address okay next slide on to 59 the beneficiary that is you the seller you are the beneficiary of this letter of credit you will benefit from this sale you are also know that a letter of credit titled completely is a beneficiary's letter of credit you own this letter of credit you control this letter of credit this letter of credit cannot be canceled unless you initiate the cancellation your customer can't initiate the cancellation so this is your baby and it should look the way you want it to look and that is all negotiable with your customer but if you have certain things you want in this this is your time to control that situation um 32b is the currency code amount that's basically um if you work in US Dollars it's in U.S dollars if you're in another country say Great Britain that would be um in great in British pounds um I have seen them come in in Euros that is acceptable if that's what you want to work in but um usually it's in the dollars available with Buy in this case um 41A this means that only these documents can only be presented back to the issue or to the advising Bank U.S Bank in Minneapolis they can't go to JPMorgan Chase and be examined they can't go to Wells Fargo be examined you would have to return these back to um this Bank you can um and we often suggest that you say with by any U.S Bank that means if you don't want to um send to Minneapolis you don't have to um there could be I mean in New Orleans they could get a hurricane and the banks could shut down and if you're advising bank is in New Orleans you're stuck you can't send your documents anywhere else so you may want to always have that line be any U.S Bank that way you could send it to another Branch say in New York or another bank in North Carolina so you want to look at consider that when you're looking at 41A 42c is um the terms you're accepting in your site are in your draft I want to be paid at site that means when the documents arrive at the issuing bank and they are determined to be clean payment will be released immediately um you can give your customer terms that's a negotiation tactic prior to the opening of the LLC you could say 60 days from data bill elating is the date I will accept it I'm extending terms to my customer um I've seen 30 days from invoice date those are all things that you can consider number 42a is the draw e in this case this letter of credit was probably a confirmed letter of credit because the draw e is the U.S Bank in Minneapolis um most often that draw e-party is the issuing Bank um that's where that's going to be drawn on um 43p is really important it looks very miniscule it's a partial shipment being allowed we always always always I can't say it enough always recommend you allow for partial shipments explain to your customer this is not because I want you've ordered 40 000 widgets and I only want to send you twenty thousand and then I want to send you twenty thousand more I want to send you all 40 000 at the time that I send this shipment out but it's going to take two containers to ship this and I'm shipping those containers from my doc on the given day of the ship date and I'm sending them by rail to the port and they get to the port and 20 000 widgets in one container go on vessel a up vessel b or vessel a there's no more room we have container number two it's not going to get on this vessel or it got left in the yard or it got left on the rail and now the vessel or the container B has to go on to a different vessel you are now partially shipping your shipment even though it left your yard at all together one got on one vessel one got on the other vessel you now have a partial shipment so if you do not have Parcels allowed your documents are discrepant because you're going to issue two separate bills of lading or in case of air to Airway bills um trans shipments not allowed um you can allow them or not we try and make sure that that you um even if it transships we liked it to just put one port of um loading in one port of discharge and make things simple on the bills of lading and airway bill 44 e um airport or port of departure we suggest you always do any port in the USA or any airport in the USA um I'll use my hurricane example again you're you're porting out of um Houston and it's hurricane season and a hurricane comes into Houston and shuts down the port but you have to get your stuff out of that port you can't um so you have to reroute to Los Angeles but if that said porting out of Houston you would have to go back and get an amendment have them issue a new amendment to stay now we're going to Port out of LA um so make sure you put any USA port and that way you can ship it out any port that is available um you have Port of desk Port of discharge Hong Kong we go back and forth on this we have often tried to have the customers allow certain saying any port in China or any port in India only because of Port overcrowding we run into that at times um that way you can say yes we want to ship it to Mumbai because that's where you want it to go in India but that Port is overcrowded and we can't offload there so we're going to have it shipped to Chennai or whatever um we're at airport um it it just allows you some some flexibility but oftentimes the customers won't um won't work that way and understandably they know they're they know their countries better and how easy it is to do that um 44c the latest ship date this is really important if I can't emphasize anything else I emphasize this this is not the date your goods leave the dock at your facility this is the date that your goods have to be on an airplane or have to be on a vessel they have to be confirmed on board by this date otherwise you will be discrepant 44 or excuse me 45 a description of goods and Deb mentioned this before and even this um I would I would simplify this even more I wouldn't say 5 times 40 foot reefer container of I would just say frozen U.S beef products now there might be some regulations because we're dealing with meat that they might have to specify this a little more detailed but you want your description to be very very very simple and you can just say frozen usab products as per applicant's order such and such end of discussion because your value is going to be noted up in another um sectional letter of credit so that's going to give you your value and um the details of your description are going to be in the separate shipping documents not the payment documents LC documents are payment documents they are only to get you paid shipping documents are your very detailed documents that you have to send with every export whether it's letter credit cash against documents or open terms they need very detailed documents on the other side to clear those through customs in a letter credit transaction you have your payment documents and you have your shipping documents your shipping documents we go to the forwarder with all those details to be put in the packet information that'll arrive on the forwarders desk in the country of of destination and they would get those when they've shown proof of payments so keep this description as simple as possible okay Deb on to the next slide um 46a is your documents required really for a letter of credit you the maximum number of documents you probably would ever truly need with some simple variation sometimes is six that would be your draft that you would create from the previous information and then your your payment documents you have assigned commercial invoice um that is very simple in description and then it would show the payment term and then you have your packing list which is very simple in its explanation it's going to say basically packing list with a brief description and it's gonna absolutely identically match your transport document as far as pieces and weights you can see there's no details in any of those requirements there that need to be added um you have your your bill of lading which is made in this case to order and it would have to be blank endorsed um you never want to consign your goods directly to your customer under a letter of credit because the whole point of letter of credit is to consign the goods so that your customer doesn't get their hands on their goods until they've paid the letter of credit so you can sign it to order blank endorsed or you can sign to the order of the bank and then notify the applicant and then the customer has to go to the bank to get the documentations in order to clear his Goods if you can sign directly to the customer they're going to get their goods because they take immediate ownership um and as you'll note here it says free prepaid because it's a prepaid shipment um the next paragraph is the insurance because this is I believe the terms were CIF um okay the insurance certificate is required in this insurance certificate um this is a basic insurance certificate with basic language oftentimes an insurance certificate automatically pre-printed in this it's going to say covering the following risks into cargo Clause Institute War clause this has to be repeated it has to be stated again but all that is very general good information and then in the next um item is your certificate of origin you'll note that not every certificate of origin needs to be certified by the chamber in this case it would just be a simple document saying these goods are of in this case USA origin um in 47a you're looking at additional conditions this is where you can see some of those hidden things that you might find in this case I don't see any hidden things um it's telling you about the sanctions regulations that the banks have to follow if they found any um any um boycott language or anything they would have they would not be able to um work with this letter of credit and it's just telling you that um as far as number two it's just disclosure information number three is just again talking about sanction information so you just want to read through these make sure there's no hidden verbage in there next slide this is another letter of credit um that that um Deb has an example of in here and bear with me just a second um there were this is basically laid out in the same exact fashion you'll see all the numbers are identical and you'll see down here on 41d I mentioned any USA Bank by negotiation in this case now these documents can be returned and presented to any Bank in the United States that accepts International letters of credit documentation and in this case the draw e and 42 2D is the issuing Bank now you'll also note that in 43p they put Parcels not allowed they probably couldn't convince the customer to allow for Parcels but it's always a good idea to allow for Parcels okay um then um continuing on you can see the the ports of discharge Etc um you'll see the description of goods here in 45a says Hangar as per performer invoice that is the best description I've ever seen it's just one word I love it um in 46a this is an example of something that that you don't necessarily you'll see under commercial invoice it says delivery note issued by seller these words countersigned by buyer and buyers or buyers representative this is something you never want to accept in a letter of credit you are allowing your buyer to have to provide you with a counter signature on a document you are presenting in the letter of credit that is that means you would prepare the document you have to send it over to your customer and have them sign that document and Courier it back to you so it's an original signature it you can email it over but it's going to take two to three business days for that Courier pouch to come back that's delaying your presentation that's delaying you get documents to the bank that's delaying you get payment that's delaying your customer getting documents from his bank so that he can quickly go and retrieve his Goods out of customs and that's all if he returns those documents immediately I have had customers that don't get statements out of this out of the bank or out of the letter of credit and um the customers two weeks later hasn't returned that document signed you can't present documents cleanly until you receive it you're late getting your presentation in now your late presentation now you have to get customer approval to get your payment it just is not worth it get that statement out of there then you have a packing list which is very simple and clean here in additional conditions they've talked about different charges and such like that down below the end or in that same place all documents required under this letter credit must be in English and that's the way it should be once in a while they'll sneak a lot another language in there you you prefer them in English if if they're gonna be done in the United States they have to be done in English otherwise the U.S banks do not have to examine them um all drafts in duplicate this means that anything any draft that you present has to be issued in duplicate it cannot be issued as a single this is a hidden little um treasure here and then it's telling you also that you have to have the LC number and the date and the name of the bank the issuing Bank and again that's hidden down in additional conditions so you got to be careful to read everything that's available um down here um Deb is highlighted 53a it's noting that the reimbursement bank is a different bank than um I think it was the opening Bank so we can go on to the next part because the rest is just information for banking purposes um here's another little example um I'm not going to read through all this in detail um I'm just going to go down to um in the commercial invoice invoice um it says the original of which must be certified by national um can you see the debits like the first plus site okay this is requiring legalization because these documents are going over to I believe Jordan we do have a service that we deal with where we can get documents legalized um it is required for a lot of the Arab countries and you do have to go through this process it is a bit of a painstaking process so you you know there are things that you need to know if and when that occurs so just note and then there are fees and um there's fees that you would be responsible for obtaining that legalization and it does require extra time because the legalization process through some of the Arab embassies can can take a little extra time so you should build at least 30 days into your presentation time and just a side note here Tammy like nowadays we're seeing where a lot of this legalization language is no longer in the letters of credit because the customers are able to legalize the documents once they get in country right so that's a really good thing I like to see that movement because now we don't have to be encompassed by waiting for documents to be returned from the legalization and from the embassies because sometimes if they take a holiday we're waiting for them to reopen for documents to get stamped and signed so it's really important if you run into that I always go to the customer and ask them hey go back to the overseas customer to ask if that can be done in country and taken out of the letter of credit and there in most countries do do that I think um I think Oman is one still that won't allow you to do that and another good point too um during this time during covid those delays can be in addition if there's illness or you know they're shut down they're having you know certain days on certain days off so it is a good idea to to try and get and here's the other thing too about legalized documents the documents they actually want to be legalized are those shipping documents that go with your Freight forwarder set that go over to the um the forwarders desk overseas to be held for payment because the banking documents are not the documents they're going to use to clear Customs these are only payment documents the documents they're going to use for Customs clearance are the documents that they really want legalized and you can get that if they absolutely insist that they have to be done here then get it out of the letter of credit and say we sort of buy that and put a statement and it says we certify we have obtained legalized documents and they are being um sent directly um and that way it's not involved in the letter of credit okay um and here again on to let's see item number three um item number three is yeah item number three is is saying the certificate of origin needs to be legalized if the certificate of origin needs to be legalized the commercial invoice needs to be legalized and vice versa item number four is a um you will see oftentimes in a lot of documentation or in the last letter letters of credit it is a certificate required by the shipping company um certifying the following items now these items all can be certified by a shipping company the thing with ship certificates you have to be careful with they can take a lot of time most shipping companies will not even look at issuing a ship certificate until the goods have been confirmed on board that's adding extra time that you need to get all your documents together and it can take them up to five days at minimum like they could do it quickly but it might take them up to five days to get you a shipping certificate so that's delaying things um this one is compliant and um it's there's no boycott language in here so they can issue this you just need to make sure also that if you have a ship certificate it has to be signed with the same signature capacity as your bill of lading if you're using an nvo carrier um and their shipping um as carrier and say for example and it's expeditors they ship on their own bills of lading um but the shipping certificate has to be issued by mayor spline because expires can't issue the shipping company you're going to have two different entities signing as carrier the bank will not accept that that's going to be in conflict so you have to make sure that when you get something like this you go to your forwarder and you say I need the bill of lading and the shipping certificate issued and signed in the same capacity can you make that happen can or you know can we get this and can it be compliant the other thing is sometimes shipping companies do not want to say the words the way they're written on this page um you just it's something you have to put together and you have to be um aware of okay here we have a packing list um it asks for a little bit more detail they want to know the method of payment it wants a statement of seaworthy that's fine the weight certificate is just the packing list with a little different wording it's not any big deal some sometimes they require two the next one is um the next slide is item seven the insurance policy or certificate and the one thing I noted on this when I looked at it is about halfway down it says um Iman Jordan irrespective of percentage stating the name and address that irrespective of percentage is going to trip you up if you have a deductible on your insurance policy on the cover because it that's a conflict if you have a deductible out of your loss and this says irrespective of percentage those two don't agree and that will be a discrepancy um on to number eight these two documents um are third-party documents and normally we would tell you that third-party documents are a curse and they should never be in a letter of credit there are a few Industries out there that do require third party documents and letter credit and the beef or the agricultural industry is one of those you'll note at the bottom of number eight it says the certificate not to show the name of the bank and the LLC number um and the reason we say third-party documents are of course because often you can't get the LC information to be on the document or the names won't be written right or the information won't be listed exactly as it is in the letter credit um in these two incidences that these this works very very well that that they do make them compliant um but third-party documents um like in the shipping company certificate often they put other information on there that is not compliant to the letter credit they could use a description that's different they could um not put the LC number on there correctly um you just do not want third-party documents to enter into an inspection certificate issued by a third party company because that third party you can have it outside the letter of credit we will send it to you we will put a statement in the letter of credit that says we have done this and and provided you your your third party certificate but keep those at a letter of credits um so those could be just sent directly by Courier to the customer so good the next slide these are just two examples of language that we suggest always avoiding in a letter of credit all cartons and boxes to State pieces quantity product name um and because you don't want to say I've got thousand widgets in this container and 5000 in this container and 2000 in this container and the weights of each of these are you know so many kilograms here so many kilograms so many kilograms and then all that stuff has to add up and balance because if you aren't exactly on the on the exact weight with in an ounce or a kilogram it's going to be discrepant you can't you need to have as little detailed information as possible you never want to have your peace and weight counts that detailed in the letter credit that's what your shipping documents are for they can have that information they should have that information but not in the payment documents that all belongs in the shipping documents okay so I think you're Deb you're on for the left yep so these are the common documents that you've just seen where Tammy explained in those samples of what you will see in a commercial letter of credit it's the draft the commercial invoice a transport document packing list sometimes Insurance certificates sometimes certificate of origin beneficiary certificate sometimes they'll ask for a copy of an advice detailing shipping information that's all fine we could just give them something that gives them more detailed information as far as the ocean vessel or the airline that helps them get more prepared for Customs clearance and then other documents is needed for specific industry or individual transactions so that's again something you can decide on with your customer on what all should be included in that LC um and then so we're going to move on next to ways to simplify the LC process so we talk with our customers we tell them it's a really good idea to be able to develop your own corporate wide letter of credit requirements and all this is is your company's terms and conditions for opening a letter of credit and this is put on your company letterhead and then a beneficiary letter the requirements get submitted to the customer with a purchase order and then this is where your customers submits that LT requirements through their bank so that's at the very beginning stages of processing when your customer is approached you wanting to get payment um to pay you through a letter of credits you're able to then send them over the terms and conditions and then they can negotiate with you at that point but it gives them a starting point and in the guidelines that we work with our customers with we always show the exact line items for that letter of credit so that when they are dialoguing and communicating with that overseas customer they're going to be able to identify which fields you're specifically talking about so that helps them to better understand what you're looking for and this is just example of what that looks like um you know we're issuing an irrevocable letter of credit we're asking you to to go ahead and advise through our bank and every information that you see in red is what we need you to fill out with this type of a form everything you see in black is something that the banks are going to be able to fill out once they get things processed I was just gonna say I forgot to mention the 21 days um that is okay from from the ship date if you shipped on the 20th you have 21 days in this case to bank those documents and you need that 21 days especially around holiday times Etc yeah and and that's where you're showing here in this red um where we've got a date in place of expiry which should be the 21 days after that latest ship date was noted in 44c and then the expiry place should be USA so we have customers that are able to calculate exactly when their shipments will be ready and they're actually putting in those dates for their overseas customer to be able to use to open the LC with so um and then I've got other customers that'll say okay let's let's go with maybe an expiration of like 90 days from date of issue so it depends on you know how you want to format that and then of course we mentioned here 40e is going to always show applicable rules as UCT latest version and then that line item 59 is the beneficiary address applicant address is 50 the currency there available with that could be your bank or any bank which is what Tammy had mentioned before the draft at spite is what we typically recommend that do your quickest time of turnaround for payment 45 a is going to be the description of goods and then it mentions all these other so all this in red is something that you as a company can decide on as to what your terms and conditions will be keep in mind too that based on that information if make sure that when you fill that out if they're going to use that as a guideline to open you check your spelling you check your your descriptions because it has to be exactly documents have to be prepared with the exact information that is in the letter credit so if you spelled um the name Lake lke that's how it's going to be spelled in a letter credit so um you want to make sure that everything is is crisp and clean when you send that over as well that's a good point and lately what I've seen Tammy is the overseas customers our misspelling our U.S company names from time to time so yeah I know you know when you're looking at things you you're kind of browsing through that pretty quickly but make sure that your company name is definitely spelled correctly all right and then here we're just going through again the 43p is that partial shipment allowed and transshipments allowed 49 is your confirmation instructions and this is where you can enter that and decide if you want to confirm that um and then 71b is going to be your charges and for 71b you can go ahead and call out as many charges as you want um that you're going to be paying for and then what your applicant's going to be paying for um we also see letters of credit open where all charges are for the account of the applicant so if they want to be able to finance through an LC then they should be paying those charges with some of our customers I've done and then here's just a list of the common discrepancies I thought this was would be interesting to be able to note that this is what we're hearing from our banking friends that um when they're reviewing letters of credit documents they in general there's a late shipment meaning they've missed um that latest ship date that's mentioned in the letter of credit and just to point something out here with the whole coveted situation I do have a couple of customers that were able to actually leave out a ship date in their letters of credit just for the time being um because things were so backed up at the ports and they did not have any control as to when those goods would be able to actually ship on the ocean vessels so I we have had some customers that have been successful with just leaving the ship date out and just letting there be an expiration date mentioned um latest president or the late presentation is a discrepancy and that's again where um documents have been presented to the negotiating Bank and it's beyond the days that were allowed so from the time that ocean vessel or airliners um from the time they ship everything out we need to count how many days until we can get those documents successfully to the negotiating main counters and typically about 21 days we've got that is 21 days including weekends that's not 21. or holidays it's including if Christmas New Year's all in there and the bank's not doing business on those days it still counts that's a good point and and also like we're throwing around the the number 21 but you can come up with as many days as you need I have one customer where they know they need more time to be able to get let's say the transport document or they've got another document that's needed that they know it takes more time to get back um so they will request their customers to allow for like a 30-day window so that's also you know acceptable as well and then documents yeah if legalization would be involved you would want at least 31 days for legalization yeah that's a good point yeah because it's more time and then also documents called for in the LC that aren't presented so missing documentation is sometimes what the banks are seeing within when they get these reviewed these documents the correct number of originals and copies of documents not presented and documents are not prepared by the correct party so if they'll see specifies that a certain document has to be issued by a certain party that's what they're going to be looking for so in these next couple slides what we're showing here is the operational procedures for letters of credit for what our company does when we work with customers so what we do is Laura receives the following documents from the beneficiary that's either by Courier Service or typically by email if you do have an original letter of credit we want we need that to be able to present documents to the bank but typically now we're getting just um an emailed version of that letter of credit a copy of a commercial invoice any product related material required in the letter of credit and we're asking for a large cover letter that's going to help us identify the forwarder and contact phone number and I'll show you an example of what that our cover letter looks like in the next couple slides and then the beneficiary is going to be sending the forward or the following documentation with the shipment a forward or cover letter which I'll show you what that looks like from us a sample um there's also the forwarders going to need a photocopy of the letter of credit plus any amendments and then a copy of commercial voice and packing list and for ocean shipments what larva will do is we'll contact the freight forwarder to email them over a master bill of lading per the letter of credit and then the forwarder is going to email us back a proof copy so we're going to look that over we're going to make any changes or you know just making sure we've got another set of eyes looking at that to make sure that the information is accurate and then once the original is is drawn up then they're gonna the freight forwarder is going to send to us the original by Courier Service for air shipments the forwarders can email us a copy of the airway bill and if we get permission from the freight forwarder we're actually able to create that airway bill in our computer system for the letter of credit so we just need an email version of an airway bill and then once we receive the transport documents what lar does is we create all the remaining beneficiary documents in our computer system and that's going to keep all the documents consistent because one of the things the banks are going to be looking for not only are they going to compare each document to the letter of credit to make sure it's in compliance they're going to also be looking for consistency within the documents so by us recreating everything we have templates in place that we're able to show the information in the same areas to make it better for the bankers to be able to negotiate and get through those those document presentations discrepancies I'm sorry the banks have five days to examine the documents that means five days at the advising bank and five days at the issuing Bank to examine documents most banks today well I shouldn't say that because kovitz adjusted that time frame but for the most part it's an overnight examination and then they advise you that the documents have gone o