Acquiring Shipping Documents for Trade

Acquiring Shipping Documents for Trade
Nikolai Pankratz with American Resource Network for Expert Village. So, we've talked about all kinds of letters of credit--the basic letters of credit. But, assuming you have agreed on the type of letter of credit you will accept, or negotiated with your seller, or vice versa, whatever, now the next step is going to be--well, the terminology in that letter of credit is very important. And your local banker actually will help you out. That's why I'm directing you to a bank that has an international department, that works with letters of credit. Because they're very familiar, and they obviously have something to gain from it. So, the next thing, you know, you want to list in that letter of credit the type of documents that the seller needs to supply to the bank in order to receive payment. I just wrote it down, because that's a very important point, and I don't want to forget anything. So, one of them is going to be the commercial invoice, obviously. And you know what an invoice is. And then you probably will have to hire an insurance company that will insure the ship to get from port to port, and actually until--you want the goods to be insured. Many times, they don't insure it. It's called CNF, cost and freight, without the insurance. Or CIF--cost, insurance, freight. FOB--freight on board. These are all the terminologies that you probably need to learn. And I would suggest you go on the internet, and you're probably going to find something there. But, it's going to stipulate "FOB," for example, payable at site, in the letter of credit. What that means is the moment the documents arrive at the bank, and the banks usually have a certain period of time, I don't know, a week or something like that. Maybe a little bit longer. I don't know what the laws are as far as that. But usually, in my experience, the bank will release the funds within a week, or after a week. They will review the list of the different documents, and it's going to be said in those documents, that letter of credit--CIF, FOB, whatever. So, that's something that is going to be in the letter of credit. In the next segment, we're going to go over the list.