The National Bank said: Contact the NBK Customer Relationship Officer and explain your needs to him. To issue Supply Letters of Credit, you are required to set a credit limit and upon approval, you can proceed with the request to issue an irrevocable Letter of Credit and deliver it to your Customer Relationship Officer.
And in case you need assistance in completing the application, you can contact the Trade Finance Department.
It is a set of internationally recognized and accepted rules for documentary credits published by the International Chamber of Commerce (ICC) in Paris, France. These rules are adopted in the international trade community to determine the responsibilities of all parties involved in letters of credit, including standby letter of credit, where the letter of credit clearly states that this is subject to the standard usage and practice of documentary credits.
Risks facing the buyer with import letters of credit
On the basis of a documentary letter of credit, the bank undertakes to pay the seller in exchange for the seller’s submission of predetermined documents. However, this is not considered a guarantee for the buyer in the event that the seller provided documents compatible with the letter of credit, but it was later proven to be fraudulent. In the event that all necessary documents are submitted to the bank in the absence of clear evidence of fraud, the bank will not be able to refuse payment and dispute will arise between buyer and seller.
To reduce this risk, the buyer should conduct thorough investigations and collect information on potential sellers. Our trade finance experts will assist you in gathering this information by using public information available to them from their global network of contacts.
Standby letters of credit provide protection to the beneficiary as they provide an undertaking to the beneficiary to pay the agreed amount after submitting certain documents.
Standby letters of credit can be canceled before their expiry date after the original letter of credit is submitted to the Trade Finance Department with an original copy of the recipients letter containing the parties’ agreement to cancel the standby letters of credit.
The commission percentage is calculated according to the risks surrounding the collateral process and according to your financial solvency. Commission is collected once letters of credit are issued.
The first beneficiary (usually the broker) transfers his rights to the second beneficiary (usually the primary or last seller). According to the rules of the International Chamber of Commerce Article 38B, letters of documentary credit are transferable only if the issuing bank expressly states that this credit is transferable. Only the selected bank or another bank authorized by the issuing bank of the credit can transfer the letter of credit.
In order to collect the payment, the exporter must provide the required documents which are stipulated in the Letter of Credit. No specific documents are required to be presented in the letter of credit. It is up to negotiation between the seller and the buyer, and sometimes the letter of credit may include specific requirements to provide documents issued by a neutral third party proving for example, the quality of the goods being shipped or their country of origin.
As proof that the goods and merchandise have been shipped, letters of credit may usually require documentation specific to the shipment, such as a road transport invoice or air freight. Please see the checklist that identifies the documents required for letters of credit for export.
In the event that the submitted documents are sound (free of contradictions), the risk is borne by the exporter on behalf of the bank. In the event that the documents are incorrect, the seller bears the risk on the part of the buyer who is entitled to waive or reject the contradictory documents.
The purpose of document collections is for you to be the owner of the goods and merchandise until the buyer pays and receives the documents. To achieve this, remember to put the name of the collecting bank (buyer’s bank) on the transport documents as the consignee of the goods.