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Import

International trade adds to or increases some risks compared to domestic trade; ensure that you know the risks in order to eliminate or reduce them.

These are some of the additional risks you need to understand and manage:

  • Customer risk or commercial risk is not only the risk that the supplier is not financially able to deliver as agreed but can also include his will to deliver as agreed.
  • Country risk or political risk includes for instance the risk of war, civil riots, acts of God and changes in trade regulations, etc.
  • Foreign exchange risk arises when you are invoiced in a currency in which you do not have an income and consequently are forced to buy the needed currency at the time of payment.
  • Other risks could include the transportation of the goods and/or interest rate fluctuations.
  • Financing
  • Get the optimal benefit of your international trade transactions.

By offering your supplier payment under a collection a documentary credit you will more easily obtain credit from the supplier, and the supplier will more easily obtain financing from his local bank.

The same applies if you offer your supplier a guarantee such as a payment guarantee.

Using the flexibility of Collections, Documentary Credits and Guarantees, you will have a vast number of possible solutions to the financing needs of your international trade.

Security in foreign trading

Offer your trading partner a standby documentary credit issued by Nordea to secure the fulfillment of your company's obligations under the agreement. This way your trading partner knows that you are a reliable cooperation partner.

Your company can also request a standby documentary credit from the trading partner so that you can be sure that your partner will act as specified in the agreement. Collateral issued by the bank provides security to your company, especially when the trading partner is not well known.

Use standby documentary credits for managing your company's foreign trade risks.

Useful tips

By offering a standby documentary credit to your trading partner as collateral for payment:

  • You may not have to pay an advance payment.
  • It may be easier for you to get a term of payment.
  • You can request a standby documentary credit issued in favour of your company if you, for example, are engaged in long-term trading. Then you do not need to re-negotiate the terms and conditions for each shipment.

Your benefits with Standby Letter of Credit

  • Avoid or secure advance payment
  • Obtain credit
  • Secure compensation for non-fulfilment of important obligations
  • The banks involved will act according to the internationally accepted rules of the International Chamber of Commerce

(Issuance requires the credit approval of Nordea)

Find a solution that suits both your and your supplier's requirements. As a buyer you would probably prefer to receive the goods before you make the payment while the supplier would probably ask for payment before delivery is made. By using the right payment method and structuring it the right way you can always find a solution that meets the requirements of both parties.

These are the most common standard payment methods in international trade:

  • Clean payment
  • Collection
  • Documentary Credit
  • Combined with a Guarantee, you have a large variety of options in order to achieve the solution needed for your international trade.

FAQ

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 which in turn must apply for an amendment at the bank (issuing bank).
Yes you do. The banks deal with documents not goods (UCP 600 article 5) and will not physically confirm the content of a shipment.
No, however many exporters will be reluctant to ship the goods under an expired LC and will require the buyer to request an extension.
A letter of credit that is payable once it is presented along with the necessary and correct documents.
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 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.
In order to receive payment, the exporter must present the documents stipulated in the letter of credit. There are no requirements for specific documents to be presented in an LC. The list and form is open to negotiation by the seller and the buyer, and sometimes the LC contains requirements to present documents issued by a neutral third party evidencing, for example, the quality of the goods shipped or their place of origin. As a proof that goods have been shipped, the LC often requires some kind of transport document to be presented, for example a Bill of Lading or Air way bill.
Contact the seller and ask for the courier tracking number which enables you to track the documents. When the documents arrive at Nordea we will advise you.
Send the application to your local Nordea Branch.
The answer differs between collection and Letter of credit but we will contact you when the goods arrive to the airport and after we've been notified by the carrier.

LC: If you want the goods we will release them which means that you are also obligated to pay when the documents arrive, even if they are determined to be discrepant.
Coll: Yes it is possible, but it has to be approved by your local branch. Please contact them.
Since we communicate though SWIFT, it is most important that the address in SWIFT is the correct one.

Get in touch 

For more information about how we can support your business contact your Nordea adviser.