Export Formalities Regarding Letter Of Credit

Recent trade statistics indicate that the exports from the France have increased substantially. However, many companies and individuals in the France, for various reasons, are still concerned about exporting their goods and services to foreign countries. One of their main concern is RECEIVING PAYMENT.

International trade involves a flow of goods from Seller to Buyer in accordance with a contract of sale. Similarly, after the goods have been shipped the Buyer must pay the Seller.

There are various methods of settling international trade transactions such as; Open Account, Foreign Collection, Cash in Advance and Documentary Credit. Parties in international trade are aware that payment may be influenced by various issues. Therefore a method of payment should be selected based on; the relationship between the Buyer & Seller, Type of Goods, Governmental Policies and Currency regulations, Politics & Economics of the country and the timing of cash flow and deliveries.

One of the most common methods of payment is the Documentary Credit. It is also know as Letter of Credit, and is issued by a bank.

The Standard Documentary Credit Application Form has been developed by the International Chamber of Commerce (ICC), in Paris, France. The ICC has also published a guide to Documentary Credit Operations. Banks around the world adhere to the uniform customs and practice for Documentary Credits, 1993 Revision, Publication No. 500, which is also referred to as UCP 500, and the L/C has to so indicate.

UCP 500 clearly states that in Credit operations, all parties concerned deal with documents and not with goods, services and/or other performances, to which the documents may relate.

Letter of Credit terms and conditions, and the required documents, should be agreed upon by the Buyer and Seller, preferably at the time when the commercial contract is concluded. L/C issuance instructions should conform to the terms of such agreement.

Those exporting goods from the France should request the overseas Buyer to open an Irrevocable Commercial Letter of Credit, payable 100% at Sight, freely negotiable or confirmed by a bank. If the L/C is to be confirmed, the Seller should also request the Buyer to instruct the issuing bank to get the L/C confirmed by a France bank.

World wide about 60% of the L/C documents are submitted with discrepancies. Therefore it is advisable for you to appoint a knowledgeable and experienced freight forwarder to prepare the L/C documents.

We have the experience and knowledge to prepare documents in accordance to L/C requirements such as; Commercial Invoice, Bills of Lading or Airway Bills, Insurance Certificate, Packing List, Certificate of Origin, Bank Drafts etc. If requested, we will also negotiate the L/C documents with your bank on your behalf.

If the L/C states Payment at Sight, the Seller should receive payment within reasonable time not to exceed seven banking days after the Documents are submitted within the validity of the L/C and accepted by the Negotiating/Paying bank.