Confirmed Letters of Credit for Foreign Trade
Part of the Video Series Foreign Trading Tips & Advice
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Confirmed Letters of Credit for Foreign Trade
This is Nikolai Pankratz with American Resource Network for Expert Village. We're talking about letters of credits and having gone through everything else, you are at the point now where you're buying say for example goods from another country. Well one thing I want to really address and want to get you thinking about, if you're dealing with some of the countries that, the new countries that jump into the, our democratic system or whatever, you know changing to a democracy, some of the Eastern Europe, African, South American countries, whatever. You know, you have to remember that the banking system is still young. The constitution is young, etcetera, etcetera, so you know, you want to make sure that you're protected. So there is a way to do letters of credits, if, if just assuming you have a bank in Kergestan for example, well the bank is small, nobody knows and by the way, I strongly recommend that you check the rating of the bank. The, the banks have ratings, AAA, AA, AB etcetera, etcetera. So if the, the, the bank and the rating, has no rating, it doesn't even show up on the map, then I would hesitate accepting a letter of credit from the bank. And what you do at that time, is you ask another bank or the, the, the seller actually needs to confirm that letter, it's called confirmed letter of credit, needs to confirm it through another bank, that could be Moscow or some other bank. And basically that confirming bank acts like a co-signor pretty much. So if something goes wrong and you, or that bank goes out of business or whichever that the confirming bank steps in and makes sure that you actually get the, the, the payment.
This is Nikolai Pankratz with American Resource Network for Expert Village. We're talking about letters of credits and having gone through everything else, you are at the point now where you're buying say for example goods from another country. Well one thing I want to really address and want to get you thinking about, if you're dealing with some of the countries that, the new countries that jump into the, our democratic system or whatever, you know changing to a democracy, some of the Eastern Europe, African, South American countries, whatever. You know, you have to remember that the banking system is still young. The constitution is young, etcetera, etcetera, so you know, you want to make sure that you're protected. So there is a way to do letters of credits, if, if just assuming you have a bank in Kergestan for example, well the bank is small, nobody knows and by the way, I strongly recommend that you check the rating of the bank. The, the banks have ratings, AAA, AA, AB etcetera, etcetera. So if the, the, the bank and the rating, has no rating, it doesn't even show up on the map, then I would hesitate accepting a letter of credit from the bank. And what you do at that time, is you ask another bank or the, the, the seller actually needs to confirm that letter, it's called confirmed letter of credit, needs to confirm it through another bank, that could be Moscow or some other bank. And basically that confirming bank acts like a co-signor pretty much. So if something goes wrong and you, or that bank goes out of business or whichever that the confirming bank steps in and makes sure that you actually get the, the, the payment.
About the Expert
Expert: Nikolai Pankratz is a German born entrepreneur with an impressive background in music, international banking, and foreign trade. Read More
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