For those considering entering the world of import / export (IMEX), you will soon learn that there are two basic forms of documentation that no agreement can do without. If you have already made some successful IMEX transactions, you have no doubt learned the importance of these documents.
I am referring to the Pro Forma invoice and the Letter of Credit (L / C).
If you are the exporter, the pro forma invoice is a quote that the buyer must approve before it becomes binding and note that once approved it becomes your responsibility to comply with its terms.
A pro forma invoice must cover:
– Price
– Shipping date and conditions
– Information of the letter of credit (L / C), including the bank to be used and the expiration date
– Necessary documents
– Packaging or labeling requirements
Remember (exporter) to think carefully about the details of the Pro Forma before sending it to your potential buyer because once accepted, those are the terms that they are responsible for completing.
A letter of credit (L / C) for the exporter must cover:
– What will be the (your) advisory bank?
– How long will you have to send your merchandise after receiving the L / C?
– How long will you have to take your documents to the bank?
– Will the letter of credit be irrevocable? The answer should be yes.
– Is the letter of credit payable on demand (when you present the written documents made, 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 opening name and the L / C number.
If you are unfamiliar with what a Letter of Credit (L / C) is, see the Optimal Results link at the end of this article for a group of articles and tutorials on Import / Export 101.
A letter of credit (L / C) for the importer must cover:
– Will the L / C be confirmed?
– What will your bank charges be?
– Is the letter of credit paid in the currency desired by the exporter? What is the currency (US dollars, Mexican pesos, etc.)?
– How long do you want to allow for shipping?
– How much time do you want to give the exporter to take his documents to the bank?
– What documents will you need?
– Is everything in the letter of credit on the proforma invoice?
– What are your shipping requirements?
– What about insurance?
– Remember: notify the exporter of your bank and the L / C number