Is it possible to amend or extend an LC? What about after it has expired?
Yes this is possible, but all amendments have to be approved by the applicant and issuing bank. When an LC has expired it means that the issuing bank has no more liability towards the exporter, and if the beneficiary ships goods he does it at his own risk and peril. If the exporter requires the LC to be extended or amended he must contact the applicant who in turn must apply for an amendment at the bank (issuing bank).
What is a transferable Letter of Credit?
It is a method which means that a first beneficiary (often a middleman) transfers his rights to a second beneficiary (normally the producer or ultimate seller). According to ICC rules, article 38(b), an LC can only be transferred if the issuing bank expressly designates it as transferable. Only the nominated bank or a bank authorized by the issuing bank may transfer the DC.
When will we receive payment under the Letter of Credit?
As per the agreed terms between buyer and seller, the period of credit is decided in the LC. Based on that period of credit, the time to effect payment by the opening bank (buyer's bank) is determined.
Am I sure to receive payment when I have a confirmed DC?
Yes, if you have presented correct documents and if Nordea has confirmed the LC you can be sure to receive payment at the time of maturity. If the LC is without confirmation you will receive funds when the foreign bank has effected payment.
What is a reimbursement bank?
It is the bank designated in the LC to reimburse the nominated bank. Thus it is the bank where the issuing bank maintains an account for the designated currency. The nominated bank will claim funds from the reimbursing bank after having accepted the documents.
Who has the documents forwarding risk with or without discrepancies?
If the documents are clean (without discrepancies), the exporter has the risk on the issuing bank. If the documents are discrepant, the seller has the risk on the buyer who has the option to waive the discrepancies or refuse documents.
What are the consequences if I deliver documents with discrepancies?
The buyer might refuse to pay, and you may have to sell the goods to another buyer. If the goods, for example, are custom made it can be difficult to find a new buyer.
When is the issuing bank no longer obligated to honour our claim?
If the LC has expired and if the documents are discrepant and not accepted by the applicant.
How much will the insurance cover?
If the LC does not state the amount of insurance, the insurance document must cover at least 110% of the invoice amount (CIF/CIP value).
If the payment term is cash against documents (i.e. export collection), how can I as an exporter gain control over my goods and secure payment?
The idea with the Documentary Collection is that the goods remain in your control until the buyer has paid and received the documents. To achieve this, remember to put the collecting bank (buyer's bank) as consignee of the goods in the transport documents.
What is an Aval?
An Aval is a joint commitment by the principal debtor and a third party (normally a financial institution) to make payment of an obligation in favour of the beneficiary. The third party commits itself for the full credit amount in the event that the principal debtor does not fulfill his obligation by the due date.
What is transhipment and partial shipment?
Transhipment is the act of taking cargo from one kind of transport to another during the goods transportation route. Partial shipment is when you split up an order into several deliveries.