Transcript WHITNEY BANK International Trade Services

GETTING PAID BY YOUR FOREIGN BUYER
Presented By
Nellie Smith
Vice President
Global Trade Services
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COMMON METHODS OF PAYMENT
WHEN SELLING OVERSEAS
• Cash In Advance
• Letters of Credit - Confirmed and
Unconfirmed
• Documentary Collections
• Open Account
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CASH IN ADVANCE
• Most secure for exporter…… however…
• Insisting on Cash in Advance could cause
exporters to lose customers to competitors who
offer more favorable terms to foreign buyers.
• Buyers may not want to wire cash because they
bear the risk of never receiving the goods.
• Cash is Advance recommended for custom
orders where the product cannot be sold to
another buyer.
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EXPORT LETTERS OF CREDIT
• Irrevocable – Cannot be changed or
cancelled without the consent of all
parties.
• Buyer cannot refuse payment by raising a
complaint about the goods. Any
complaints must be settled between the
Buyer and Seller outside of the L/C.
• Confirmed LCs vs. Unconfirmed (Advised)
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OFFERING CREDIT TO FOREIGN BUYERS
• Exporter can offer credit to buyers and not
have to wait to be paid.
• Term LCs – WB can discount the drafts on
presentation so customer does not have to
wait to be paid 30, 60 90 days etc.
• Most foreign buyers willingly absorb the
discount charges because their banks’
interest rates can be as high as 24%. WB all
in discount charges are 6% to 7%.
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OTHER TYPES OF LETTERS OF CREDIT
• STANDBY LETTERS OF CREDIT – Apply in general to
transactions which are based on the concept of default
by the Applicant in performance of a contract or
obligation. In the event of default, the beneficiary is
permitted to draw under the Letter of Credit. Not
normally used for the purchase/sale of goods, but can
be structured to cover non payment of invoices.
• BONDS AND GUARANTEES – Beneficiary requires
guarantee to be issued by a local foreign bank.
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DOCUMENTARY COLLECTIONS
DOCUMENTS AGAINST PAYMENT
PROS - Offers good security to the seller because
the Collecting Bank can only release documents to
the buyer if full payment made. Exporter retains
title to the goods until the importer pays.
CONS – Buyer can decide he does not want the
shipment and does not have to pay. Seller still
retains title to the goods but would then have to
find another buyer in that country or have goods
shipped back, at seller’s expense.
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OPEN ACCOUNT
• Seller (Exporter) ships goods and invoices Buyer
(Importer).
• Seller has to wait for Buyer to make payment.
• Only advisable if Buyer has excellent credit rating
and is a long-time, well-known customer of Seller,
usually in low risk country.
• Financing and non payment risks borne by the
Seller.
• Exporter should consider having Foreign Buyer
Insurance from ExIm, if shipping on Open
Account basis.
• Not a recommended payment method.
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TIPS FOR EXPORTERS
• Communicate with Buyers in detail before accepting
a Letter of Credit. The LC is part of the sales process.
• Consider whether a confirmed Letter of Credit is
needed. If in doubt, seek advice from your bank.
• Ask for a “draft” of the LC before it is issued, so terms
and conditions can be reviewed and agreed upon.
• Have a competent Freight Forwarder to assist with
the preparation of the shipping documents.
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FOREIGN EXCHANGE SERVICES
SPOT DEAL:
A transaction between a client and Whitney Bank who
will buy or sell foreign currency with settlement in two
business days (with the exception of the Canadian
Dollar, which is one business day).
FORWARD CONTRACT:
A transaction between a client and Whitney Bank who
will buy or sell foreign currency with settlement on a
specified future date, or between specified future
dates at an exchange rate agreed upon at the time of
entering into the contract.
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QUESTIONS?
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CONTACT INFORMATION
Nellie Smith
Vice President
Whitney Bank
Global Trade Services
[email protected]
Office - 504-586-7305
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