INTERNATIONAL COMMERCE

B2B Newsletter International Commerce

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Hello Global B2B Friends,

This issue includes a very valuable article about "Letters of Credit" by a good friend and business associate, be sure to read it.

Until next issue, your friend in global business.

Ron Coble

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FREE Trade Magazine Subscription of The Week

Thomas Register Regional Industrial Buying Guide

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Industry's most comprehensive resource for professionals looking to make best-educated buying decisions.

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Geographic Eligibility: USA (Published annually for 19 region-specific industrial markets)

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The following article on "Letters of Credit" was written by my good friend and business associate, Dennis Hessler of Spyglass Point Productions. You should take a look at their TWO BEST How to Export or Import Training packages by visiting the following web pages:

Exporting - How to Export Training

Importing - Starting An Import Business

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IS THE LETTER OF CREDIT REALLY A GUARANTEE OF PAYMENT?

If there's one eternal, never-to-be-denied, valid-under-all- circumstances truth in the international trading arena, it's this: The confirmed, irrevocable letter of credit is the one sure way of making sure you get paid. Uh-oh.

Maybe like everything else, nothing is true under all circumstances for all time. As one wag put it, forever is a long time.

First, a little review. What is the letter of credit and how did it earn this high and mighty reputation?

Here's one definition: The Letter of Credit (L/C) is an instrument issued by a bank through which the bank will undertake payment upon proper and complete presentation of required documentation, with the understanding of contingent liability. That's a mouthful, isn't it? What does it all mean in English?

Basically, the L/C is nothing more than an agreement between a bank acting for the buyer (which is the issuing bank) and a bank acting for the seller (called the advising or confirming bank) that payment for the seller's goods will be made within a set time limit.

The nice thing about this arrangement is that since the agreement between buyer and seller is guaranteed by their banks, the seller doesn't need to worry about whether or not the buyer will pay him. Assuming the L/C's term are complied with, the seller's bank has already agreed to pay.

What could be simpler, right? But the letter of credit is not a guarantee that you will be paid. What it is a guarantee that the buyer's bank will pay if the conditions in the letter of credit are conformed to precisely. The fact is, one single error or omission means you will be paid only if the buyer decides to excuse it.

Even if the letter of credit is confirmed, the U.S. advising bank is guaranteeing payment only if everything is done perfectly.

How many things in your life are done perfectly? Yeah, mine too. And that's one reason the L/C can be a gigantic pain in the backside.

And even if you do everything right and insist on a confirmed, irrevocable letter of credit you can still miss payment if one other condition is not considered closely.

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THERE'S CONFIRMED AND THEN THERE'S CONFIRMED

You may think that when the L/C comes in and the advising bank has added its confirmation, you are ready to ship. I mean, that's why you went to the trouble (and expense) of making sure you had a confirmed, irrevocable letter of credit, didn't you?

The reason we normally insist on a confirmed L/C in the first place, especially on a first sale, is because you may have never heard of the buyer's bank. Or maybe conditions in the country are shaky or deteriorating. Or maybe the bank itself doesn't have a great reputation.

But when the bank in your buyer's country issues an L/C, they will probably advise the L/C through their bank's own office in the U.S. And if you told the buyer you want a confirmed letter of credit, the issuing bank will have their U.S. office not only advise the L/C but add their confirmation too.

But this is not a good deal and here's why. Despite the fact that you are holding a confirmed letter of credit, you still have foreign risk because the foreign office of the issuing bank located in the U.S. is only as strong as the issuing bank. The political and economic conditions in the buyer's country that led you to seek a confirmed L/C in the first place still apply to the U.S.-based branch of the issuing bank.

Oops. So you've paid a hefty confirmation fee and gotten a whole bunch of false security. Is there a way around this?

There sure is. And it goes back to the negotiation process. Instead of saying you want a confirmed letter of credit, provide the buyer with a list of banks located in the U.S. that you would find acceptable as a confirming bank. In fact, it's a good idea to mention specifically that you will not, under any circumstances, accept an L/C confirmed by any office of the issuing bank. To be extra safe, tell the buyer that if the L/C is confirmed by a bank not on your approved bank list, the letter may be rejected.

The best advice is to carefully read the L/C and if you are uncomfortable or confused by some part of it, ask your bank to clarify and provide advice, if necessary.

Remember, the letter of credit is a document transaction. Make sure your documents are in order and that any paid-for assurances are all you think they should be.

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WHO really makes money in Real Estate?

The Seller makes money. The Real Estate agent, Bank, Appraiser, Lawyer, Insurance Agent, and even the City, County and State (tax collectors) make money -- but -- the BUYER pays (even if the 'lucky' buyer buys a distressed fixer upper for no money down, he pays).

But, each year, poor souls across this country who want to 'Get Rich in Real Estate' fall for the same old sucker-pitch and pay out millions upon millions of dollars for courses, tapes, manuals and books on 'How To' -- buy distressed properties -- buy with No Money Down -- buy tax lien properties -- buy fixer uppers.

Real Estate BUYERS are the ones who have to make the monthly payments (if they can get the financing to begin with); pay the interest; pay the taxes and assessments; pay the cost of upkeep and maintenance; and pay the commission to the Real Estate agent when they decide to sell. (How do you get rich "paying?")

Doesn't logic tell you that to make money in Real Estate, you MUST be on the 'selling' side of the deal? But ...

How can you 'sell' something if you don't own (buy) it first?? Find out ...

"How To Get Rich SELLING REAL ESTATE YOU DON'T OWN!"
Options On Real Estate

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SELF-LIQUIDATING (Arbitrage) LOANS

Are Self-Liquidating Loans legal? - Do they really exist? - Can you qualify for such a loan? - What are Prime Bank Notes? Where & how do you get one? - Why do most bankers cringe when you ask them to act as a fiduciary for your Self-Liquidating Loan? After all, all you are asking them to do is disburse the funds against your orders. - How can it be a rip-off if there aren't any front-fees involved? - Who really puts together Self-Liquidating Loans? - Could you do a Self-Liquidating Loan in a smaller amount and have a better chance of success? - Can you do a Self-Liquidating Loan locally; in your own home town? Arbitrage Loan

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LEARN HOW TO EXPORT CLOSEOUTS - SURPLUS - OVERSTOCKS - LIQUIDATIONS

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Although we believe all the information contained is legitimate, we cannot he held responsible for any dealings you have with any of the people and firms mentioned in this issue.

Ronald Coble
Coble Intl.
1420 Steeple Chase Drive
Dover PA 17315-3784

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