Letters of Credit (LCs) are financial instruments used to transfer funds from an importer/customer to an exporter/shipper. LCs act as a safety net, mitigating the risk of importer nonpayment by substituting the creditworthiness of a foreign financial institution. This allows companies engaged in export sales to minimize their risk of payment.
LCs require very precise, detailed documentation -- as one would expect when millions of dollars are involved! Many problems arise when companies try to generate LCs in-house, through a freight forwarder, or the bank. Each of these scenarios has its share of risks and problems -- and even the smallest of LC problems can cause a delayed LC payment.
Also, it is not unusual for overseas companies (including China) to use the Letter of Credit in their normal trading business. However those companies may not necessary to have staff or working office (only corresponding address) in Hong Kong nor they may understand or familiar with the procedures in the process of documentation.
For those reasons, ACS provides a complete and professional service for the clients in preparing the trading documents. The complete service not only prepares the application and receiving of L/C but also provides service to the client in collecting money from the L/C bank as well as the delivery of receipt. This service would greatly reduce the difficulties and inconvenience of the overseas companies to manage the L/C trading in Hong Kong.
International shipping isn't as simple as putting something in a box and affixing a stamp on it. A number of logistical procedures via letters of credit (LC) provide a sense of security and safety. The following details the process for using LCs during the shipping/payment process:
The Purchase: An international importer agrees to purchase a product from a domestic exporter. To minimize financial risks, the exporter requests that the importer provide payment with a LC.
The LC Request: The importer puts in a request to their bank for a LC to the exporter's domestic bank. This document ensures payment to the exporter upon product delivery.
Shipment: The product is packaged and shipped across international lines to the importer.
LC Analysis: The documents are delivered to an advising bank. The advising bank searches for discrepancies and issues; if a problem is found, the documents are returned to the exporter for correction. Documents can be resubmitted continuously until they are compliant with the terms of the LC.
Compliance: Once LCs are deemed compliant, the documents are forwarded to the importer's bank. The bank sends confirmation that the shipment was received.
Confirmation: The importer's bank analyzes the transaction to confirm that all terms are completed. Once this has been determined, the importer's banks send payment to the exporter's bank.
Payment: With everything confirmed and completed, funds are forwarded to the exporter.
The ACSís approaches to provide LCs solution for clients:
Accuracy: When ACS sends documents, they will minimize discrepancy. That means the potential delays due to review periods or correction time are minimized!
Focus on business: ACS allows you to focus on your business, not payment logistics. ACS handles all information, including interfacing with the freight forwarder and bank, to free up resources and save money.
Regular checking: When important transactions are involved, itís best to stay connected and get the latest status whenever possible. ACS regularly check with banks, forwarders and related to make available all the information you need, when you need it.
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