Letter of Credit Import
- Security of delivery of goods
- Strengthens your negotiating position
A Letter of Credit for you as an importer
The steps involved in the importing process
- You and the exporter agree on the documents, terms and conditions to be included in the L/C.
- Next, you instruct ABN AMRO to open the L/C. We open the L/C and send it to the advising bank.
- The advising bank checks a.o. the authenticity of the L/C and notifies the exporter.
- Once the goods have been shipped, the exporter prepares the required documents and sends them to the advising bank.
- The advising bank checks the documents and forwards them to ABN AMRO. We then verify whether the documents comply with the terms and conditions of the L/C. If they do not comply, we will contact you.
Points to be aware of with an import L/C
- International business is also based on trust, so make sure you know the exporter well enough before doing business.
- Banks deal with documents, not with goods.
- Once ABN AMRO has checked the documents and confirmed that they comply with the terms of the L/C, we are obliged to effect payment. This is because we have irrevocably undertaken to pay upon submission of L/C-compliant documents.
- Make sure that you have enough working capital in your account. This may be a credit facility or funds in your business account. We can only execute your request if there is sufficient balance in the account(s) specified in your application. When opening an L/C on your instruction, ABN AMRO undertakes to pay a specified amount once the L/C terms and conditions are met. We will therefore reserve this amount in your account.
If you want to use funds from your business account to cover the L/C, you will need to have a Trade Finance Cover Account. If you do not yet have one we will open it for you. Find out more about the Trade Finance Cover Account.
Benefits of an import L/C
An import L/C gives you an increased certainty that goods will be shipped on time and in accordance with agreed terms. You are only required to pay once the exporter has shipped the goods in time and the documents comply with the terms and conditions of the L/C.
In addition, providing the exporter with security of payment, can strengthen your negotiating position.
The steps involved in the importing process
- You and the exporter agree on the documents, terms and conditions to be included in the L/C.
- Next, you instruct ABN AMRO to open the L/C. We open the L/C and send it to the advising bank.
- The advising bank checks a.o. the authenticity of the L/C and notifies the exporter.
- Once the goods have been shipped, the exporter prepares the required documents and sends them to the advising bank.
- The advising bank checks the documents and forwards them to ABN AMRO. We then verify whether the documents comply with the terms and conditions of the L/C. If they do not comply, we will contact you.
Points to be aware of with an import L/C
- International business is also based on trust, so make sure you know the exporter well enough before doing business.
- Banks deal with documents, not with goods.
- Once ABN AMRO has checked the documents and confirmed that they comply with the terms of the L/C, we are obliged to effect payment. This is because we have irrevocably undertaken to pay upon submission of L/C-compliant documents.
- Make sure that you have enough working capital in your account. This may be a credit facility or funds in your business account. We can only execute your request if there is sufficient balance in the account(s) specified in your application. When opening an L/C on your instruction, ABN AMRO undertakes to pay a specified amount once the L/C terms and conditions are met. We will therefore reserve this amount in your account.
If you want to use funds from your business account to cover the L/C, you will need to have a Trade Finance Cover Account. If you do not yet have one we will open it for you. Find out more about the Trade Finance Cover Account.
Benefits of an import L/C
An import L/C gives you an increased certainty that goods will be shipped on time and in accordance with agreed terms. You are only required to pay once the exporter has shipped the goods in time and the documents comply with the terms and conditions of the L/C.
In addition, providing the exporter with security of payment, can strengthen your negotiating position.
Trade Finance mitigates your trade risks
To avoid situations where a buyer doesn’t pay or a supplier doesn’t deliver, importers and exporters often use Trade Finance products to finance and manage their international transactions.
Doing business internationally
Make a strong, well-prepared start on your international ambition. We can support you with import and export checklists, risk mitigation and practical tips.