A letter of credit terms is a document that lists the conditions of an importer’s letter of credit. It guarantees payment for goods and shipping to the exporter, as long as they can agree to the stipulations. This may included clauses such as a latest shipping date or the specific port to be used.
Payment is held in escrow, meaning it has left the buyer’s account but is yet to be transferred to the exporter. When the letter of credit terms have been met and verified by the issuing and receiving banks, payment will be released to the exporter. However if the exporter fails to meet their obligations, and both banks verify this, payment may be returned to the importer or held while a formal dispute is opened.
Similar letters are used to outline the terms of loans and mortgages, though are not usually titled “Letter of Credit Terms”, rather simply “Terms of Conditions”.
Be realistic, the exporter is not going to want to do business with you if you set unreachable terms.
The exporter themselves will have a rough idea of the time it will take to ship your goods. Take this expected date and extend it to create a reasonable “latest shipping date” clause.
Be sure to specify the documentation required for your import. The exporter may ship to many countries with different laws and regulations regarding paperwork.
This is not the place to negotiate payment, you will have already agreed to a price.
Sign the letter to bind the agreement.
China Toys Inc,
Please find outlined below the terms of the letter of credit, for amount $8,000.
Product: Pink Stuffed Teddy Bears
Technical Details: US regulated material
Required Documents: Commercial Invoice, Contents List, Bill of Lading
Domestic Shipping: FedEx
Latest Date of Shipping: January 06, 2011
Shipping Port: Boston Harbour
If the aforementioned terms can be reasonably met, $8,000 will be released to the nominated bank.
It’s a pleasure doing business.
Mr. M. Herschel
The Beanie Company
Marjorie J. Grove
3057 Frum Street
Nashville, TN 37201
Dear Mrs. Grove,
These are the following terms that accompany the letter of credit granted to Tangelo Exports on the date of November 3rd, 2009 in regards to transaction #456545.
To collect the letter of credit, Tangelo Exports must satisfy the following terms:
1) Tangelo Exports must make at least 3 attempted transactions to collect what money is owed to them from bank account# 4543675475
2) Tangelo Exports must contact, in writing, Rising Sun Import/export Company, notifying them of their intentions of collecting on the provided letter of credit.