Back to posting, in from developing. It has been several busy months meeting clients and rolling out product. The economy is improving, companies are investing and supply chain finance is growing.
During my blog hiatus I was asked a couple of times: “What about letters of credit? Are they not still needed to protect the importer and exporter in new markets?” The answer is: “Of course.” Letters of credit are not going away. There will always be a place for them. When an importer and exporter have established a new relationship, the letter of credit helps mitigate the trade risk between the two parties. When the importer is purchasing a custom-made good, one that cannot be liquidated, the letter of credit offers risk mitigation.
Banks have very good articles on the use of various payment terms: letter of credit, open account and even cash in advance. A good introduction to international import trade is provided by Bank of America at the following link: http://corp.bankofamerica.com/publicpdf/landing/tradeguides/importer.pdf . Check it out.
