Import services

Import letter of credit

Letters of Credit (otherwise known as documentary credits) are one of the most commonly used methods of payment in international trade and can be used for all types of goods and services. They offer the seller the security that they will get paid and the buyer the assurance that payment will only be made under the terms of the Credit. Next Steps

How an Import Letter of Credit works:

Conditional payment guarantee

A Letter of Credit is a conditional payment guarantee provided by an importer's bank to the exporter. The payment guarantee is conditional upon the exporter providing documentary evidence of the shipment of goods in accordance with the terms of the Letter of Credit. The bank does not become involved in the actual delivery of goods.

Terms of Guarantee

The importer's bank takes on responsibility of paying the exporter and can only authorise payment for documents that comply with the terms and conditions of the Letter of Credit. Letters of Credit are normally irrevocable, which means they cannot be amended or cancelled without the approval of all parties, including the seller.

World standard

The documents presented to the banks must meet the specific requirements of the Letter of Credit and must also satisfy the International Chamber of Commerce (ICC) Uniform Customs and Practices for Documentary Credit Rules. The standard imposed by these ICC rules ensures the acceptability of Letters of Credit world-wide.

Benefits of Letters of Credit

Security

An importer has the security of knowing that their bank is only authorised to effect payment for documents that comply with the terms and conditions of the Letter of Credit. In the event that documents do not comply, the bank must refer to the importer before payment is made.

Facilitates obtaining Trade Credit

The Importer's bank will guarantee the payment to the exporter either immediately, or at a future date, upon receipt of the correct documents. The capability of the letter of credit to facilitate a guarantee of payment in the future can enable the importer to negotiate extended credit terms with the exporter. For example, payment may be made to the exporter 60 days from sight (by the bank) of the shipping documents or 90 days from the Bill of Lading date.

Convenience

The importer's bank takes on the responsibility of paying the exporter, reducing the administration of the importer's accounts payable function. Multiple payments can be effected under one Letter of Credit.

Eligibility

All our importing customers.

Subject to credit approval.

Importer bond

An Importer Bond, Trade Guarantee or Standby Letter of Credit is a facility where regular export suppliers are guaranteed payment of a predetermined amount from the importer's bank. A claim can be made in the event that the exporter either fails to complete an export contract, fails to supply goods as agreed, or fails to take up a contract tender awarded. This bond is particularly useful in larger and more complicated contracts. Next Steps

How an Import Bond works

Guarantee

An exporter is given a written bank undertaking to pay a declared sum(s) on receipt of a written claim that the goods were shipped but not paid for by the importer. These guarantees may be payable on demand or claims may need to be substantiated by further documentation. The claims are limited to the maximum amount due under the guarantee.

Security in trade

The Importer Bond is more commonly used where an importer has a regular supply contract and credit terms with an exporter - for instance where an importer buys EUR10,000 of goods per month from a supplier on 60 days credit terms. The Guarantee is a standby or fallback source of payment for the exporter.

Benefits of a Trade Guarantee

Security

An Importer Bond from First Trust Bank can help secure a regular supply of goods from a supplier, as the supplier is secured for the full value of the guarantee amount.

Facilitates obtaining trade credit

An importer can take advantage of the security an Importer Bond provides to obtain more favourable prices for their goods or better credit terms with a supplier. This may prove cheaper than utilising an overdraft to pay for the goods in advance or immediately upon receipt.

Eligibility

Available to all our importing customers

Subject to credit approval.