1. EXPORT LETTER OF CREDIT PROCESS AND DOCUMENTATION
LARR & ASSOCIATES LLC
LARR & ASSOCIATES LLC
EXPORT LETTER OF CREDIT PROCESS AND DOCUMENTATION
Deborah Montgomery, President
Larr & Associates LLC
Good afternoon and welcome everyone. Today we are going to unpack ways to reduce trade financing through the EXPORT LETTER OF CREDIT PROCESS. I am Deborah Montgomery president of L&A . Just to give you a bit of background about us, I opened the business 22 years ago after I saw a great need for export companies to better understand and streamline the LC process. So I sat down with bankers from several major banks to discuss what exactly they were looking for in LC documentation and ever since then we have been helping to get the word out to better improve the letter of credit process for many companies. Our customers are referred to us through bankers and freight forwarders but the majority or our customers base we have met through are involvement with several international groups. During the presentation please feel free to stop and ask any questions.

2. Payment Term Considerations – Credit and Other Risks
LARR & ASSOCIATES LLC
Payment Term Considerations – Credit and Other Risks
Country (Political Risks)
Customer (Commercial Risks)
Foreign Bank Risks
Currency Risks
Shipping
The world of exporting is very exciting and never a dull moment!
Next step is to recognize how to make these ventures a success.
Most important is understanding the issues that surround you receiving payment. These are the Payment Term Considerations – Credit and Other Risks that may impact your decision to ship internationally. Country (political risks), Customer (Commercial Risks), Foreign Bank Risks, Currency Risks, Shipping

3. Most Commonly Used Methods
LARR & ASSOCIATES LLC
International Payment Methods
Most Commonly Used Methods
Next we move onto Intl Payment Methods – these are the most commonly used methods
We start from the bottom the lowest risk for you the exporter begins with:
CIA – cash in advance. Payment is made prior to goods shipping
Confirmed LC – bank has added a layer of protection as long as LC terms are met and docs are presented clean and on time
Unconfirmed LC – payment is made based on terms of the LC and docs submitted
Sight Collection – also known as Cash Against Docs, Docs against payment, Draft Collections. U.S. and foreign banks are still involved in transation but have limited
Abilities to help you collect.
Term Collection – same idea as Sight Collection only there are terms of payment such as 30, 60, 90 days from shipment date
Finally Open Account – the least protection where you ship goods and invoice your customer and hope they pay

4. What is a Letter of Credit?
LARR & ASSOCIATES LLC
What is a Letter of Credit?
An L/C 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 the seller’s country, known as the advising bank, to make payment to the beneficiary (the seller or exporter) against the receipt of stipulated documents.

5. LARR & ASSOCIATES LLC
A Letter of Credit is
The L/C is a separate contract from the sales contract on which it is based and, therefore, the bank is not concerned whether each party fulfills the terms of the sales contract.
The bank’s obligation to pay is solely conditional upon the seller’s compliance with the terms and conditions of the L/C. In L/C transactions, banks deal in documents only, not goods.

6. COMMERCIAL LETTERS OF CREDIT
LARR & ASSOCIATES LLC
COMMERCIAL LETTERS OF CREDIT
A Commercial Letter of Credit is a sales transaction taking place
It is an exchange of goods or services for a payment
Usually a shipment of goods takes place and documents are required to prove the shipment

7. COMMERCIAL LETTERS OF CREDIT
LARR & ASSOCIATES LLC
COMMERCIAL LETTERS OF CREDIT
“Letters of Credit” (L/C, LOC) are issued for all kinds of different reasons
When the seller feels insecure with the buyer and his abilities to make payment
The buyer may want the L/C so he can finance against it
The country may control movement of funds with letters of credit
May be the standard way of doing business in that country

8. Commercial Letters of Credit Advantages for the Seller
LARR & ASSOCIATES LLC
Commercial Letters of Credit Advantages for the Seller
Provides an independent credit backing with a clear cut promise to pay upon certain conditions
Substitutes the banks credit standing for the applicant’s
Payment is assured if the terms of the L/C are met
Protection from order cancellation

9. Commercial Letters of Credit Advantages for the Buyer
LARR & ASSOCIATES LLC
Commercial Letters of Credit
Advantages for the Buyer
Assures that shipment was made according to the terms in the L/C and on time
Assures that the documents requested in the L/C are provided, otherwise the seller is not in compliance with the L/C
Payment is not made until goods are shipped and compliant documents are presented or the buyer approves the discrepancies

10. COMMON DOCUMENTS TO A COMMERCIAL LETTER OF CREDIT
LARR & ASSOCIATES LLC
COMMON DOCUMENTS TO A COMMERCIAL LETTER OF CREDIT
Draft
Commercial Invoice
Transport Document
Packing List
Insurance Certificate
Certificate of Origin
Beneficiary’s Certificate
Copy of Advice detailing shipping information
Other documents as needed for the specific industry or the individual transaction

11. KEYS TO SIMPLIFYING THE LETTER OF CREDIT PROCESS
LARR & ASSOCIATES LLC
KEYS TO SIMPLIFYING THE LETTER OF CREDIT PROCESS
DEVELOPING CORPORATE WIDE LETTER OF CREDIT REQUIREMENTS
COMPANY’S TERMS AND CONDITIONS FOR OPENING A LETTER OF CREDIT
BENEFICIARY LETTER OF CREDIT REQUIREMENTS FORWARDED TO CUSTOMER WITH P.O.
CUSTOMER SUBMITS LC REQUIREMENTS TO ISSUING BANK TO OPEN THE LETTER OF CREDIT

12. OPERATIONAL PROCEDURES For Letters of Credit
(1) Larr & Associates LLC (L&A) receives following documents from Beneficiary via courier service /
A. original letter of credit
B. copy of commercial invoice
C. product related material required in L/C.
D. Larr cover letter identifying forwarder contact & phone no.
(2) Beneficiary sends forwarder the following documentation with shipment:
A. Forwarder cover letter
B. photo copy of L/C plus any amendments
C. copy of commercial invoice, packing list

13. (3) OCEAN SHIPMENTS: L&A will contact forwarder to master bill of lading per L/C. Forwarder will L&A copy to proof before sending originals by courier service to L&A.
(4) AIR SHIPMENTS: Forwarder will copy of airway bill to L&A in order for L&A to create the airway bill on computer system per L/C.
(5) L&A re-creates all Beneficiary documents on computer system to keep documents consistent.

14. (6) L&A will date all documents with the actual ship date/on board date
(7) L&A will process documents needing consulate work
(8) All bank inquiries regarding discrepancies and clarification on documentation will be directed to L&A.
(9) One full set of documents will be ed to each division for their files and follow up.
(10) Any discrepancies created by L&A will be corrected immediately.

15. LARR & ASSOCIATES LLC
COUNTRIES Larr & Associates HAS PROCESSED LETTERS OF CREDIT THROUGH
Argentina Jordan Thailand
Australia Kazakstan Turkey
Bangladesh Kuwait United Arab Emirates
Bahrain Luxembourg United States
Bolivia Malaysia Venezuela
Bulgaria Mexico Vietnam
China Nigeria
Croatia Oman
Ecuador Pakistan
Egypt Paraguay
Germany Philippines
Ghana Qatar
Greece Russia
Hong Kong Saudi Arabia
India Singapore
Indonesia South Afica
Israel South Korea
Italy Taiwan

16. HOW TO OVERCOME THE RISKS
LARR & ASSOCIATES LLC
HOW TO OVERCOME THE RISKS
Request to advise L/C through your bank who has an L/C department
Work with a freight forwarder who has experience with L/C shipments
Use a GOOD document preparation service (LARR)

17. HOW TO OVERCOME THE RISKS Cont….
LARR & ASSOCIATES LLC
HOW TO OVERCOME THE RISKS Cont….
Refuse any document that is issued by or signed by applicant
Avoid steamship company certificates that need to be issued by carrier of vessel
Watch out for boycott language this includes any document requesting a negative shipping statement (Ex: We certify the goods will not pass through Israeli waters).

18. Take Advantage of What Letters of Credit Can Offer
LARR & ASSOCIATES LLC
Take Advantage of What Letters of Credit Can Offer
Security of payment by or through a bank
If the buyer can obtain a Letter of Credit, they must have some “credit” with the bank
Discounted or Usance credits can offer “win/win” payment terms for both the buyer and the seller - provide financing for the buyer
Confirmed L/Cs mean document examination and payment from a U.S. bank (or bank in your country)

19. LARR & ASSOCIATES LLC
QUESTIONS?

20. Deborah Montgomery Larr & Associates LLC
Contact Information
Deborah Montgomery
Larr & Associates LLC