Trade Services

Import / Inland Letters of Credit

From the importer’s or applicant’s perspective, the issuing bank (local bank) issues an import letter of credit for the account of the applicant (local importer or buyer), in favor of the beneficiary (foreign seller), to secure payment for foreign goods purchased. Under an inland LC structure, the bank that opens the letter of credit (the issuing bank) to pay the agreed amount to the seller on behalf of the buyer, upon receipt of the documents specified in the letter of credit under domestic business jurisdiction. 

Export Letters of Credit

From the exporter’s perspective, it is the same (import) letter of credit opened by the issuing bank on behalf of the beneficiary. This letter of credit is viewed by the advising / confirming / paying / negotiating bank as an export letter of credit for the account of an overseas buyer of the exporter’s goods, in favor of the exporter, as payment for goods purchased.

LC Confirmations

Confirmation is a security tool for the exporters. Confirmation eliminates country risk and insolvency risk of the issuing bank.

Documentary Collections

Documentary collections, is a method by which a seller is able to collect payment from an overseas buyer through an intermediary bank. Banks act as intermediaries in facilitating the flow of the title documents and in the payment of the transaction.

Guarantees

• Bid Bonds

An instrument designed to ensure that the tenderer (e.g.,supplier) will honor its commitment to a buyer when bidding for a construction or supply contract. The tenderer submitting a bid requests its bank to issue a bid bond in favor of the buyer as beneficiary. In the event the tenderer’s bid is accepted and the tenderer fails to sign the contract, the bid bond is normally payable against the buyer’s statement that the bank’s customer, the tenderer, failed to sign the contract.

• Performance Guarantee

Performance guarantee is issued when the contract has been awarded. It is an instrument designed to ensure that the contractor (e.g. supplier) will perform and execute the contract in accordance with all its terms and conditions. A performance guarantee gives the buyer an indication of the contractor’s credit worthiness and, in the case of default, is payable on demand.

• Advance Payment Guarantees

An advance payment guarantee is used when the contract provides for advance payment to be made to the seller, and it guarantees that the advance payment will be returned to the buyer if the seller does not fulfill its obligations on delivery of goods or services.

• Standby Letter of Credit

A Standby Letter of Credit protects the interests of the principal by ensuring that in the event that a contractor fails to fulfill its contractual obligations, the bank must make the payment guaranteed by the SBLC.