A guide to using letter of credit for export financing


A guide to using letter of credit for export financing

written by: mrana616

Letters of credit are also called drafts or documentary collections. They are a financial instrument often used in export financing to protect both interests of the buyer and seller. They require that payment to be made immediately or at a later date. Letter of credits paid at a later data are called date drafts, while those paid on presentation are called sight drafts.

For handling letter of credits, banks usually charge fees. In export transactions, it is customary for the exporter to usually expect the buyer to pay the letter of credit charges. The fees for letters of credit can be high relative to the sale, therefore they can be somehow expensive for smaller amounts.
For international traders, letters of credit are considered as one of the most secure and versatile instruments. A letter of credit states the bank’s commitment on behalf of the importer to make the payment to the exporter under the conditions and terms stipulated. These terms and conditions are evidenced by presenting some specified documents.

Among the benefits of using letters of credit are included:

• Letters of credit are highly customizable.
• They enable new trades by reducing credit risk.
• Letters of credit provides the trade partners the ability to enter newly established trade relationships and to quickly expand their business into new territories.
• The issuing bank is independent of the obligations of the trading partners as well as of any arising disputes.
• The credit-worthiness is transferred from the importer to the issuing bank.
• In case that the importer goes bankrupt, letters of credit are safer for the exporter.
• Letters of credit are quick to execute.
• They provide certainty to the timing and amount of the exporter’s cash flows.

As consequence of these advantages provided by this financial instrument, a number of major banks considering loans for exporters based on incoming letters of credit in favor of those exporters. These letters of credits are offered to creditworthy customers that have reasonable sound finances and proven track records.



IMPORTING AND EXPORTING IN INDIA written by: sarahsandicks

Over the years, India has played a significant role in the global trade market. The country has long served as an entry to global markets due to its location on the map, and many importers and exporters trading with India continue to benefit from India’s geostrategic position.

Importers and exporters will find an unchanging trading environment in India, this is mainly because over the years the country’s import – export scene has remained stable despite significant changes in economic situations, both domestically and internationally. In recent years, significantly low operating costs and business friendly measures from the government have given the opportunity to importers and exporters trading with India to expand their interests domestically. In recent years, India’s key import and export commodities have mostly not changed, while its major trading partners have also remained the same. This steady import-export landscape will prove to be beneficial for businesses that trade with India, as well as those that would like to expand their operations to the country.

Over the past few years, crude oil imports for India have been rising steadily with its budding economy. During the 2015 financial year, India has been reported to be the third largest importer of crude petroleum (US$ 116.4 billion). In the same year, the country has also been one of the major exporters of petroleum products. These statistics clearly show a stable level of trade for the oil sector in India. The jewelry industry continues to play a dominant role in the global trade. The country shares a parallel trade dynamic with gold, pearl, precious and semi-precious stones. Jewelry remains one of India’s top exports and imports due to various economic and cultural factors. In the year 2015 alone, nearly US$ 57 billion of imported goods has been accounted for by this sector.

At present, India is one of the world’s largest mobile services market. The drastic increase in the import of telecom instruments in recent times demonstrate the consumer behavior, and the consumer spending on these electronics continue to rise. Foreign investors that are willing to invest in this sector will face high levels of demand, an expanding market and immense government support. Meanwhile, the pharmaceutical industry is still growing in the country and will become more competitive once the necessary precautions are adopted. The increasing level of pharmaceutical exports highlights the emergence of an important industry for the Indian economy. The constancy of India’s import-export landscape is encouraging for foreign businesses considering investing in the country. However, to clearly understand the direction of India’s economic development, investors should monitor the developing nature of imports and exports in India.

Overall, the country’s geostrategic position, low operating costs are complemented by steady government policies and well established trade flows. These factors have proven to be greatly beneficial for businesses that trade with the country. As India’s investment climate continues to develop and improve, exporters and importers that master the current trade conditions are well in position to gain profit in the coming years!

Benefits of Exporting and Importing Scrap Metals

Metals serve countless purposes depending on their nature but seem to pose major challenges when we can no longer use them. Many people unwittingly dump metals as they do normal trash but that is a huge mistake that leads to serious environmental degradation, pollution and thereby an increase in diseases among the population. It is therefore imperative that we recycle all the metal that we can and dump the rest appropriately so our environment doesn’t bear the brunt.

Individual households with scrap metals often sell them to companies with the skills and equipment to turn them into useful items. Jewelry, cables, wires and other metallic items can be gathered and sold off to these companies which either resell or re-purpose them. Import and export of scrap metals has become an ideal business venture for many who would otherwise be out of work. Here are some benefits if importing and exporting scrap metals;

  • Different countries have certain metals in large supplies which means they probably have more scrap of one kind that they don’t need. Exporting gives them a chance to dispose what they don’t require and in turn they could export scrap metals that are not readily available.
  • Trading in scrap metals reduces pollution and emission of dangerous fumes that are harmful to people. Instead of dumping scrap in pits, rivers or incinerating traders sell these materials to be used in other applications. This way we save on money and prevent damage of the environment and natural resources.
  • The international scrap metals trade encourages recycling as opposed to producing more metal items. Recycling demands less energy than manufacturing from virgin ore which makes it cheaper to recycle. It takes 95% less energy to recycle aluminum, 90% for copper and 60% to recycle steel or iron.
  • Exporting and importing scrap metals creates jobs for hundreds if not thousands of people. The industry benefits more than its employees with evidence showing that scrap metal trade employs hundreds of people indirectly.
  • This trade is a great way of improving diplomatic ties among countries whose citizens participate in exchange.

Foreign trade in scrap metals benefits the whole country if not the entire world but this is only possible if you understand how things work. Remember that countries have governing laws about trade and make sure that requirements are met before trying to trade. You should also choose the kind of scrap you want to trade in as different metals have unique qualities that would make them good to trade in or otherwise. It is also worth noting that some countries might not allow you to sell certain types of scrap metal.

If you are sure that exportation and importation is the trade for you, simply approach relevant authorities to get licenses and all necessary paperwork in order. It is important to research well in advance before participating in this trade to ensure that you get the best rates for your metals or the best metals for your price. This and dedication to your work will lead to success for you and your country.

written by: Mr. Write