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DOCUMENTARY LETTER OF CREDIT RISK ANALYSIS

Reading a Letter of Credit is the first most important point in creating good Banking Documents. It may sound like a funny statement, but to someone not specialized in this field, reading a Letter of Credit is not like reading a simple instruction set. It requires in-depth subject matter knowledge, it requires Logistics knowledge, and an eye for contract loopholes, gray language and requirements inherently in the Letter of Credit that may trip you or simply not be doable. It is a Contract. The ‘Risk Analysis’ under the management of a Documentary Letter of Credit is a term that was first coined by the Principal of Letter of Credit Solutions.com . We understand what should be in the Letter of Credit and what shouldn’t. It sounds simple, but it’s not. We go back and review the quote, the sales acknowledgment, the purchase order, the proforma invoice and Letter of Credit prior to the issue across the board and not only look for inconsistencies but also consider all Logistical issues and write up a full report of all of the potential problems that could arise due to Letter of Credit language.

DOCUMENTARY LETTER OF CREDIT MANAGEMENT

At times, a Letter of Credit simply arrives on the Credit Managers’ desk. It’s left to them to put the pieces together. Their information may be limited to their specialty which is the Finance aspect. Without the knowledge of the current UCP or ISBP or Logistics, bank ratings, country ratings, and a multitude of aspects that go into deciding whether to accept the Letter of Credit as well as to have it ‘confirmed’. They may not have the necessary tools to make recommendations or to put a credit hold on the shipping process. The Letter of Credit is a Contract. We are not attorneys, and Legal Council is always recommended to be one of the parties that review the Letter of Credit. Our assistance and guidance are based on our personal experience and knowledge of LC influences. This assistance begins prior to the issuance of the Letter of Credit as there are many times throughout establishing the Letter of Credit, where points should be discussed and negotiated, before it arrives to the Credit Manager. This will empower them to manage a Letter of Credit most effectively.

DOCUMENTARY LETTER OF CREDIT DOCUMENTATION

Documents are everything. You need the correct and accurate Documents to get paid, to get through U.S. Export Customs, Foreign Customs importation, to support the terms and conditions of a purchase order, to satisfy the Exporters internal policies, U.S. Governing Laws, the governing UCP and ISBP and of course the Letter of Credit. Not everyone that claims they can ‘handle’ Letters of Credit and their subsequent required documents really know all of the considerations involved. We, at Letter of Credit Solutions.com, ensure that we create all of the Documents required under the Letter of Credit with consideration to all of those factors clearly at the forefront of every piece of data we input. It’s simply not enough to know the basics. We create documents every day and have banked Billions of US Dollars’ worth of Letters of Credits since our inception. We have made a huge difference to countless Exporters bottom lines and have helped them get paid as quickly and as effectively as could be done. We know the elements necessary in the Export Documents and can get you paid.

DOCUMENTARY LETTER OF cREDIT tRAINING

The Letter of Credit Training we provide by the Letter of Credit Solutions.com is by its own nature taking a very complex subject and presenting it in a way that is unlike any other class you may have attended. The subject is broken down into a form of interactive learning that makes the subject matter clear, simple, and unforgettable. You will have access to inside information, document templates, a manual, and frankly content that is currently being prepared for publishing. We know that our Letter of Credit Training attendees become empowered with what they learn.

LOGISTICS AS IT AFFECTS DOCUMENTARY LETTERS OF CREDIT

If you don’t know Logistics, or you don’t speak the ICC INCOTERMS language, then you are missing two of the most important elements in the Letter of Credit. Remember, the Documents required in a Documentary Letter of Credit are, for the most part, Shipping Documents. These Documents are created not only with the supreme goal of getting you paid, but also to meet the U.S. Government Exporting requirements, Carrier expectations, and Foreign Destination Import Requirements. The logistics companies involved in the execution and issuance of Transport and Shipping Documents must have Letter of Credit knowledge, to effectively manage this process or to work hand-in-hand with Letter of Credit Solutions.com to create pristine, compliant documents.

INSURANCE FOR CARGO UNDER DOCUMENTARY LETTERS OF CREDIT

Depending on the INCOTERMS governing the sale, one party or the other will have to purchase insurance for the goods. The Letter of Credit will ask for proof of the insurance policy or certificate covering 110% of the goods value if you are the Seller. This policy or certificate must be written strictly to conform with the Letter of Credit requirements. If your transaction requires the Buyer to purchase the Insurance, your Letter of Credit, as a Seller, will then require a simple notification of shipment details notifying the Buyers’ insurance company that the goods have shipped, and the details involved. You can procure your insurance from us and we can provide you with a pristine LC compliant policy or certificate or we can create the notification for the Letter of Credit, but the truth is, there is so much more behind these two seemingly benign options.

DOCUMENTARY LETTER OF CREDIT RISK ANALYSIS

There are hundreds of questions potentially necessary to perform a thorough check of a letter of credit, or rather what jolie coined over 30 years ago, the ‘LC Risk Analysis’ before you can approve a Credit Hold Release.

As a standard of our high service level, with every Letter of Credit Document Preparation Service, we will provide you with our highly acclaimed “LC Credit Risk Analysis”. We perform this upon receipt of the Letter of Credit Application, the Draft, the Issuance, and any Amendments that may follow.

letter of credit Risk

The LC must be checked thoroughly for all potential risks. Are the goods described in a way that matches what will be shipped? Is the pricing mentioned as per your quotation and their purchase order? Have the payment terms been defined correctly? Are the INCOTERMS correct? Are all of the Documents required, correct, and feasible?

Have you determined if your inspected Letter of Credit should be “Confirmed”? To determine this, you will need to review your Client, His bank, His Country, the value and complexity of the LC, and maybe even the cost of the Confirmation.

Just remember, that if anything goes wrong throughout this chain of risk, regardless of your Confirmation, should there be a single Discrepancy found in your documents which you cannot fix, it will ultimately lie in the hands of the Buyer and his bank to decide if and when to pay you. That is why Documents being compliant are so important.

Client Risk

If you are a U.S. based company, prior to your concern of the LC Risk, and before even quoting a potential client, you must be sure that they are cleared by all U.S. Government governing bodies of the ‘Know your Client’ program to be certain that you can, in fact, do business with this entity and their employees. Once that point has been cleared and they ask for open terms, you as the Credit Manager have to examine your history with this Buyer just as you would with any potential Buyer in your country. you would go to your preferred Reporting Outlets and inspect their credit status, review independent cases of late payments, write-offs, or any rating that may determine the risk in giving them open terms. If, after this study, it was determined that you would require a Letter of Credit, then further considerations apply, such as determining their Issuing Bank’s Risk.

bank Risk

We know the picture to the left is far fetched and probably unrealistic, but what if it was not too far off from a true depiction of the Issuing Bank’s development? Before you accept the proposed Issuing Bank, you should be very well assured of the Issuing Bank’s standings, ranking, and rating in their country and Global community. The Seller should be certain that the bank not only exists and at what standard, but that they also have a way to effectively wire funds into their bank’s account. Do they have an account with your preferred Confirming Bank so a transfer can be easily made? Who is their corresponding U.S. Bank? How is that Bank Rated? Do they have a well-established Letter of Credit Department? Those are some concerns when reviewing a new client and their LC.

country risk

With the global change going on in the world today, the issuing country must also be inspected for potential risks. Economic, Political, War, and Embargo Risks, etc. What are they today, and what is the possibility of fluctuation during the actual shipment? These first three elements will assist you in determining if you should ‘Confirm’ your Letter of Credit, or if you should ‘Discount’ the LC and if you have made arrangements for these extra costs of doing business included in your quote.

DOCUMENTARY LETTER OF CREDIT MANAGEMENT

the Support letter of credit management service we provide you, as a finance, sales, or operations Executive, is to mitigate the letter of credit risk while creating your letter of credit documents and getting you paid..

Our involvement starts from the ‘get-go’. As soon as you know that a payment will be made with a Letter of Credit, we can with assist you with the tools you need to provide to your Buyer to open Documentary Letter of Credit with terms and Documents that reflect the INCOTERMS you have selected or negotiated for payment.

From there, we are with you to read the Letter of Credit Language, provide you with the Letter of Credit Risk Analysis, a thorough report of what is a potential area of risk, general options you may have, what changes you may want to make, and what to look for from your logistics team.

We work with your vendors to book the right vessel, create or check their air way bill or ocean bill of lading drafts to ensure that the transport document will meet the Letter of Credit or if we are your Freight Forwarder, complete these Letter of Credit Compliant Documents ourselves. Then we will create all of the documents required by the LC and get with the required third parties to ensure their work meets the Letter of Credit, UCP and ISBP requirements. We will follow the LC from issuance, Shipping to Presentation and Payment.

The Letter of Credit Management program described herein is the service we perform while we are handling any of your export shipments at no additional cost to our document preparation service.

DOCUMENTARY LETTER OF CREDIT DOCUMENT PREPARATION

the documents are everything

Smile it could be worse. Your Letter of Credit can’t be that bad and we’ve seen them all! From a fun little excerpt in the LC that stated: ‘Even upon presentation of compliant documents we will only make payment when we have determined we have the funds to do so.” to Letters of Credit that are requesting documents no one has ever heard of, much less agreed upon and ergo, the comedy continues.

That’s why we have to put on that smile and just enjoy this business of creating legal compliant documents. Remember we have to create documents that satisfy:

• The Purchase Order and the Importers Terms and Conditions

• The Sales Acknowledgement and the Exporters Terms and Conditions

• The Export Regulations

• The Exporter’s Internal Requirements

• The Letter of Credit

• The governing UCP

• The governing ISBP

• The Advising Banks Policy and Interpretations

• The Confirming Banks Policy and Interpretations

• The Issuing Banks Policy and Interpretation

• The Import Regulations according to the LC

With all of that prevalent in our mind, we have no doubt that we can review a Letter of Credit and let you know what obstacles you may face and whether we can create compliant documents for the LC as is. Potentially your Letter of Credit may need an Amendment to make it functional or practical, but we are certainly well equipped for the task at hand.

85% of Companies who present documents are Discrepant on their first try. Consistently we are the 15% of companies who get it right the first time. That’s why our best references, hand in hand with our clients, are Banks. We make their job easier too.

We understand that with this experience, comes responsibility. We stand by our work and commit to our zero tolerance goal of Zero Discrepancies. Discrepancies cost you money and even if documents are corrected- bank fees are taken directly out of your proceeds. We would not be keeping our responsibility to you if we stood by and let that happen.

While our standards are high and we have quality control procedures in place to avoid any discrepancy, we understand that there will be times that the bank may spot an item that simply did not make the grade. Our promise to all of our clients is that if any document we create is found to be discrepant, we will immediately correct the problem, resubmit on a priority basis and directly cover any bank discrepancy fee the advising or confirming bank may charge up to $175.00 and allow you to receive your proceeds in full. You will never have to pay for any oversight on documents we issue.

Give us the opportunity and you will learn to love the ease and reliability of working with Letter of Credit Solutions.com.

DOCUMENTARY LETTER OF CREDIT TRAINING

We know what it takes to create clean, compliant documents. We've done it time after time., on a daily basis.

What we’ve also done is teach! For easily, over 30 years Jolie Cosman has been speaking as a volunteer for a number of organizations in Houston and teaching clients both in Houston and throughout the United States. From our own workshops and Training Forums at our Training Institute to On-Site at our Client’s facilities, we have been a long standing reliable Letter of Credit Resource. It’s been a long history of meeting new people that have traveled from around the U.S. to as far as from Nigeria to learn about Letters of Credit. Countless Shippers and Manufacturers, Exporters, Traders and Freight Forwarders has approached Jolie but also for Export programs and events for The Greater Houston Chamber of Commerce, The District Export Council, Houston Export University, ITMA (International Transportation Management Association, OWIT (Organization of Women in Transportation), NACM (National Association of Credit Managers), U.S. Export Assistance Administration, UofH and Houston Community College educational programs.

we can teach you and your team how to do documents right

Our workshops are exactly that, they are round table style interactive working meetings where everyone is involved and it’s a kind of discussion that puts your mind to work. While we are talking about contracts and contractual agreements for payment, they are not cut and dried material that can put you to sleep. It is memorable and we can use your personal past Letters of Credit with the Buyer/Seller names taken out in order to use your real life examples for the class to learn from each other. We want you to learn how to manage your personal Letters of Credit that matter to your daily business and circumstances. So we will work with your examples as well as some Letters of Credit that have simple requirements to others with extremely complex requirements, and we’ll learn them all while having a good time.

LOGISTICS AS IT AFFECTS DOCUMENTARY LETTERS OF CREDIT

so many elements have to fall into perfect balance

Have you ever really stopped to think about how many people are involved in touching your freight and handling your paperwork for everything to go right with your Documents? Let’s take an Ocean Freight Shipment for example, on a Letter of Credit with no Partials, on FOB terms and cargo made in the USA, HS Code provided, and a specified latest shipment date. Simple requirements right? What has to happen for all of the pieces to come together? It takes:

Sales: They must have quoted all of the associated costs, including Banking charges, and all related to the INCOTERMS selected.

Production or Procurement: All of the cargo has to all be ready at the same time.

Origin: All of the cargo or the majority of components built into your final product has to be made in USA.

Finance: The final issued and advised Letter of Credit has to be perfect, with all requirements that you can meet, with the banks you have approved and must be released from Credit Hold.

Export Packing: This has to go according to plan and must be packed with sufficient knowledge to allow this cargo to weather ‘The Perfect Storm” and get to the overseas location in one perfect piece.

Trucking: The trucker hauling the freight or container has to be on time, bring the right truck for the freight its hauling with appropriate tie downs and tarping or must be supplied with any special equipment like spreader bars for loading and unloading. If it’s in a container is the weight over the maximum legal weight? And just because we can handle heavy lifts in the USA, can it be handled at destination

Cranes: At loading special cranes may be required if it is Bulk Cargo, are those in place and are costs considered in the quote and Letter of Credit Value?

Port Terminal Handling: Have they made any notations that cargo has rust, or cracks, bends, breaks, any damage whatsoever and have they notified you prior to loading"?

Hazardous Cargo: Do you have paint or any materials that are considered Hazardous and has this been taken account in the LC?me,

Vessel: Is it on time? Have they accepted the freight without notations?

Freight Forwarders, Export Customs Controls, Licenses, permits, Letter of Credit Document Preparation Companies, Messengers, Couriers, Banks has everyone done everything right?

Here we see only a small window into some pieces of the logistics puzzle that have to go right. At Letter of Credit Solutions.com we are tracking and at times leading this process so everyone who touches your freight has been controlled as much as possible and will not or has not done anything that may jeopardize your payment. These considerations are daily aspects of which we work with you on making sure we are several steps ahead of the game and can foresee problems before they happen and can offer solutions in order to protect your payment.

For a lifelong career of over 30 years as a Project Freight Forwarder and many times working for clients that were in the Forbes Top 100 or 500 Largest Global Companies. This knowledge is invaluable and that is a key element of why no other company compares to Letter of Credit Solutions.com, they are not in the same league. We are capable to so much more than simple Letter of Credit Management.

We have been tasked with Global Projects and goals under stringent Zero Tolerance Logistics errors, and it is no small task. So when we tell you that we can handle your Letter of Credit Management you can trust that we are confident in our experience to deliver proven solid solutions.

INSURANCE FOR CARGO UNDER DOCUMENTARY LETTERS OF CREDIT

when your incoterms and lc require an insurance policy or certificate, we can do.

Securing Insurance through our well known and world renowned company with policies underwritten by Lloyds of London, you can rest assured that we have an online and easy way to create the coverage that your Letter of Credit requires. Without further details to educate companies who are selling Document Preparation Services, let us rest with simply assuring you that we have state of the art preparation mechanisms in place and our rates are very competitive.

when your incoterms and lc don’t require an insurance policy or certificate, what then?

Again, we like to use our website to share with Exporters, Manufacturers and Traders of what we know and how we can help, but sometimes in giving too much information, we are assisting others in stepping up their game. So let’s suffice it to say that under certain INCOTERMS you still have to be sure that you are protected and we can assist you in this area as well.

What should keep you up at night regarding insurance if you are a buyer or you are a seller?

Whether you are the Seller of the goods or the Buyer, there should be concerns on both ends. Make it a point to call Jolie and talk about this question and be sure you understand what is not disclosed within the Letter of Credit.

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