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Picture is Worth a Thousand Words . . .
and a New Shirt!
Are
you using Shipping Solutions to prepare your export documents?
Would
you like to brag to the world about how much time and money you're
saving because you were brilliant enough to invest in Shipping
Solutions?
Here's
your chance!
Send
us a picture of you and your colleagues using Shipping Solutions along
with a short statement of how you and your company have benefited from
the software. If you'll give us permission to use your picture and
words in our newsletter and on our website, we'll send you a shirt with
our new Shipping Solutions logo on the pocket.
This
is a very handsome long-sleeve, button-down collar cotton shirt, not some
cheap t-shirt that you'd be embarrassed to wear around the house!
Hurry
and share your story today by submitting your picture and words in an electronic format to Lisa
Nemer or by mailing them to:
Lisa
Nemer
Shipping Solutions
PO Box 22267
Eagan, MN 55122
Don't Let This
Happen To You . . .
Just in case you and your company need any more
incentives to closely monitor your exports, here are just a few
examples of some of the U.S. companies that have been sanctioned by
Customs for export violations:
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The U.S. Bureau of Export Administration (now
the Bureau of Industry and Security or BIS) has imposed
a $95,000 civil penalty on Neopoint, Inc. of San Diego, CA, for
exporting 128-bit encryption software to South Korea without the
requisite export licenses.
-
Earlier this year, BS&B Process Systems
Inc. was fined more than $500,000 and agreed to suspend their export
privileges for three years for falsely claiming they were exporting
oil production equipment to the United Kingdom when they knew the
ultimate destination was Iran.
-
The U.S. Commerce Department fined Kaiser
Aluminum $210,000 for shipping potassium fluoride to Jamaica and
high-strength aluminum rod to Israel without first obtaining the
proper export licenses.
-
The Bureau of Export Administration suspended export
privileges of Thane-Coat, Inc. of Stafford, TX, two of its
executives, and two of its subsidiaries for shipping pipe-coating
materials, machinery and parts to Libya via the United Kingdom and
Italy without the authorizations required under U.S. law. In
addition, the two executives pled guilty to criminal charges and
forfeited $800,000 of personal property to the government.
Make sure you and your company understand your
responsibilities as an exporter. You can find more information about
the Export Enforcement Program (including more details about the
above-mentioned export violations and penalties as well as many other)
at the BIS
website.
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Don't get lost in . . .
The Letter of Credit Triangle
By Chris
Lidberg
You have probably heard of the Bermuda Triangle, but have you ever
heard of the Letter of Credit Triangle? It really does exist!
I’m not talking about documents mysteriously disappearing in a hazy
mist. I’m referring to a triangle of contracts between the issuing
bank, the buyer and the seller.
The first contract is perhaps the most obvious. It is the sales
contract between the buyer and seller. Ideally, the sales contract
identifies the method of payment. In this case, the method of payment
is a letter of credit (LC).
In addition, the sales contract should also indicate some of the
more important details of the LC, such as a shipping deadline, an
expiration date for the LC, the mode of transportation, bill of lading
consignment, currency and amount, Incoterm and specific documents. For
more details on this, please refer to my article, Getting
the Letter of Credit That You Want!
Since the sales contract requires a letter of credit, the buyer
must fill out and sign an application for a LC and present it to their
bank. This leads us to the second contract: the application and
agreement between the buyer and the issuing bank.
When the buyer submits the application, they also sign an agreement
that, among other things, authorizes the bank to automatically charge
their account if the terms of the letter of credit are in compliance.
This is why, if there are discrepancies, the bank contacts the buyer
for a waiver in order to go ahead and make payment. Without the waiver
from the buyer, the issuing bank is not authorized to charge the
buyer’s account.
The third contract is the letter of credit itself. This is a
contract between the issuing bank and the seller. If the terms of the
letter of credit are complied with, the issuing bank is legally
obligated to effect payment to the seller. This holds true even if the
buyer is no longer able to make payment to the issuing bank. If that
situation should occur, the issuing bank will have to effect payment
using bank funds. That’s not a situation banks want to find
themselves in!
 These
three contracts are certainly related, but they are definitely
independent. If someone cancels one of the contracts, it doesn’t
automatically cancel the other two. In other words, if the sales
contract is canceled, that action does not automatically cancel either
the letter of credit or the application and agreement.
If the buyer changes their mind and tries to cancel the sales
contract, the seller could ignore the request for the cancellation of
the contract and still ship against the LC. If there are no
discrepancies, the seller knows they will get paid. (This is a risky
venture since discrepancies are pretty common.)
If all parties agree to cancel the sales contract, they should also
cancel the letter of credit. At the request of the buyer, the issuing
bank will issue an amendment canceling the letter of credit. By
agreeing to issue the amendment, the bank is automatically agreeing to
cancel the application and agreement if the amendment is accepted.
Since the letter of credit is irrevocable, the seller has to agree
to the amendment in order for the LC to be canceled. Once the seller
agrees, the LC, application and agreement are all legally cancelled.
At that point, the buyer’s line of credit is reinstated for the
outstanding value of the LC.
Ms.
Lidberg's bio.
Other Resources:
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