For those considering entering the world of import/export (IMEX) you will soon learn that there are two basic documentation forms that no deal can go without. If have already conducted a few successful IMEX transactions then you no doubt have learned of the importance of these documents.
I am talking about the Pro Forma invoice and the Letter of Credit (L/C).
If you are the exporter, the Pro Forma invoice is a quotation that the buyer must approve before it becomes binding and keep in mind that once it is approved it becomes your responsibility to fulfill its terms.
A Pro Forma invoice should cover:
- Price
- Shipping Date and Terms
- Letter of Credit (L/C) information, including bank to be used and expiration date
- Necessary documents
- Packing or labeling requirements
Remember (exporter) to think the details of the Pro Forma through carefully before submitting it to your potential buyer because once accepted, those are the terms are responsible for completing.
A Letter of Credit (L/C) for the exporter should cover:
- What will be the advising (your) bank?
- How much time will you have to ship your merchandise after you receive the L/C?
- How much time will you have to get your documents to the bank?
- Will the letter of credit be irrevocable? The answer should be yes.
- Is the L/C payable at sight (when you present the done-deed documents, not after another 30, 60, or 90 days)? The answer should be yes.
- Will you pay your bank charges, and will the importer pay his?
- What will your bank charges be?
- Are there any special requirements? If so, what are they?
- Remember: When the L/C is opened, get the name of the opening and and the L/C number.
If you aren't familiar with what a Letter of Credit (L/C) is, then check out the link for Optimum Outcomes at the bottom of this article for a group of articles and tutorials on Import/Export 101.
A Letter of Credit (L/C) for the importer should cover:
- Will the L/C be confirmed?
- What will your bank charges be?
- Is the L/C payable in the exporter's desired currency? What is the currency (US dollars, Mexican pesos, etc,.)?
- How much time do you want to allow for shipment?
- How much time do you want to give the exporter to get his documents to the bank?
- What documents will you need?
- Is everything in the letter of credit on the pro forma invoice?
- What are your shipping requirements?
- What about insurance?
- Remember: Notify the exporter of your bank and the L/C number
Andrey Polston manages Optimum Outcomes, LLC an export management company (EMC) helping small and medium sized business' find and develop global sales markets.
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