Making the Foreign Familiar

A vital import tool offers buyers four key advantages
Commercial lending
Import-export
International finance

Written by: Kristin Kyle-McQuesten, VP, Trade Finance Manager
A tug boat pulling a cargo ship out to sea from a canal or harbor at sunrise or sunset

If your company imports merchandise or raw goods, you know the shipment has to arrive on time and in the proper condition. Many importers don’t realize there’s a tool that lets you facilitate payment, ensure your items arrive on time and control other aspects of delivery: the commercial letter of credit (L/C).


The convenience, cost savings, security, and peace of mind this instrument provides might surprise you.


The letter of credit brings a commonality to the transaction and mitigates risk for the buyer and the seller. Each document is structured in a similar manner and is subject to globally accepted rules created by the International Chamber of Commerce. The letter of credit is issued by the buyer’s bank, guaranteeing payment to the seller, provided the conditions set in the L/C—like the delivery date—have been satisfied.


For a buyer, the many advantages of a letter of credit include:

  • No advance payment due to the seller
  • You control the delivery date
  • You can require special documentation that may be needed for unique customs clearance
  • You can be assured that your documents will be screened for compliance with U.S. regulations

 

The advantages add up to convenience and cost savings. By not having to provide a down payment, you can hold funds longer. By indicating a latest shipment date, you ensure that you don’t pay if your order ships late. That’s crucial if you’re ordering perishable, seasonal or special event items.

 

And if you’re importing products that need special documentation for customs clearance, requiring that document in the letter of credit avoids delays and confusion when the goods arrive. Plus, the issuing bank acts on your behalf to ensure that all conditions are met before making payment, so you can concentrate on other aspects of your business.

 

Learn more about letters of credit or other solutions for conducting business across the globe with Banner Bank's experts.