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Friday, 12 September 2014

Get Your Letter Of Credit And Make Your Business Easier

By Kerri Stout


Having the money to do business, without having to work in cash and with a good name behind you is always nice. A Letter of Credit is a written promise by an importers bank to the exporter's bank that an amount in a specific currency will be paid within a certain time. There are conditions that will have to be adhered to and certain documents need to be forwarded. The documents that are needed are a Clean Bill of Lading, Commercial Invoice and a Certificate of Origin.

These are normally used when one buys something from overseas and the transaction is between suppliers in one country to another. This form of letter is controlled by the International Chamber of Commerce. These letters cannot be changed or cancelled unless both parties approve of it.

It is very important that each country is able to export products otherwise each nation will be limited with all goods and services within their own territory. To transport domestically is not much of a difference then doing it internationally except that it will cost a lot more. This is only because borders add extra costs such as tariffs and time costs as well as any that hinder the legal system, culture and language.

In some cases the bank will even issue a Standby Letters of Credit promising that the payment will be made even if the buyer is unable to pay for them himself. A Clean Bill of Lading is made by a shipping company that records the condition, quantity and packaging of all goods that are being shipped. These are always insisted upon by importers and their banks.

Labor is the supply of workers and the demands that the employers expect. This will also include wages and all income. It is measured by the work that is produced by humans and the different skills they possess. Not everyone will receive the same wages as experience and skill play a big part in what is paid out. Capital is used for goods that are durable and do not lose their value over time.

Factors of production can also be put into two categories. The most important are all stocks and include land, labor and capital that are applied to the manufacturing of products. The less important are all materials and energy because they come from both labor and land.

The Harmonized System code is numbers and names of a certain product. This is generally a numbered code that is comprised of eight digits and in some cases two extra numbers are added. Every product is assigned a number according to the function and form. If one is transporting frozen peas this will be a different classification to fresh peas.

If by some chance the ship carrying the goods never makes it to port, the seller will still get the money as the bank has now made a promise to them that payment will be made no matter what. The Credit Letter is a binding document that no one should try and bypass. It is there for the buyer as well as the seller for their peace of mind.




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