exporters handbook€¦ · web viewtable of contents. titles .....pages

Exporters HandbookTable of Contents

Titles ....................................................................................................................................Page s International Services.............................................................................................................1 - 2Determining Payment Terms/Comparing Payment Terms......................................................3 - 4Foreign Credit Checking .........................................................................................................5Incoming International Wire Transfers (Foreign Drafts) ..........................................................6Documentary Collection..........................................................................................................7 - 8D/P vs. D/A ..............................................................................................................................9Export Letter of Credit.............................................................................................................10 - 11Export Letter of Credit-Communication and Payment.............................................................12 - 13Example of Sight Export L/C in Swift Format..........................................................................14

Example of Usance L/C in Swift Format/Paid at Sight ................................................15Example of Sight Deferred Payment L/C in Swift Format ...........................................16Example of Deferred Payment Usance L/C in Swift Formatand Shipped “Ex -Works” ............................................................................................17 - 18

Export Quotation Sheet...........................................................................................................19Sigh t Export Letter of Credit Instructions to Buyer ..................................................................20 - 21Usanc e (Time) Export Letter of Credit Instructions to Buyer....................................................22 - 23Export Letter of Credit Checklist .............................................................................................24 - 25Drafts Under Export Letters of Credit.......................................................................................26 - 27

Sample Drafts .............................................................................................................28 - 33Transport Documents ..............................................................................................................34 - 35

Air Waybill Example ...................................................................................................36Ocean Bill of Lading Example ....................................................................................37

Export Documents...................................................................................................................38 - 40Export Letters of Credit/Payment and Discrepa ncies..............................................................41 - 46Fees Charged on Export Letters of Credit` ..............................................................................47 - 49Export L/C’s As Loan “Collateral” ...........................................................................................50 - 51Choosing a Freight Forwarder ................................................................................................52Terms of Trade International Commercial Terms (INCOTERMS) .............................................53 - 55

INCOTERMS Chart .......................................................................................................56Financing Foreign Sales/The Export Usance Letter of Credit .................................................57 - 58Letters of Credit/Advised vs. Confirmed ..................................................................................59Authorizations to Pay..............................................................................................................60Transferable Letters of Credit .................................................................................................61 - 62Standby Letters of Credit ........................................................................................................63 - 64Standby Letters of Credit Procedures .....................................................................................65 - 66Export Financing Assistance ...................................................................................................67 - 76Comparison Chart of Foreign Credit Insurance Programs.......................................................77 - 78Export-Import Bank Fact Sheet ...............................................................................................79 - 80California Export Finance Program (CEFO).............................................................................81 - 82

BANK OF THE WEST

INTERNATIONAL SERVICESBank of the West serves middle-market companies in the western United States, bringing the international resources of its parent, BNP Paribas, to its customers. BNP Paribas is one of the largest banks in the world and has an extensive overseas network. At Bank of the West, the Trade Department team offers advice on a wide range of trade finance products to assist our customer’s importing and exporting activities.

TRADE DEPARTMENT 1(888) 60 0 - TRAD E

IMPORT SERVICES

Bank of the West Trade/Import L/C, a web-based product which allows our customers to issue and track letters of credit directly from their files in the Trade Center Operations Department.

Advice on the terms and conditions of an import letter of credit and the rules governing those letters of credit, the UCP 500.

Advice on structuring a line of credit for import letters of credit and related financing.

Advice on import documentary collections as an alternative to letters of credit.

Advice on banker’s acceptances arising from usance letters of credit.

Using banker’s acceptances to finance payments under sight letters of credit.

DOCUMENTARY EXPORT SERVICES

Structuring export letters of credit to enhance timeliness of payment.

Advices on export documentary collections as an alternative to export letters of credit.

Advice on using the export usance letter of credit to extend terms to overseas buyers.

Advice on the usefulness of a confirmation of an export letter of credit.

Bank of the West/DCL (Export Direct Collection Letter), a web-based product which allows customers to process their export collections directly to the buyer’s bank, speeding receipt of

funds.

EXPORT FINANCING SERVICES

Pre-export financing to provide working capital for exporters under 90% guarantee from Eximbank, the California Export Finance Office, or the Small Business Administration.

Lending against eligible foreign receivables, which are covered by foreign credit insurance.

Providing medium-term financing to overseas buyers of U.S. exports under either an Eximbank insurance policy or guarantee.

STANDBY LETTER OF CREDIT

Advice on the wording for standby letters of credit issued for our customers covering: unpaid invoices; backing of credit facilities to related parties; bids and performance on overseas contracts.

Advice on the wording for standby letters of credit received in favor of our customers or in the bank’s favor to provide security for the bank extending a credit facility.

Our Northern and Southern California teams of senior trade managers are on the same floor with our Trade Center Operations staff. If you need general advice about letters of credit/collections or import/export finance, we encourage you to contact a senior trade manager by calling toll free1 (888) 600-TRADE.

Our address and communication references for international transactions are:

Bank of the WestTrade Center Operations -South/SC MPK 02 G1977 Saturn StreetMonterey Park, CA 91755SWIFT: BWSTUS66LAX

Bank of the WestTrade Center Operations – North/1-759-4180 Montgomery Street, 4TH FloorSan Francisco, CA 94104SWIFT: BWSTUS66

BANK OF THE WEST

DETERMINING PAYMENT TERMS

CASH IN ADVANCE LETTER OF CREDIT

DOCUMENTARY COLLECTION

OPEN ACCOUNT

RELATIONSHIP NEW NEW WELL ESTABLISHED WELL ESTABLISHED

TYPE OF GOODS CUSTOM-MADE CUSTOM-MADE STOCK ITEMS STOCK ITEMS

POLITICAL UNSTABLE UNSTABLE* STABLE STRONG

ECONOMIC UNSTABLE UNSTABLE* STABLE STRONG

TIMING OF CASHFLOW AND DELIVERY YES YES NO NO

CONFIRMATION BY U.S. OR OTHER MAJOR BANK SUGGESTED

WHAT METHOD OF PAYMENT SHOULD BE USED? DEPENDS ON EVALUATION OF RISK.

CUSTOMER RIS K : COUNTRY RIS K : FINANCIAL STRENGTH POLITICAL STABILITY CREDIT RATING EXCHANGE RESTRICTIONS RELIABILITY

BANK OF THE WEST

COMPARING PAYMENT TERMSMETHOD OF PAYMENT TIMING OF PAYMENT GOODS AVAILABILITY SELLER'S RISK BUYER'S RISK

CASH IN ADVANCE Before shipment At destination arrival None !00% reliance on seller

SIGHT L/C Presentation of documents after shipment

When L/C is paid Minimal, Issuing/confirming bank obligation to pay if documents conform to L/C

Assurance of shipment, but depends on seller to supply goods ordered

USANCE (TIME) L/C Maturity of B/A or at discount of the draft

At acceptance of draft drawn under the L/C

Minimal, bank obligation to pay if documents conform to L/C terms

Regardless of product quality, payment due at B/A maturity

D/P COLLECTION* When documents received at the presenting bank

When payment is made Non-payment of draft Assurance of shipment, but depends on seller to supply goods ordered

D/A COLLECTION** When accepted Trade Draft matures

At time Trade Draft is accepted Non-payment of draft, even though buyer has the merchandise

Minimal, may refuse to pay draft at maturity

OPEN ACCOUNT Buyer's discretion Upon arrival 100% reliance on buyer Zero

* Also known as: Documents against Payment, Cash against Documents (CAD), and Sight Draft** Also known as: Documents against Acceptance, Time Draft and Trade Acceptance.

Note: With Letters of Credit and Collections, banks deal only with documents, not with the merchandise.

BANK OF THE WEST

FOREIGN CREDIT CHECKING

WORLDWIDE

CREDITEL OF CANADA LTD. P.O. Box 532, Station F Toronto, OntarioCanada M4Y 2N1(416) 968-9252

DUN & BRADSTREET INFORMATION SERVICES(800) 234-3867

FCIB-NACM CORPORATION8840 Columbia 100 ParkwayColumbia, MD 21045-2158(410) 423-1840 (FCIB)(410) 423-1845 (Fax) (FCIB)(410) 740-5560 (NACM)(410) 740-5574 (Fax) (NACM)

GRAYDON AMERICA, INC.110 Jericho TurnpikeFloral Parks, NY 11001(516) 620-5400(800) 466-3163(516) 620-2276 (Fax)www.creditriskmonitor.com

NOVINFORM15 Elm PlaceP.O. Box 7609Greenwich, CT 06836-7609(203) 622-4462

OWENS ONLINE, INC. Airport Business Center/Free Trade Zone4707 140th Ave. N. #208Clearwater, Florida 34622(800) 745-4656(813) 535-7786

WORLD TRADERS DATA REPORTSU.S. Dept. of CommerceUS & FCS District Office11000 Wilshire Blvd, #9200Los Angeles, CA 90024(310) 235-7104(310) 235-7220 (Fax)

250 Montgomery St. 14/FlSan Francisco, CA 94104(415) 705-2300

6363 Greenwich Dr. #145San Diego, CA 92122(619) 557-5395

JAPAN ONLY

TEIKOKU DATABANK AMERICA, INC.747 Third Ave., 25th FloorNew York, NY 10017(212) 421-9805(212) 421-9806 (Fax)

WESTERN HEMISPHERE

VERITAS CREDIT CORPORATION121 Whitney AvenueNew Haven, CT 06510(800) 929-8374(800) 929-5559www.veritas-usa.com

BANK OF THE WEST

INCOMING INTERNATIONAL WIRE TRANSFERSFOREIGN DRAFTS

Incoming Internatio nal Wire Transfers

If you are an exporter selling on open account or prepaid terms, you should instruct your buyer to send the wire transfer to Bank of the West, ABA# 121100782 with the following instructions:

Name of your companyAccount Number at Bank of the WestName of Bank of the West branch where your account is domiciled

Please note that the wire transfer should be directed to Bank of the West. Foreign banks typically send their U.S. dollar wire transfers to one designated U.S. correspondent bank for this purpose, where they can concentrate balances and ease their reconcilement work. This U.S. correspondent bank in turn sends the money to its final destination by a wire transfer through the Federal Reserve. Thus, the foreign bank does not need a direct correspondent bank relationship with Bank of the West to effect a wire transfer.

The Trade Center Operations and Trade Department staff are not responsible for wire transfers coming in directly to your account. Questions about incoming wires going directly to your account should be directed to your local branch or cash management service staff; alternatively, you can subscribe to cash management balance reporting services.

Foreign Drafts

If you are an exporter and selling merchandise for small dollar amounts on an open account basis and the buyer is sending you a check in dollars drawn on a non-U.S. or non-Canadian bank, insist that your buyer purchase a foreign draft (i.e. check) for the prescribed dollar amount from its local bank. Since this foreign draft expressed in dollars will be drawn on a U.S. bank, you can deposit it in your bank account with us and it will clear through the U.S. check clearing system. If your buyer sends you a U.S. dollar check drawn, for example, on its bank in Italy, you will have to use our Collection Department to send this item back to Italy for collection, which will be a time consuming and costly process.

BANK OF THE WEST

DOCUMENTARY COLLECTIONWHAT IS A DOCUMENTARY COLLECTION?

This payment mechanism is the collection by a bank of funds due from a buyer against the delivery of documents. The bank, acting as agent for the seller (exporter), presents documents to the buyer(importer) through that party's bank and in exchange receives payment of the amount owed, or obtains acceptance of a time draft for payment at a future date. The liability of the bank under a documentary collection is primarily restricted to following the seller's instructions in forwarding and releasing documents against payment or acceptance.

HOW IS A DOCUMENTARY COLLECTION DIFFERENT FROM AN L/C OR OPEN ACCOUNT?

Unlike a letter of credit, the bank does not assume any liability to pay if the buyer does not want or is unable to pay. Compared to open account sales, the documentary collection offers more security to the seller, but less than a letter of credit.

WHEN SHOULD A DOCUMENTARY COLLECTION BE USED?

Numerous criteria are applied by businesses when determining which payment instrument to offer as a term of sale. However, in general, a documentary collection would be appropriate where:

The seller and the buyer know each other to be reliable There is no doubt about the buyer's willingness or ability to pay The political and economic conditions of the buyer's country are stable The importer's country does not have restrictive foreign exchange controls

WHAT ARE THE ADVANTAGES OF A DOCUMENTARY COLLECTION?

Simple and inexpensive handling compared to letters of credit Often faster receipt of payment than open account terms Seller retains title to the goods until payment or acceptance is made

ARE THERE ANY DISADVANTAGES?

If the buyer refuses or is unable to pay, the seller has three options, which could be expensive:

Find another buyer Pay for return transportation Abandon the merchandise

WHO ARE THE PARTIES INVOLVED?

PRINCIPAL - exporter, seller, remitter, drawer of the draft REMITTING BANK - exporter's bank handling the collection PRESENTING OR COLLECTING BANK - usually the buyer's bank DRAWEE - importer, buyer, payee

WHAT TYPES OF DOCUMENTARY COLLECTIONS ARE THERE?

.Documents against Payment (D/P) also known as "Sight Draft" or "Cash against Documents” (CAD). The buyer must pay before the collecting bank releases the title documents

Documents against Acceptanc e (D/A). The buyer accepts a time draft, promising to pay for the goods at a future date. After acceptance, the title documents are released to the buyer.

WHAT IF SHIPMENT IS BY AIR FREIGHT?

An Air Waybill (AWB) is a straight consignment; it is not negotiable. The buyer does not need the AWB to pick up the goods. In other words, he can obtain the merchandise without paying for it. To avoid this possibility, when shipping by air, the AWB should always be consigned to the buyer's bank. This prevents release of the merchandise until such time as the buyer's bank issues an Air Releas e to the carrier. This is done only after the buyer has made payment or accepted the draft.

WHAT ARE THE STEPS IN A DOCUMENTARY COLLECTION?

1. The buyer (importer) and seller (exporter) agree on the terms of sale, shipping dates, etc., and that payment will be made on a documentary collection basis.

2. The exporter, through a freight forwarder, arranges for the delivery of goods to the port/airport of departure.

3. The forwarder delivers the goods to the point of departure and prepares the necessary documentation based on instructions received from the exporter.

4. Export documents and instructions are delivered to the exporter's bank by either the exporter or the freight forwarder.

5. Following the instructions of the exporter, the bank processes the documents and forwards them to the buyer's bank.

6. The buyer's bank, on receipt of documents, contacts the buyer and requests payment or acceptance of the trade draft.

7. After payment or acceptance of the draft, documents are released to the buyer, who utilizes them to pick up the merchandise.

8. The buyer's bank remits funds to the seller's bank or advises that the draft has been accepted.9. On receipt of good funds, seller's bank credits the account of the exporter.

WHAT IS THE URC 522?

URC 522 stands for The Uniform Rules for Collections, 1995 Revision, International Chamber ofCommerce Publication No. 522, the rules that banks apply to the handling of collections.

Any company importing or exporting on a documentary collection basis should be familiar with the URC522, as it has a direct impact on how the collection is handled and what procedures the banks follow.

The URC 522 may be ordered from ICC Publishing SA, 156 Fifth Avenue, New York, New York 10010(212) 206-1150

BANK OF THE WEST

D/P VS D/A

COLLECTION D/P D/A

PAYMENT AT SIGHT AT DRAFT MATURITY

CONTROLOCEAN AIR DOCUMENTS TO BUYER ON

PROMISE TO PAYNEGOTIABLE NO N - NEGOTIABLE

RISK BUYER REFUSES SHIPMENT

BUYER ACCEPTS SHIPMENT AND DOESN'T PAY AT DRAFT

MATURITY

IF THE AIR WAYBILL IS CONSIGNED TO BUYER, MERCHANDISE MAY BE PICKED UP WITHOUT RELEASE FROM BANK. NO CONTROL.

COLLECTIONS ARE GOVERNED BY THE UNIFORM RULES FOR COLLECTIONS, I.C.C. PUBLICATION NO. 522

BANK OF THE WEST

EXPORT LETTER OF CREDITWHAT IS AN EXPORT LETTER OF CREDIT?

It all depends on your point of view. From the seller's (beneficiary's) perspective, a commercial letter of credit from a foreign country is an export credit. To the buyer (applicant), the same letter of credit is an import credit. An export credit is a conditional payment mechanism whereby the issuing bank irrevocably promises to pay the seller, if presented documents comply with all of the L/C's terms and conditions. As the issuing bank's undertaking is conditional, a commercial letter of credit is not a guarantee of payment.

HOW IS THE EXPORT L/C PROCESS INITIATED?

Once the buyer (importer) and the seller (exporter) agree on price and terms of sale, the importer arranges for its bank to open an irrevocable letter of credit. The buyer's bank prepares a letter of credit based on instructions from the buyer, which are in agreement with the previously arranged terms of sale. The buyer's bank sends the letter of credit by either wire or mail to its U.S. correspondent bank. The exporter may request that a specific U.S. bank be the advising bank, such as Bank of the West or if no advising bank is requested, the issuing bank will select one of its correspondents.

WHAT IS THE ADVISING BANK'S ROLE?

The U.S. advising bank verifies the authenticity of the letter of credit, prepares a cover letter containing presentation instructions, and forwards the L/C to the exporter (beneficiary). The advising bank has no obligation to pay. Unless the advising bank has added its confirmation to the L/C, it will pay the beneficiary only after it has received good funds from the issuing bank.

The letter of credit should be advised to the International Department of the exporter’s bank, not to the exporter’s local bank branc h . Local bank branches do not have the ability to authenticate letters of credit from overseas.

WHAT ARE THE BENEFICIARY'S RESPONSIBILITIES?

The beneficiary reviews the letter of credit to make sure it conforms to all of the terms of sale and that all requirements, such as latest shipping date, can be met. If the exporter cannot comply with any of the credit terms, the buyer is contacted directly and an amendment is requested. The advising bank has no responsibility in the amendment process except to forward received amendments to the beneficiary after verifying their authenticity.

The exporter contacts a freight forwarder to arrange delivery of the merchandise to the port/airport of departure. The goods are delivered to the departure point and the forwarder prepares the necessary documentation in compliance with the L/C terms and conditions. Either the exporter or the forwarder presents complying documents and the original letter of credit to the advising bank.

WHAT IS "NEGOTIATION"?

The U.S. bank reviews the documents for compliance with the letter of credit terms and conditions. If found to be in order, they are forwarded to the foreign bank for review and transmission to the buyer. If the documents are not in compliance with all the terms and conditions of the letter of credit, the bank can act only in the following ways:

a. Return the documents to the exporter for correction, if possible, and time permitting.

b. Send the documents to the issuing bank on an approval basis.

c. Cable the issuing bank for authority to pay.d. Accept an indemnity from the exporter covering discrepancies. This is an extension of credit.

e. Pay under reserve with recourse to the exporter if buyer refuses documents. This is also anextension of credit.

f. Return the documents to the seller for their disposition.

HOW LONG DOES IT TAKE FOR THE EXPORTER TO GET PAID?

The timeliness of payment to the exporter is dependent on the reimbursement instructions in the letter of credit. Unless the credit has been confirmed, the U.S. bank is under no obligation to pay. It will pay only after receiving funds from the issuing bank. Listed below are the three methods of settlement from fastest to slowest. The issuing bank determines the settlement method.

a. Negotiating bank is authorized to debit issuing bank's "DUE TO" account.

b. Negotiating bank is authorized to claim reimbursement from the issuing bank's U.S. correspondent/settling agent.

c. Documents are payable at the counters of the issuing bank and must be forwarded to them. After examining the documents, the issuing bank remits payment.

WHAT IS THE UCP 500?

The Uniform Customs and Practice for Documentary Credits, 1993 Revision, International Chamber of CommercePublication No. 500 is the set of rules that banks apply to the handling of letters of credit.

Any company using letters of credit for importing or exporting should be familiar with the UCP 500 as it has a direct impact on how the letter of credit is handled and what procedures the banks will follow.

The UCP 500 may be ordered from ICC Publishing SA, 156 Fifth Avenue, New York, New York 10010, Phone(212) 206-1150.

BANK OF THE WEST

EXPORT LETTERS OF CREDIT

COMMUNICATION AND PAYMENT

Letters of credit in favor of exporters in the United States are usually sent by SWIFT and in a prescribed format. A SWIFT format indicates the issuing bank at the top (“received from”) and has numbers at the left for specific information such as:

31C: date credit issued31D: expiration date50: order customer (account party)59: beneficiary (the exporter - usually customer of BANK OF THE WEST)41D: available “by payment” or “by negotiation”42C: tenor of drafts42D: bank on which drafts are drawn44A: shipping dispatch point: place of export44B: shipping destination point: place of import44C: latest shipping date (year/month/day)45A: goods being shipped and terms of trade (FOB, CIF, etc.)46A: documents required to draw under letter of credit47A: additional conditions: this is often where it mentions if TT

reimbursement is acceptable (“TT” means tested teletransmission)48: period for presentation of documents (if silent, 21 day maximum

after shipping date on bill of lading, but within expiry date see UCP500, 43a)49: confirmation instructions: requests advising bank to confirm;

usually states “without”, i.e. no confirmation.53A: issuing bank’s U.S. correspondent who will act as reimbursing bank71B: who pays for banking charges outside the issuing bank’s country?

usually beneficiary pays for charges in the United States.72: bank to bank information: almost always states that the credit is

operative and subject to the UCP 500. However, the SWIFT convention is that all letters of credit sent by SWIFT are subject to the Uniform Customs and Practices (UCP) for Documentary Credits (Number 500 revised in 1993).

78: instructions to advising bank: includes information on where documents are to be sent and from which U.S. bank to claim reimbursement and where drafts are to be sent.

SWIFT stands for Society for Worldwide Interbank Financial Telecommunication and is a bank group which has set up global standards for sending and receiving authenticated instructions for wire transfers and letters of credit. SWIFT is increasingly replacing the tested telex. Some letters of credit are sent by tested telex, and these usually are in a free format without the numbered designations at the left.

Banks around the world have set up testing arrangements with each other on a telex and SWIFT basis. This is the basic level of a correspondent banking relationship to allow the sending of letters of credit and payment under these letters of credit.

Most foreign banks have cut back on the number of accounts maintained in the United States to eliminate idle balances and reduce the cost of reconcilement of numerous unnecessary accounts. Foreign banks are increasingly maintaining specialized dollar accounts at selected banks to handle specific kinds of transactions: L/C reimbursement account; foreign exchange clearing account; wire transfer payment account; and cash letter (check clearing) account. By setting up specialized accounts for specific kinds of transactions, the foreign banks have greatly simplified their reconcilement process and their ability to control these accounts.

Presenting conforming documents, specifying that the L/C is “available by negotiation”, and reimbursement instructions are all important considerations for an exporter being paid on a timely basis. Instructions in a letter of credit may call for the documents to be sent back to the issuing bank for a final examination before allowing payment to be made. For example, when U.S. banks issue letters of credit, they may require documents to be sent back to the U.S. bank for a final examination before payment is made (“available by payment” with issuing bank - see 41.D on the SWIFT).

Many export letters of credit in favor of U.S. beneficiaries are “available by negotiation” and allow for TT(“tested teletransmission”) reimbursement which is done either by an authenticated SWIFT message or a tested telex. If the U.S. bank examining the documents for strict compliance to the terms of the letter of credit per the UCP 500 finds no discrepancies, the U.S. bank can request reimbursement from the issuing bank’s U.S. correspondent for this purpose (often the issuing bank’s New York or Los Angeles branch). Since payment is made before the issuing bank sees the documents, this method of payment is more risky and in many instances the issuing bank will not authorize TT reimbursement. For example, if payment is made to the beneficiary under TT reimbursement and the issuing bank later does find discrepancies in the documents, the issuing bank can require that the U.S. paying bank return the money (if the importer does not waive the discrepancies).

If the export letter of credit does not allow for TT reimbursement and documents are sent back to the issuing bank with drafts to its U.S. reimbursing bank, the examination process at the issuing bank may slow down the payment process. The exporter’s documents may sit in a stack waiting to be examined and when they are examined, discrepancies may be found which necessitates calling the importer for permission to waive the discrepancies. This waiver may not be made immediately which will also slow down the payment process.

Exporters often mistakenly believe that requesting the advising bank to confirm the letter of credit will speed up their payment. However, a confirmation by a U.S. bank is a promise to pay by the U.S. bank in the event the issuing bank does not make payment under the letter of credit when clean (i.e. no discrepancies) documents are presented. Thus, the confirmation typically protects the exporter against the issuing bank failing to pay because the issuing bank is bankrupt or adverse economic circumstances have occurred (such as foreign exchange controls). For usance letters of credit where the drafts are drawn on a U.S. reimbursing bank, once the drafts have been “accepted” by the U.S. bank, the exporter has the credit risk of the U.S. bank. Thus, if an exporter requests a confirmation on a usance letter of credit where the drafts are drawn on a U.S. bank, the confirmation is basically protecting the exporter during the period from the date of issuance on the letter of credit to the date when the time draft is accepted by the U.S. bank. If the time draft were drawn on the issuing bank, the confirmation would still protect the exporter during the acceptance period.

BANK OF THE WEST

EXAMPLE OF SIGHT EXPORT L/C

IN SWIFT FORMATRECEIVED FROM: MITSUBISHI BANK, LTD., TOKYO

:form of d/c :IRREVOCABLE:40A :crdt issued :001130:31C :expiry :010122 COUNTERS OF NEGOTIATING BANK:31D :ord customer :TOKYO MEAT CO., LTD.:50 2-24-80, HORIKARA, TOKYO

:ben customer :CALIFORNIA BEEF, INC. 1412 FLANK STREET:59 LOS ANGELES, CA 91107

:currency amount :USD 70822.50:32B :amount spec :5/5:39A :available with :ANY BANK:41D BY NEGOTIATION

:drafts :SIGHT FOR FULL INVOICE COST:42C :drafts :BISHUS6L:42A :part shipment :PROHIBITED:43P :trans shipment :PROHIBITED:43T :ship -disp-take :U.S. PORT:44A :ship -disp-take :TOKYO, JAPAN:44B :ship -disp-take :001231:44C :shipment of :9,950 LBS (5 PCT MORE OR LESS ALLOWED) OF FROZEN BEEF FLAP:45A STEAK AT USD3.55 PER LB AND 10,000 LBS (5 PCT MORE OR LESS

ALLOWED) OF FROZEN DICED BEEF AT USD3.55 PER LB CANDF JAPAN

:docmt required :+SIGNED COMMERCIAL INVOICE IN 3:46A :2/3 SET OF CLEAN ON BOARD BILLS OF LADING MADE OUT TO THE

ORDER OF SHIPPER AND BLANK ENDORSED MARKED FREIGHT PREPAID NOTIFY APPLICANT.+PACKING LIST IN 3+USDA FSIS FORM 9060-5 AND 9290-1 EACH IN 1 COPY

:addtnl cond :ONE SET OF NON-NEGOTIABLE DOCUMENTS INCLUDING 1/3 ORIGINAL:47B BILL OF LADING AND THE ORIGINAL OF USDA FSIS FORM 9060-5 AND

9290-1 TO BE AIRMAILED DIRECTLY TO TOKYO MEAT CO., LTD. IMMEDIATELY AFTER SHIPMENT AND BENEFICIARY'S CERTIFICATE TO THIS EFFECT IS REQUIRED.

:period for doc :WITHIN 15 DAYS AFTER DATE OF SHIPMENT BUT WITHIN VALIDITY OF:48 presentation THE CREDIT.

:confrmtn instr :WITHOUT:49 :senders corr :BISHUS6L:53A MITSUBISHI BANK, LTD., LOS ANGELES BRANCH

LOS ANGELES, CA:instr to bank :REIMBURSEMENT BY TELECOMMUNICATION IS PROHIBITED. SPECIAL INSTRUCTIONS TO

THE NEGOTIATING BANK:78 :

ALL THE DOCUMENTS MUST BE FORWARDED US, I.E. THE MITSUBISHI BANK LTD. 7-1 MARUNOUCHI, 2-CHOME, CHIYODA-KU, TOKYO JAPAN BY REGISTERED AIRMAIL(S) IN 1. THE DRAFTS MUST BE PRESENTED TO THE DRAWEE BANK, ATTN: L/C REIMBURSEMENT DEPT. FOR REIMBURSEMENT CLAIMS.

:acct with bank :BANK OF THE WEST:57D TORRANCE BRANCH

CHECKING ACCOUNT NO.4368:bk to bk info :THIS CREDIT IS ISSUED SUBJECT TO UNIFORM CUSTOMS AND PRACTICE FOR

:72 DOCUMENTARY CREDITS (1993 REVISION) ICC PUBLICATION NO.500.

BANK OF THE WEST

EXAMPLE OF USANCE L/CIN SWIFT FORMAT/PAID AT SIGHT

RECEIVED FROM:

CITIZENS NATIONAL BANK - SEOUL, KOREA

FROM:

:31C :credit issued :001211:31D :expiry :010221 AT THE NEGO BANK:50 :ord customer :SOUL MAN MARKETING CO., LTD.

RM 100 HANIL BLDG. 18-KA, CHUNG-KU, SEOUL KOREA

:59 :ben customer :DHARMA TRADING, INC. P.O. BOX 60, SAN FRANCISCO CA 94120, USA

:32B :currency amount :USD 100,000:41D :available with :ANY BANK

BY NEGOTIATION:42C :drafts :90 DAYS AFTER SIGHT:42A :drafts :BWSTUS66LAX:43P :part shipment :ALLOWED:43T :trans shipment :PROHIBITED:44A :ship -disp-take :US PORT:44B :ship-disp-take :BUSAN PORT, KOREA:44C :ship -disp-take :010131:45A :shipment of :SHIPMENT OF 10,200 T-SHIRTS

F.O.B. ANY U.S.A. PORT:46 :docmt required :+SIGNED COMMERCIAL INVOICE IN 3 COPIES

+SIGNED PACKING LIST IN 3 COPIES+FULL SET OF CLEAN ON BOARD OCEAN B/L MADE OUT TO ORDER AND BLANK ENDORSED MARKED FREIGHT COLLECT, NOTIFY APPLICANT

:71B :charges for :ALL BANKING CHARGES AND COMMISSIONS INCLUDING REIMBURSEMENT CHARGES OUTSIDE KOREA ARE FOR ACCOUNT OF BENEFICIARY

:48 :period for doc :WITHIN 20 DAYS AFTER THE DATE OF SHIPMENT BUT WITHIN THE VALIDITY presentation OF THE CREDIT.

:49 :confrmtn instr :WITHOUT:53A :senders corr :BWSTUS66LAX

BANK OF THE WEST LOS ANGELES, CA

:78 :instr to bank :ALL DOCS MUST BE MAILED TO CITIZENS NATIONAL BANK, FOREIGN BUSINESS DEPT. 9-1,2-GA, NAMDAEMUN-RO, CHUNG-KU SEOUL, KOREA BY COURIER IN ONE LOT. THIS CREDIT IS TO BE NEGOTIATED AT SIGHT BASIS, WITH THE ACCEPTANCE COMMISSION AND DISCOUNT CHARGES FOR ACCOUNT OF BENEFICIARY.

:72 :bk to bk info :THIS IS OPERATIVE INSTRUMENT. THIS CREDIT IS SUBJECT TO UCP(1993 REV) I.C.C. PUB 500

BANK OF THE WEST

EXAMPLE OF SIGHT DEFERRED PAYMENT L/C IN SWIFT FORMAT

RECEIVED FROM: BANCO CENTRAL HISPANOAMERICANO, S.A.

:4 :message text:40A :form of d/c :IRREVOCABLE:31C :crdt issued :001004:31D :expiry :001231 LOS ANGELES, CA:51D :appl bnk/agent :BANCO CENTRAL HISPANOAMERICANO

BILBAO SPAIN:50 :ord customer :MARIO COMA, S.A.

BARRIO DE JOSE NO. 61VIZCAYA, SPAIN

:59 :ben customer :SUMP PUMPS, INC. 43 ROMAN STREET OAKLAND, CA USA

:32B :currency amount :USD amount 105000

:39B :amount spec :MAXIMUM:41A :available with :BWSTUS66LAX

BY DEF PAYMENT:42P :drafts :120 DAY AFTER BILL OF LADING DATE:43P :part shipment :ALLOWED:43T :trans shipment :NOT ALLOWED:44A :ship -disp-take :ANY USA AIRPORT:44B :ship -disp-take :MADRID-BARAJAS AIRPORT, SPAIN:45A :shipment of :CIF-MADRID: 45 SUMP PUMPS. STRICTLY IN ACCORDANCE WITH PROFORMA

INVOICE/603/E DD 9511.16:46A :docmt required :BL-ORIGINAL 3 FOR SHIPPER-ISSUED TO THE ORDER OF MADRID COMA S.A.

NOTIFY THE SAME, MARKED FREIGHT PREPAID.+SIGNED COMMERCIAL INVOICE, THREE FOLD.+CERTIFICATE OF ORIGIN ISSUED BY CHAMBER OF COMMERCE, IN COPY.+BENEFICIARIES CERTIFICATE, STATING THAT THE ORIGINALS OF THE ABOVE DOCUMENTS HAVE BEEN SENT TOGETHER WITH THE GOODS.+POL/CERT OF INSURANCE IN FAVOUR OF APPLICANTS, COVERING ALL RISKS FROM WAREHOUSE TO WAREHOUSE CLA USED 'CLAIMS PAYABLE IN BILBAO'

:47A :addtnl cond :DOCUMENTS MUST BE SENT TO: BANCO CENTRAL HISPANOAMERICANO GRAN VIA. 4 48001 BILBAO, SPAIN

:71B :charges for :ALL BANKING CHARGES OUTSIDE OF SPAIN. FOR BENEFICIARIES ACCOUNT

:49 confrmtn instr :MAY ADD:53A senders corr :CENTUS33

BANCO CENTRAL HISPANOAMERICANO, S.A. NEW YORK, NY

BANK OF THE WEST

EXAMPLE OF DEFERRED PAYMENT USANCE L/C IN SWIFT FORMAT AND SHIPPED "EX-WORKS"

(SAMPLE OF A TYPICAL DETAILED MIDDLE EASTERN L/C)RECEIVED FROM: BANK OF ISRAEL

:40A :form of d/c :IRREVOCABLE:20 :tran reference :412-01-051884645:31D :expiry :010712 CALIFORNIA (USA):50 :ord customer :ICES AND SORBET, LTD.

80 BEN GURION STREET HERZLIYA 46603

:59 :ben customer :ICE SCREAM, INC.43 MELTDOWN STREETMOUNTAIN VIEW, CALIFORNIA 94040

:32B :currency amount :USD 28432.80:41A :available with :BANK ISRAEL

BY DEF PAYMENT:42P :drafts :AT 90 DAYS AFTER DATE OF B/L

WITHOUT INTEREST AND CHARGES:43P :part shipment :PROHIBITED:43T :trans shipment :PERMITTED:44A :ship -disp-take :USA PORT:44B :ship -disp-take :ASHDOD PORT:44C :ship -disp-take :960620:45A :shipment of :FROZEN DESERTS PER P.O. 803A

INCOTERMS: EX-WORKS GEORGIA GOODS OF U.S. ORIGIN

:46A :docmt required :1) MARINE BILL OF LADING 2/3 ORIGINALS PLUS 3 NON-NEGOTIABLE COPIES CLEAN ON BOARD MADE OUT TO THE ORDER OF BANK ISRAEL, TEL AVIV MAIN BRANCH NOTIFY APPLICANT MARKED FREIGHT PAYABLE AT DESTINATION SPECIFYING THAT IN VIEW OF THE DANGER OFCONFISCATION WARRANTED VESSEL IS NOT TO CALL AT PORTS AND NOT TO ENTER THE TERRITORIAL WATERS OF SYRIA, LEBANON, IRAQ, IRAN, SAUDI ARABIA, YEMEN, SUDAN, LIBYA OR OTHER ARAB COUNTRIES EXCEPT EGYPT AND JORDAN PRIOR TO UNLOADING IN ISRAEL UNLESS IN DISTRESS OR SUBJECT TO FORCE-MAJEURE2) ORIGINAL INVOICE SIGNED BY BENEFICIARY IN 6 COPIES3) PACKING LIST IN 6 COPIES4) PHOTOCOPY OF ORIGINAL U.S. CERTIFICATE OF ORIGIN FOR EXPORTS TO ISRAEL MARKED 'P' IN BOX 8 SIGNED BY BENEFICIARY, NOTARIZED BY A NOTARY PUBLIC, AND CERTIFIED BY AN APPROPRIATELY CONSTITUTED LOCALBUSINESS ORGANIZATION, SUCH AS A CHAMBER OF COMMERCE OR BOARD OF TRADE5) BENEFICIARY'S SIGNED DECLARATION STATING THAT 1/3 ORIGINAL B/L ORIGINAL U.S. CERTIFICATE OF ORIGIN FOR EXPORTS TO ISRAEL AND ONE SIGNED ORIGINAL OF EACH DOCUMENT (INCLUDING CERTIFICATE OF ANALYSIS) PRESENTED AT THE BANK WERE SENT DIRECTLY TO PROGRESS (1984) LTD.,P.O. BOX 529, INDUSTRIAL AREA, ASHKELON, BY SPECIAL COURIER6) PHOTOCOPY OF CERTIFICATE OF ANALYSIS.

EXAMPLE OF DEFERRED PAYMENT USANCE L/C IN SWIFT FORMAT AND SHIPPED "EX-WORKS"

(SAMPLE OF A TYPICAL DETAILED MIDDLE EASTERN L/C) Continued...

:47A addtnl cond :1) ALL DOCUMENTS TO MENTION OUR L/C NUMBER 386-432) ADDITIONS, CORRECTIONS, ERASURES, AMENDMENTS MUST BE DULY STAMPED AND INITIALLED BY THE PARTY/AUTHORITY ISSUING THE DOCUMENT IN QUESTION3) A CHARGE OF USD 100.00 (OR ITS COUNTERVALUE)PLUS RELATED TELEX COSTS WILL BE APPLICABLE IN CASE DISCREPANT DOCS ARE PRESENTED.4) INVOICE TO STATE INCOTERMS AND ORIGIN OF GOODS, IF MENTIONED IN FIELD 455) INVOICES TO STATE THAT GOODS ARE OF FIRST QUALITY AND MADE IN U.S.A.6) FORWARDER'S B/L ISSUED WITH ALL PARTICULARS AS PER FIELD 46A DOC. NO. 1 ACCEPTALBLE7) ALL DOCUMENTS, EXCEPT MARINE B/L, TO BE ISSUED IN THE NAME OF PROGRESS (1984) LTD. P.O.BOX 529, INDUSTRIAL AREA, ASHKELON.

:71B :charges for :ALL BANKING CHARGES AND COMMISSIONS OUTSIDE ISRAEL INCLUDING REIMBURSING BANK'S CHARGES ARE FOR BENEFICIARY'S ACCOUNT.

:49 :confrmtn instr :WITHOUT:78 :instr to bank : AFTER RECEIPT OF DOCUMENTS BY US STRICTLY CONFORMING WITH CREDIT

TERMS WE SHALL AUTHORIZE YOU TO CLAIM REIMBURSEMENT ON MATURITY DATE ON BANK ISRAEL 80 WALL STREET, NEW YORK, NY 10036 WHOM WE SHALL AUTHORIZE TO HONOUR YOUR CLAIM. PLEASE ADVISE US BY TESTED TELEX/ SWIFT AMOUNT INVOICED, NAME OF STEAMER, DATE AND NUMBER OF B/L. ALTERNATIVELY, ADVISE CANCELLATION IF CREDIT UNUTILIZED, FORWARD US DOCS BY REGISTERED AIRMAIL TO OUR ADDRESS 603 ALEYKOM ST.,TEL AVIV 61000 ISRAEL FOR THE ATTENTION OF L/C DEPARTMENT.

:72 :bk to bk info :L/C SUBJECT TO UCPDC 1993 (ICC 500)

BANK OF THE WESTEXPORT QUOTATION WORKSHEET

Date: Pro Forma Invoice No.

Customer Country:

Purchase Order No. Date Received:

Merchandise:

Gross Weight Cubic Measurement:

Ship by Air Ocean Truck/Rail

From To:

Export Selling Price $

Export Packing

Inland Freight to Departure Point

Consular / Legalization Fees

Inspection Fees

Freight Forwarders Fees

Banking Fees

Other ChargesFOB - OCEAN PORT OF LOADING orFCA - AIRPORT OR PLACE OF LOADING $

Ocean Freight

Air/Truck/Rail FreightCFR - OCEAN PORT OF UNLOADING orCPT - AIRPORT OR PLACE OF UNLOADING $

Insurance Premium

CIF - OCEAN PORT OF UNLOADING orCIP - AIRPORT OR PLACE OF UNLOADING $

This quote is based on current prices and is valid untilTerms: L/C Collection Open Account

Prepared by _______________________ Authorized by: __________________________

BANK OF THE WEST

SIGHT EXPORT LETTER OF CREDITINSTRUCTIONS TO BUYER

Please instruct your Bank to open an Irrevocable Letter of Credit by full cable in accordance with the following terms and conditions:

Beneficiary: American Exporter, Inc. Balance of Payments St. Anywhere, California 90000

Advising Bank:Bank of the WestBank of the West –Trade Center Operations1977 Saturn Street, SC MPK 02 GMonterey Park, CA 91755 SWIFT: BWSTUS66LAX

Drafts are to be drawn at sight and are to be available by Negotiation or Payment at the counters of Bank of theWest, Los Angeles with TT Reimbursement allowed.

Amount: Currency/ US $ ___________________________________To be invoiced: FOB FCA CFR CIF OTHER

(Refer to INCOTERMS for more information on shipping terms)

Expiry Date: _________________________ Place: ______________________________

Merchandise Description:

From: _________________________________To: ____________________

Latest Ship Date:___________________

LADING: (Refer to “Transport Documents” section for more information) Full set original clean on board ocean bills of lading issued to order of ___________

marked freight: Collect Prepaid, Marked notify:__________________________________________________________________

Air Waybill consigned to _______________________________________________ marked freight Collect Prepaid, Marked notify: _________________________ __________________________________________________________________

Full set original clean multimodal transport document issued to order of _______________________________ marked freight: Collect Prepaid, Marked notify:__________________________________________________________________

DOCUMENTS: (Refer to “Export Documents” section for details) Signed Commercial Invoice in ___________________ copies. Packing list in ___________________ copies. Certificate of ____________________ Origin issued by ______________________

Inspection Certificate in ____________________ copies, issued by ____________ certifying that __________________________________________________

Other document (s)___________________________________________________

INSURANCE: Covered by: Applicant Beneficiary

Documents to be presented to the negotiating bank within _____ days after the date of shipment. (If blank, 21days.)

Transshipment: Permitted Not PermittedPartial Shipments: Permitted Not Permitted

Confirmation required: Yes No (Confirmation requires a credit decision on Bank of the West’s part. Please check with us prior to having the L/C opened.)

L/C to be Transferable: No Yes, with Bank of the West as transferring Bank.

All charges other than the issuing and reimbursing bank's charges are to be for account of: Applicant Beneficiary

OTHER INSTRUCTIONS:Letter of credit is to be issued at least _____ days prior to the latest shipment date.

L/C is to be subject to the Uniform Customs and Practice for Documentary Credit (1993 Revision) InternationalChamber of Commerce Publication No. 500.

Shipment will be effected after our receipt of a satisfactory Letter of Credit. If you are unable to comply with any of the foregoing, please advise us by:

FAX NO. ________________________ PHONE NO. ________________________

ANY DEVIATION FROM THE ABOVE TERMS WITHOUT OUR CONSENT WILL DELAY SHIPMENT UNTIL THE LETTER OF CREDIT IS AMENDED.

THIS IS A SAMPLE ONLY. NEVER SEND THIS FORM TO YOUR BUYER. USE IT AS A GUIDE TO PREPARE YOUR OWN INSTRUCTION LETTER, DELETING THE INFORMATION, WHICH IS NOT APPLICABLE TO YOUR TRANSACTION.

BANK OF THE WEST

USANCE (TIME) EXPORT LETTER OF CREDITINSTRUCTIONS TO BUYER

Please instruct your Bank to open an Irrevocable Letter of Credit by full cable in accordance with the following terms and conditions:

Beneficiary: American Exporter, Inc. Balance of Payments St. Anywhere, California 90000

Advising Bank: Bank of the WestTrade Center Operations1977 Saturn Street, SC MPK 02 GMonterey Park, CA 91755 SWIFT: BWSTUS66LAX

Drafts at : ________ day’s sight, ________ days from shipment date Drafts drawn on and available by acceptance with:

Issuing Bank, Advising Bank, Reimbursing Bank(Acceptance requires a credit decision on the part of the drawee bank. Please check with us for details.)

Acceptance Commission for account of: Applicant BeneficiaryDiscount charges (if any) for account of: Applicant Beneficiary

Acceptance and discount are for buyer’s account, therefore L/C to be paid at sight.

Amount: Currency/ US $ ___________________________________ To be invoiced: FOB FCA CFR CIF OTHER

(Refer to INCOTERMS section for more information on shipping terms)

Expiry Date: _________________________ Place: ______________________________

Merchandise Description: From: _______________ To: ________________ Latest Ship Date: ________________

LADINGS: (Refer to “Transport Documents” section for more information)

Full set original clean on board ocean bills of lading issued to order of ___________ ________________________ Marked freight: Collect Prepaid, Marked notify:__________________________________________________________________

Original clean Air Waybill consigned to ____________________________________ marked freight Collect Prepaid, Marked notify: _________________________

Full set original clean multimodal transport document issued to order of _______ ________________________ marked freight: Collect Prepaid, Marked notify:_________________________________________________________________

DOCUMENTS: (Refer to “Export Documents” section for details)

Signed Commercial Invoice in ___________________ copies.

Packing list in ___________________ copies.

Certificate of ____________________ Origin issued by ______________________

Inspection Certificate in ____________________ copies, issued by ___________ certifying that _______________________________________________________

Other document (s)___________________________________________________

INSURANCE: Covered by: Applicant Beneficiary

Documents to be presented to the negotiating bank within _____ days after the date of shipment. (If blank, 21days.)

Transshipment: Permitted Not PermittedPartial Shipments: Permitted Not Permitted

Confirmation required: Yes No (Confirmation requires a credit decision on Bank of the West’s part. Please check with us prior to requesting that the L/C be opened.)

L/C to be Transferable: No Yes, with Bank of the West as transferring Bank.

All charges other than issuing & reimbursing banks’ charges are for account of: Applicant Beneficiary

OTHER INSTRUCTIONS:Letter of credit is to be issued at least _____ days prior to the latest shipment date.

L/C to be subject to the Uniform Customs and Practice for Documentary Credit (1993 Revision) InternationalChamber of Commerce Publication No. 500.

Shipment will be effected after our receipt of a satisfactory Letter of Credit. If you are unable to comply with any of the forgoing, please advise us by: Fax _ ________ Phone _________

ANY DEVIATION FROM THE ABOVE TERMS WITHOUT OUR CONSENT WILL DELAY SHIPMENT UNTIL THE LETTER OF CREDIT IS AMENDED.

THIS IS A SAMPLE ONLY. NEVER SEND THIS FORM TO YOUR BUYER. USE IT AS A GUIDE TO PREPARE YOUR OWN INSTRUCTION LETTER, DELETING THE INFORMATION, WHICH IS NOT APPLICABLE TO YOUR TRANSACTION.

BANK OF THE WEST

EXPORT LETTER OF CREDIT CHECKLIST

BUYER: DATE:

PURCHASE ORDER NO. PRO FORMA INV.NO.

L/C NO. DATED:

ISSUING BANK:

I. TERMS:

Letter of credit is Irrevocable Revocable

Subject to UCP 500 Yes Needs amending

Letter of Credit has been Advised Confirmed

Seller's Name & Address O.K. Needs Amending

Buyer's Name & Address O.K Needs Amending

Amount O.K. Needs Amending

Expiry Date & Place O.K. Needs Amending

Draft Tenor O.K. Needs Amending

Goods Description O.K. Needs Amending

Latest Shipping Date O.K. Needs Amending

Documents Required O.K. Needs Amending

Document Presentment Days O.K. Needs Amending

Banking Charges O.K. Needs Amending

II. SHIPPING INSTRUCTIONS:

Export License Needed Yes No

Need Documents Legalized Yes No

Partial Shipments O.K. Needs Amending

Trans-shipment O.K. Needs Amending

Ship by ocean/air O.K. Needs Amending

Terms: FOB/CFR/CIF etc. O.K. Needs Amending

Insurance Coverage O.K. Needs Amending

Shipment from/to O.K. Needs Amending

Consignee O.K. Needs Amending

Shipping Marks O.K. Needs Amending

III. BANKING:

L/C Negotiation Restricted Yes No

Availability & Settlement O.K. Needs Amending

Submit Documents to (Bank)

IV. SEND L/C COPY TO: Forwarder Traffic Dept. Sales Dept.

Accts. Payable Credit Dept. Inventory Control Production

Other:

V. FINAL APPROVAL:

Letter of Credit Acceptable Needs amending

Amend the following: ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Checked By: ___________________ Approved By: ___________________________

BANK OF THE WESTDRAFTS UNDER EXPORT LETTERS OF CREDIT

When exporters make a drawing under a letter of credit, the presented documents (bill of lading, invoice, packing list, certificate of origin, etc.) should usually be accompanied by a draft, which is basically a check, representing demand for payment. The draft or Bill of Exchange is drawn and signed by the exporter (seller). The terms of the draft are “at sight” or a number of days after sight or after the bill of lading date.

Historically, the draft (especially the usance draft) is the instrument used for litigation. Although this is no longer true in most jurisdictions, the draft is still used as the instrument to demand payment.

“At sight” means that the draft is paid upon sighting of the documents which are found to be conforming. The terms, which specify a number of days after sight or after the B/L date, are commonly called “usance”, indicating that the issuing bank is obligated to pay the beneficiary (exporter) at some specific future date. For usance drafts, the obligation to pay begins when the drawee bank “accepts” the draft and a banker’s acceptance are created.

The letter of credit specifies on which bank the draft is to be drawn. For export letters of credit where the beneficiary is a U.S. exporter, the drawee is usually either the issuing bank or the issuing bank’s designated U.S. reimbursing bank (in rare cases the drawee can be the buyer). Letters of credit in the SWIFT format specify the drawee bank in section 42D (see reference sheet “Export Letters of Credit: Communication & Payment” for a brief explanation of the SWIFT teletransmission network among banks). When the drawee bank is the issuing bank’s designated U.S. reimbursing bank, this bank’s name is repeated in section 53A, sender’s correspondent bank.

For example, BNP Paribas may issue a letter of credit advised through Bank of America to one of Bank of America’s customers. The letter of credit may call for the drafts to be drawn on Bank of the West. The letter of credit may spell out the name of the drawee bank or quite often just use the SWIFT code for that bank, i.e. BWSTUS66LAX for Bank of the West. If the SWIFT code is not clear as to the actual name of the drawee bank, please call our Trade Center Operations or one of our Trade Department Senior Trade Managers.

When discussing specific questions about your export L/C with our staff, it is important that you have our reference number which is a five-digit number preceded by “E”, such as E12534, for letters of credit advised by us. If the letters of credit were confirmed by us, the reference number would start with a “C”, such as C12543.

The parties specified on the draft or Bill of Exchange are:

1. The exporter (beneficiary of the letter of credit) is the drawer of the draft. The exporter’s company name must be exactly as it appears in the letter of credit. The exporter signs the draft.

2. The importer (account party in the L/C) is the buyer of the merchandise under the export commercial letter of credit.

3. The payee (“pay to the order of”) may be the beneficiary (exporter) of the L/C or its designated negotiating bank. If the exporter is the payee on the draft, then the draft must be endorsed to the negotiating bank. It is usually easier to show the negotiating bank as the payee (i.e. Bank of the West), and our blank drafts with a carbon duplicate are formatted in such a manner.

4. The draft is addressed TO the drawee bank, which may be the issuing bank or its designated U.S. reimbursing bank (or in rare cases the buyer). Under our printed draft form, the DRAWN UNDER space details the issuing bank’s name (at the top of the SWIFT), the issuing bank’s L/C number (see SWIFT section 20), and the date which that L/C was issued in the foreign country (see SWIFT section 31D).

European credits usually do not call for drafts because a stamp tax on drafts in Europe is common. Usance credits in Europe usually take the form of a deferred payment credit with no draft required.

A draft cannot have any corrections, deletions or erasures. If the draft does, then the document-examining bank will note a discrepancy.

You may ask our Export Letter of Credit section to mail you our pre-printed draft form or you can make your own draft on your personal computer. The more sophisticated and efficient exporters just duplicate the bill of exchange form on their PC’s and fill in the information accordingly. This, of course, makes it very easy to correct mistakes and prepare a perfect draft that eliminates a potential discrepancy. Although drafts are similar to checks, they do not possess any special characteristics such as micro encoding and thus the easiest method of preparing drafts is to use your PC.

The printed draft form provides an original and a carbon copy which differs only in that the original states “THIS FIRST BILL OF EXCHANGE (SECOND UNPAID)” and the carbon copy states “THIS SECOND BILL OF EXCHANGE (FIRST UNPAID)”. The reason for the two drafts goes back to the days when the documents were sent in separate mailings in the event that one became lost.

First Example: a sight drawing. A $500,000 sight letter of credit is opened by Gifu Bank Limited in Gifu, Japan on September 1, 1995 with reference number LC137045. Gifu Bank advises the letter of credit through Bank of the West and specifies Chase Manhattan Bank (CHASUS33) as its designated U.S. reimbursing bank. The account party under the L/C is Kyowa Corporation, 43-12 Hokkaido Street, Gifu, Japan. The beneficiary(exporter) of the letter of credit is Snowboards and Skis, Inc. (“SSI”). The L/C permits partial drawings covering the shipment of snowboards to Japan. The first drawing is for $100,000. On October 2 the exporter, Snowboards and Skis, Inc., assembles the required documents to be presented under the letter of credit and dates the draft accordingly. Since SSI numbers drafts drawn under letters of credit consecutively for all drawings under export letters of credit, its internal reference number is “43”.

Second Example: a usance L/C calling for drafts to be drawn at 90 days after sight. The details of the letter of credit are the same as above except for the fact that it is now a usance credit.

Third Example: a usance L/C calling for drafts to be drawn at 90 days after bill of lading date.

SAMPLE DRAFTSBILL OF EXCHANGE

NUMBER: AMOUNT: $ DATE:

AT SIGHT OF THIS FIRST BILL OF EXCHANGE (SECOND UNPAID)

PAY TO THE ORDER OF BANK OF THE WEST THE SUM OF

VALUE RECEIVED AND CHARGE THE SAME TO ACCOUNT OF

DRAWN UNDER

L/C NUMBER DATED

TO DRAWER

_______________________________Authorized Signature

BILL OF EXCHANGE NUMBER:

AMOUNT: $ DATE:

AT SIGHT OF THIS SECOND BILL OF EXCHANGE (FIRST UNPAID)

PAY TO THE ORDER OF BANK OF THE WEST THE SUM OF

VALUE RECEIVED AND CHARGE THE SAME TO ACCOUNT OF

DRAWN UNDER

L/C NUMBER DATED

TO DRAWER

_______________________________Authorized Signature

BILL OF EXCHANGE NUMBER: 43

AMOUNT: $100,000.00 DATE: October 2, 2001

AT SIGHT OF THIS FIRST BILL OF EXCHANGE (SECOND UNPAID)

PAY TO THE ORDER OF BANK OF THE WEST THE SUM OFU.S. dollars one hundred thousand

VALUE RECEIVED AND CHARGE THE SAME TO ACCOUNT OF Kyowa Corporation,43-12 Hokkaido Street, Gifu, Japan

DRAWN UNDER Letter of Credit issued by Gifu Bank Ltd., Gifu, Japan

L/C NUMBER LC137045 DATED September 1, 2001

TO: Chase Manhattan Bank DRAWER Snowboards and Skis, Inc. New York, New York

_______________________________ Authorized Signature



AT SIGHT OF THIS SECOND BILL OF EXCHANGE (FIRST UNPAID)






_________________________________ Authorized Signature



AT Ninety Days After SIGHT OF THIS FIRST BILL OF EXCHANGE (SECOND UNPAID)






_________________________________ Authorized Signature



AT Ninety Days After SIGHT OF THIS SECOND BILL OF EXCHANGE (FIRST UNPAID)






_______________________________ Authorized Signature

Sample draft for a draft with a tenor of 90 days after B/L date



AT Ninety Days After SIGHT OF THIS FIRST BILL OF EXCHANGE (SECOND UNPAID)Bill of Lading Date






__________________________________ Authorized Signature

For Sight L/C

BILL OF EXCHANGE Exporter’s internalNUMBER: reference #

AMOUNT: $ (amount of drawing under L/C) DATE: Date Documents Presented to Bank

AT(Leave blank if sight L/C) SIGHT OF THIS FIRST BILL OF EXCHANGE (SECOND UNPAID) PAY TO THE ORDER OF BANK OF THE WEST THE SUM OF

Spell out amount of drawing under L/C

VALUE RECEIVED AND CHARGE THE SAME TO ACCOUNT OF Name of account party on the letter of credit (buyer of merchandise) and address

DRAWN UNDER Letter of credit issued by (name of issuing bank and city)

L/C NUMBER given by issuing bank DATED date when L/C was issued

TO: Name of issuing bank or its Designated U.S. bank upon Which the drafts are to be Drawn; city and country

DRAWER Name of exporter exactly as it appears in the letter of credit

__Signed by Exporter’s Authorized Signer Authorized Signature

For Usance Letter of Credit calling for Time Drafts

BILL OF EXCHANGE Exporter’s internalNUMBER: reference #

AMOUNT: $ (amount of drawing under L/C) DATE: Date DocumentsPresented to Bank

AT (Specify # of days after) SIGHT OF THIS FIRST BILL OF EXCHANGE (SECOND UNPAID) PAY TO THE ORDER OF BANK OF THE WEST THE SUM OF

Spell out amount of drawing under L/C

VALUE RECEIVED AND CHARGE THE SAME TO ACCOUNT OF Name of account party on the letter of credit (buyer of merchandise) and address

DRAWN UNDER Letter of credit issued by (name of issuing bank and city)

L/C NUMBER given by issuing bank DATED date when L/C was issued

TO: Name of issuing bank or itsDesignated U.S. bank uponWhich the drafts are to beDrawn; city and country DRAWER Name of exporter exactly as it appears

in the letter of credit

__Signed by Exporter’s Authorized Signer Authorized Signature

BANK OF THE WEST

TRANSPORT DOCUMENTS

The transport document is issued by the “Carrier” whether a shipping line, airline, trucking company or railroad. They come in various forms and each serves several, but not necessarily all of the following functions:

1. Receipt for the goods, evidencing loading, dispatch, or taking in charge and indicating the general condition of the goods received.

2. A contract for carriage between the shipper and the carrier3. An invoice from the carrier for charges.4. A negotiable document exchangeable for money, allowing goods to be sold in transit.5. A document of title representing ownership of the goods, which will only be released by the

shipping company against presentation of a signed original document.

Only one transport document, the negotiable bill of lading serves all five functions. For the exporter, selling on a letter of credit or documentary collection basis, the last two functions are the most important. A negotiable title document means that the buyer can only obtain the merchandise if he surrenders an original bill of lading to the carrier. On L/C or D/P collection sales, where documents move through the banks, the buyer must first pay the bank for the bill of lading or signs a promissory note in the case of a D/A collection. Only then will the bank provide the bill of lading.

Negotiable bills of lading come in two forms:

1. Marine bills of lading convey title to the goods and are negotiable title documents when issued “TO ORDER”. This would be expressed in the Consignee block on the B/L as “TO ORDER OF SHIPPER”, “TO ORDER OF ABC BANK” or “TO ORDER OF 123 COMPANY”. When shipment is made with an order B/L, the buyer only gets the merchandise if he surrenders an original B/L to the carrier. All other copies marked“Original” then become void.

CAUTION: If an export L/C calls for the B/L to be consigned to the buyer or for 1/3 original B/L to be sent directly to the buyer. The buyer will obtain the merchandise and if the L/C documents contain discrepancies the buyer may refuse payment to the beneficiary even though he already has the goods.

Less common is the “straight consigned” marine bill of lading which does not convey title and is not negotiable. As such, the buyer does not need an original to obtain the merchandise from the carrier. This negates the utility of the letter of credit and documentary collection.

2. Multimodal bills of lading are used when two or more forms of transport are involved from place of receipt to place of delivery. In all other respects they are the same as marine bills of lading and may be issued either in negotiable or straight form.

NON-NEGOTIABLE TRANSPORT DOCUMENTS ARE DESCRIBED BELOW:

Charter Party bills of lading are contracts between the ship owner and the chartering party under which the vessel is put at the disposal of the charterer. They are not acceptable under the UCP 500 unless specifically authorized in the letter of credit.

Sea Waybills are not negotiable. They simply evidence that goods are on the way and should only be used when title and payment/financing are not issues. Their function is contract, receipt, and invoice as discussed earlier.

Air Waybills are never negotiable. They are always straight consignments even if “TO ORDER” is typed in the Consignee block. Not being a title document, but merely a receipt for shipment, the importing buyer can pick up the merchandise at the airport simply by providing proper identification to the carrier.

When a letter of credit or documentary collection is used, how does the exporter prevent the buyer from getting the merchandise without paying for it? Answer: The Air Waybill consignee is the buyer’s bank. That bank will transfer the goods to the buyer through an “Air Release”, but only after the buyer has paid or obligated himself to pay for the merchandise.

Air Waybills should only be consigned to the buyer’s bank with that bank’s permission.

Truck and Rail Waybills are both receipts for goods, contracts for carriage and invoices. They are always straight consignments, never negotiable, and should only be used when the exporter is prepared to allow the buyer to get the goods irrespective of payment being made.

Courier & Postal receipts are always addressed to a specific consignee; are not negotiable and should only be used if getting paid is not a consideration. They are basically delivery instructions for a specific consignee at a specific address. Almost all banks will refuse to accept a parcel consigned to them. Shipments by courier or post should only be consigned to a bank if that bank’s L/C so instructs or if the bank has specifically authorized delivery to them under a documentary collection.

Forwarding Agents Certificates of Receipt or Transportation (FCR/FCT) are not transport documents. They do not evidence shipment of the goods; only their receipt by the forwarder.

IN SUMMARY, when the payment method is letter of credit or documentary collection make sure the appropriate transport document and consignment are used. Otherwise, the unfortunate situation may arise where the buyer obtains the merchandise and never pays for it. Remember, under a waybill all a consignee has to do to secure delivery is to identify himself to the carrier as the manifested consignee and claim delivery. Documentation (other than proof of identity) is not required.

Please consult with your freight forwarder about the nuances of transport documents and the relationship of payment versus control of goods.

BANK OF THE WEST

EXPORT DOCUMENTS

Documents required for an international sale can vary significantly from transaction to transaction, depending on the destination and the product being shipped. At minimum, there will be two documents: the invoice and the transport document. The buyer will usually provide the seller with a list of documents needed to get the goods into his country as expeditiously and inexpensively as possible. Some documentary requirements are not open to negotiation, as they are needed by the importer to clear customs at the port of destination.

This presentation discusses documentation in relation to export letters of credit.

When the letter of credit payment method is used for an export sale, each document presented under the terms and conditions of the letter of credit must:

Conform to all L/C terms and conditions Comply with the UCP 500 Agree with the data content of every other document

For the documents listed, the number in parenthesis refers to the relevant UCP 500 article.

THE BILL OF EXCHANGE / DRAFT (9)Almost every letter of credit presentation and documentary collection is accompanied by a draft. This demand for payment is drawn by the seller on the payee. The payee on a letter of credit draft is almost always a bank. For a documentary collection it would be the buyer. Refer to the section in this handbook on “Drafts under Export Letters of Credit” for details.

COMMERCIAL INVOICE (37)The accounting document claiming payment from the buyer. Normally an export invoice would include:

Seller’s name and address Buyer’s name and address Issue Date Invoice Number Shipping marks and numbers Term of Sale: e.g. FOB, etc. Shipping information Info required by L/C Country of Origin L/C number Merchandise description, P.O. number, unit price, and total price

CONSULAR INVOICE / VISAED INVOICE (20, 21)For exchange control and balance of payments reasons, some countries do not allow the import of merchandise unless accompanied by a certificate issued by one of its officials in the exporter’s country. These certificates evidence that the shipment meets certain statutory or other regulations of the importing country. A visaed invoice is an original or copy of an invoice, which has been originally signed and/or stamped by a consulate official.

INSURANCE POLICY OR CERTIFICATE (34, 35, 36)Every export sale should be covered by insurance. Who provides the coverage depends on the INCOTERM used. Insurance coverage is outside the scope of this explanation. For specifics, contact your insurance agent or freight forwarder as to who can provide insurance on an” as needed basis” or “by blanket policy” on an annual basis.

CERTIFICATESWhen a letter of credit calls for a document to be issued as a “certificate”, that document must be signed. Certificates come in a myriad of forms depending on the product and the country of destination. L/C’s often require that certificates be issued by reputable third party inspection surveyors such as the Societe Generale de Surveillance (SGS) or the U.S. Department of Agriculture. It is important to remember that each certificate required by an L/C will increase the cost of goods sold. Some of the most common certificates are discussed below.

Certificates should always be issued before the goods are shipped. Certificates issued after the goods arrivedin the country of import defeat the purpose of the letter of credit.

CERTIFICATE OF ORIGIN (20, 21)A signed statement certifying the country of origin of the goods being sold. is sometimes required by regulation in the buyer’s country; may be as simple as a certificate signed by the seller. Certain countries may require it to be issued by a third party such a Chamber of Commerce, or be notarized, legalized, or visaed by their Embassy or Consulate.

INSPECTION CERTIFICATE (20, 21)An independent firm would usually conduct the inspection to ensure that the merchandise conforms to the buyer’s criteria. Inspection certificates should be based on quantifiable criteria. When an L/C is the method of payment, the criteria should be specifically spelled out in the letter of credit.

WEIGHT LIST OR CERTIFICATE (38, 20, 21)Not synonymous to a packing list. This document breaks down the shipment by weight. Need be signed only if a “certificate” is required.

USDA INSPECTION CERTIFICATE (20, 21)This certificate is issued by the U.S. Department of Agriculture and covers grade and condition for agricultural products. It provides evidence that the produce was in good condition at the date and time of inspection and can be useful in the event of a claim.

PHYTOSANITARY CERTIFICATE (20, 21)Numerous foreign governments and buyers require a “phyto” for fresh plants and plant products. This certificate states that the product has been inspected and is free of harmful pests and plant diseases. They are issued by the USDA Animal and Plant Health Inspection Service.

PACKING LIST (20, 21)A mirror of the merchandise covered by the invoice, the packing list omit prices, but itemizes the merchandise by number of cartons, packages, etc. and the contents of each. Need not be signed unless called for in the L/C.

OTHER MISCELLANEOUS DOCUMENTS (20, 21)UCP 500 ARTICLE 21: “WHEN DOCUMENTS OTHER THAN TRANSPORT DOCUMENTS, INSURANCE DOCUMENTS AND COMMERCIAL INVOICES ARE CALLED FOR, THE CREDIT SHOULD STIPULATE BY WHOM SUCH DOCUMENTS ARE TO BE ISSUED AND THEIR WORDING OR DATA CONTENT. IF THE CREDIT DOES NOT SO STIPULATE, BANKS WILL ACCEPT SUCH DOCUMENTS AS PRESENTED, PROVIDED THAT THEIR DATA IS NOT INCONSISTENT WITH ANY OTHER STIPULATED DOCUMENT PRESENTED.”

SELECTED REFERENCES TO DOCUMENTS IN THE UCP 500

DOCUMENT TOPI C UCP 500 ARTICLE

Authentication requirements 20Copies of 20Conforming 14Content of 21Documents v. Goods/ Services/ Performance 4Dated prior to L/C issuance 22Discrepancies 14Examination 13Fraudulent documents 15Issuer, ambiguity about 20Lost documents 16Non-stipulated documents 13Originals 20Required documents 5Signature on 20“Stale” documents 43

BANK OF THE WEST

EXPORT LETTERS OF CREDIT PAYMENT AND DI S CREPANCIES

Letters of credit issued by most banks around the world are subject to the UCP 500 (1993 Revision). “UCP” stands for Uniform Customs and Practice for Documentary Credits, which is a body of rules (not law) on letters of credit. The conventions under the UCP were first adopted by the International Chamber of Commerce in1933 and subsequently revised many times, with the most recent being in 1993. Federal laws and the laws of the State of California, specifically Article 5 of the California Commercial Code (“CCC”), govern letters of credit.

In addition to understanding the rules of letters of credit, as outlined in the UCP 500, exporters should have a basic understanding of the International Commercial Terms (INCO Terms) of trade such as FOB, CIF, CFR, DDP, etc. (Please see our reference sheet on INCO Terms which provides a basic overview.)

We recommend that the exporter order from ICC Publishing SA, an affiliate of the International Chamber ofCommerce in New York, a copy of the UCP 500, “UCP 500 & 400 Compared” and “The Guide to Incoterms2000” (phone: 212-206-1150; fax: 212-633-6025; www.iccbooks.com).

Strict versus Substantial Compliance

Under the UCP 500 issuing banks are obligated to make payment under letters of credit when conforming documents (bill of lading, packing list, invoice, certificates, etc.) are presented. The documents are to be in strict compliance with the terms of the letter of credit. Generally, rulings in legal cases, revolving around the issue of payment when discrepant documents are presented, have come down on the side of strict compliance rather than substantial compliance. However, strict compliance does not demand oppressive perfectionism such as the misspelling of a word. A typical discrepancy, which would fall under the strict compliance rule, is that the invoice does not describe the goods exactly as specified in the terms of the letter of credit.

Letters of Credit Deal in Documents

Another important principle underlying letters of credit is that all parties concerned deal with documents alone, and not with goods, services and/or other performances to which the documents may relate (UCP 500 - Article4). In practical terms this means that issuing banks make payments under letters of credit based on the examination of documents, not on the examination of the goods. The letter of credit does not protect the applicant from paying for the shipment of shoddy goods. The applicant cannot wait until the goods arrive, examine the goods, and then approve payment under the letter of credit.

Available by Payment or Negotiation

Payments under sight letters of credit are “available by payment” or “available by negotiation”. Banks in the United States typically issue letters of credit which are “available by payment” with payment made at their counters in the U.S. This means that the exporter’s bank in the foreign country must send the documents to the issuing bank for examination and payment. Banks in foreign countries commonly issue letters of credit which are “available by negotiation with any bank” (see SWIFT field 41D), naming a U.S. reimbursing bank(SWIFT field 42D) where the negotiating bank is to obtain the U.S. dollars for the conforming presentation of documents.

In the event a U.S. exporter receives an L/C which is “available with negotiation at any bank”, the exporter may present the documents with the original L/C to the advising bank or its own bank. Many banks are reluctant to negotiate an original L/C if it was not advised through them because the letter of credit may have been amended and the negotiating bank would not be aware of all the amendments.

If, after examination, the documents are found to be conforming, then the negotiating bank will courier the draft to the U.S. reimbursing bank or send a teletransmission claim and courier the documents to the foreign issuing bank. The negotiating bank then must wait for the reimbursement bank to wire the funds representing the L/C drawing to the negotiating bank. Once the funds arrive by wire transfer from the reimbursing bank, the negotiating bank does the appropriate paperwork to indicate the successful drawing by reducing the L/Cliability and credits the customer’s (exporter) account.

If the L/C is a negotiable one and the documents have discrepancies, the U.S. negotiating bank can:

1. Return the documents to the exporter for correction, if possible and time permitting.2. Send the documents to the issuing bank on an approval basis.3. Cable the issuing bank for authority to pay.

The U.S. negotiating bank is accepting a higher level of risk on negotiable credits because payment may be made and when the documents arrive at the issuing bank, discrepancies are found and the issuing bank demands return of the funds.

Prompt Decision to Honor or Dishonor Pre s entation of Documents/Negotiable Credits

The responsibility of the negotiating bank under a letter of credit is to examine documents and make a prompt decision (see next section on time parameters set by UCP in article 13.b) to honor or dishonor documents based upon their examination. Since the letter of credit is the legal obligation of the issuing bank, the decision to honor payment upon document presentation rests with the issuing bank or its designated negotiating bank.

Prompt Decision to Honor or Dishonor Presentation of Documents/Payment

If the presented documents are not in compliance with the terms and conditions of the letter of credit, the documents may be sent to the issuing bank on an approval basis. The issuing bank must give notice to the exporter’s negotiating bank by teletransmission (telex or SWIFT) without delay, but no later than the close of the seventh banking day following the day of receipt of the documents (UCP 500 - Article 14, Section d.i.). Under the UCP issuing banks have a reasonable time to give notice of discrepancies or dishonor to the exporter’s negotiating bank. The outside limit of this reasonable time is seven banking days under the UCP. The time within which the issuing bank must give notice of discrepancies is the lesser of a reasonable time or seven banking days. Where the terms and conditions of the letter of credit are straightforward and uncomplicated, the reasonable time period would be much less than the seven days.

The issuing bank may contact the applicant to determine if the applicant wants to waive the discrepancies and make payment under the letter of credit. If the applicant decides not to waive the discrepancies, the consequences are serious. The issuing bank must give notice to the exporter’s negotiating bank, detailing all discrepancies and stating whether the issuing bank is holding the documents at the disposal of instructions from the exporter or is returning the documents to the presenter. Since the exporter retains title to the goods, the exporter may have to arrange for disposal of the goods, clear customs, and pay demurrage charges. Once the applicant makes the decision not to waive discrepancies, the underlying import/export transaction becomes more costly with the result that the business relationship between buyer and seller will most likely not be a continuing one.

If there are discrepancies in the documents and the exporter wants to be paid quickly, the exporter should fax its buyer in the foreign country and request that the buyer contacts its bank’s letter of credit department to waive the discrepancies. The buyer will always have more leverage over its bank than a U.S. bank sending a SWIFT or telex follow-up to the foreign bank. In addition, a fax to the buyer will be much cheaper than afollow-up SWIFT or telex sent by the U.S. bank.

Preventing Discrepancies

In order to prevent discrepancies from occurring when documents are presented under the letter of credit, the exporter should take the following steps as soon as the sale is concluded, but before the letter of credit is opened.

1. Fax the buyer the terms of the letter of credit, which should conform to the underlying contract of sale between the exporter and importer.

2. After the buyer fills out the letter of credit application, which it will take to its bank, the exporter should insist that the buyer fax a copy of the letter of credit application to the exporter for its review. It is much cheaper to change the terms of the proposed letter of credit before it is issued; after it is issued the buyer has to pay for amendments to change the terms of the letter of credit.

3. The exporter should make sure that the description of the merchandise as it appears in the letter of credit is stated exactly the same as in the invoice. The exporter must insure that the accounting department(invoice), shipping department (packing list), and the freight forwarder (bill of lading) are all aware of the importance of describing the goods in conformance with the L/C.

4. The exporter should request at least a 14-day period in which to present documents after the shipping date. If the L/C is silent on the presentation period, the period of time that is allowed by Article 43.a is 21 days. Since late presentation is one of the most common discrepancies, this simple request should alleviate the possibility of a late presentation. Not only does a 14-day (or more) period allow the exporter some extra time in putting together the documents, it also allows for time to fix “correctable” discrepancies after the U.S. negotiating bank discovers discrepancies. A 21-day period is essential for transferable letters of credit since the process of presenting documents by both the first and second beneficiaries can be time consuming. (If the presentation period is 21 days, the exporter, of course, can present documents as soon as practical in order to speed up the receipt of the L/C drawing.)

5. The exporter should discuss the INCO terms in the L/C with its freight forwarder to insure that the proper shipping documents can be obtained with the required signatures.

Common Discrepancies

In order to assist the exporter in proofing the documents versus the terms of the letter of credit, we have put together the following list of areas where typical discrepancies occur. The exporter should have a detail- oriented person within the company do this examination and not rely exclusively on the bank or freightforwarder to catch discrepancies. The exporter should make sure that its staff dealing with L/C’s and its freight forwarder have copies of the UCP 500 and have read it!

Draft (Bill of Exchange) Please see our reference sheet in preparing a draft. Although we have pre-printed drafts for use by our customers, the more sophisticated and efficient exporters just duplicate the form on their PC’s and fill in the information accordingly. This, of course, makes it very easy to correct mistakes and prepare a perfect draft, which eliminates a potential discrepancy. Although drafts are similar to checks, they do not possess any special characteristics such as micro encoding. The easiest method of preparing drafts is to use your PC word processing program.

The draft is correctly drawn if:

1. The draft refers to the letter of credit; specifying issuing bank and its L/C reference number, and is phrased according to the L/C terms.

2. Amount in words is identical with amount in figures.

3. The draft bears the appropriate endorsement if the payee is the exporter.

4. The exporter signs the draft.

5. The tenor of the draft (at sight or some days after sight or bill of lading date) conforms to the terms of theL/C.

6. Names and/or addresses of drawee and buyer agree with L/C terms.

7. All names are correctly spelled.

8. The amount of the draft correlates to the invoice.

Invoice 1. The invoice indicates that it has been prepared by the exporter and addressed to the buyer (account party

under L/C). The names of the buyer and seller on the invoice should correspond exactly to the names and addresses of the account party and beneficiary in the L/C.

2. The merchandise is described exactly as in the letter of credit; this merchandise description is consistent with the packing list and bill of lading. The documents must be internally consistent with each other.

3. Purchase order numbers, if any, agree with the L/C.4. The invoice must list the prices and unit prices and various charges/expenses if required by the L/C.

5. A sufficient number of invoices must be presented as required by the L/C.

6. The invoice must indicate shipping terms, if required by the L/C.

7. If required by the L/C, all listed items (merchandise, freight, insurance, and handling) must be allowed under the shipping terms. For example, if the shipment were on a C&F basis, but the exporter bills for insurance, then a discrepancy would occur.

8. The amount of ocean freight and/or insurance premium, if listed, agrees with amounts shown on bill of lading and/or insurance document and/or other documents.

9. If the L/C allows partial shipments, the portion of merchandise shipped should not be invoiced out of proportion to the total amount of the L/C.

10. The invoice must show all the clauses, certifications, and/or visa requirements following exactly the terms of the L/C.

11. Shipping marks (quantity, weight, and measurement) on the invoice must correlate with the bill of lading, packing list, and other appropriate documents.

Insurance Documents 1. If L/C requires an insurance certificate, a certificate should be presented; if an insurance policy is required,

then a policy should accompany the presented documents. Under Article 34.a the insurance documents must appear on their face to be issued and signed by insurance companies or underwriters or their agents. Under Article 34.b if the insurance document indicates that it has been issued in more than one original, all the originals must be presented unless otherwise authorized in the L/C.

2. It is blank endorsed, to be in transferable form, provided the L/C does not require the buyer, its bank, or other representative to be the beneficiary of the insurance.

3. It is in the currency of the L/C unless the L/C states otherwise.

4. Under Article 34.f.ii the insurance must cover the CIF or CIP value plus 10 percent, if that value can be determined. This article should be read in detail to understand the nuances.

5. Merchandise description is consistent with the L/C. It lists the marks and numbers of packages and quantities in accordance with the other documents.

6. It is dated on or before the date of shipment or indicates that coverage is established as of the date of shipment.

7. It covers merchandise upon the carrying vessel specified in the B/L with shipment from the proper point of loading to the proper destination.

8. It covers risks specified in the L/C.9. The amount of the insurance premium agrees with that appearing on the invoice, if listed.

Transport Documents

The following articles in the UCP deal with transport documents. This area is one where discrepancies commonly occur. The exporter should carefully review these sections in consultation with its freight forwarder to insure that transport document discrepancies do not occur.

The exporter should make sure that its freight forwarder has a copy of the L/C before the forwarder books the freight and obtains the B/L. This should help eliminate obvious discrepancies concerning markings on the B/L, ports of loading and discharge, shipping terms and description of goods.

There is a common thread running through most of these articles and that is: the transport document must be signed by the carrier (or in some cases an agent of the carrier) and the signature must identify (usually below

it) the name of such carrier (or agent). Read the articles below so that the nuances of signatures will be understood for all types of transport documents.

Article 26 Marine/Ocean Bills of Lading Article 24 Non-Negotiable Sea Waybill Article 25 Charter Party Bill of Lading Article 26 Multimodal Transport Document Article 27 Air Transport DocumentArticle 28 Road, Rail or Inland Waterway Transport DocumentsArticle 29 Courier and Post ReceiptsArticle 30 Transport Documents issued by Freight ForwardersArticle 31 “on Deck”, “Shipper’s Load and Count”, Name of ConsignorArticle 32 Clean Transport DocumentsArticle 33 Freight Payable/Prepaid Transport Documents

Since this short explanation is not intended to be an all-inclusive bible on this subject, only a few items onMarine Bills have been listed below as examples of items to be aware of.

Marine Bill of Lading

1. A full set of original bills of lading signed by a named carrier, or agent, must be presented, or otherwise accounted for in accordance with the terms of the L/C. It is not acceptable for the B/L to be issued by a Forwarding Agent, except acting as agent for a named carrier.

2. The bill of lading terms are not altered without authentication by the issuer.

3. Bill of lading is not a Charter Party Bill of Lading unless specifically authorized by the L/C.

4. The B/L shows a date of shipment on or before the latest shipment date authorized in the L/C.

5. The B/L does not evidence transshipment, if prohibited by the L/C.

6. The merchandise description is consistent with the commercial invoice. The marks and number of packages, weights, dimensions and quantities are in accordance with other documents.

7. The B/L is “clean”; i.e. it does not contain clauses, which expressly declare a defective condition of the goods.

8. The B/L should be consigned exactly as per the L/C terms and endorsed properly, if required.

9. The “notify party” is specified on B/L exactly as per the L/C terms.

10. The B/L should show the loading and discharge ports as specified in the L/C.

Export letters of credit should be advised to Bank of the West. Our communication references are:

Bank of the WestTrade Center Operations/SC MPK 02 G1977 Saturn StreetMonterey Park, CA 91755SWIFT: BWSTUS66LAX

Bank of the WestTrade Center Operations/1-759-4180 Montgomery StreetSan Francisco, CA 94104SWIFT: BWSTUS66

Our export L/C staff can assist you on questions about specific export letters of credit. When you call, please make sure that you have our export L/C reference number which most commonly starts with “E” followed by a five digit number (confirmed export letters of credit start with “C” followed by five digits).

BANK OF THE WEST

FEES CHARGED ON EXPORT LETTERS OF CREDIT

How Are L/C Fees Split Between Importer and Exporter ?

The usual fee splitting arrangement under letters of credit is for the buyer to absorb the costs incurred in its country for issuing the letter of credit. The costs in the beneficiary’s country are usually for the account of the beneficiary.

Although this is the typical arrangement, the buyer and seller can arrange to split letter of credit fees in a variety of ways. For example, the buyer could absorb all fees both on its end as well as on the beneficiary’s side. Or, the beneficiary could pay for all the bank fees charged in the U.S. except for the reimbursing bank charge (see below).

What Types of Fees Does the Beneficiary Typically Pay ?

Export letter of credit charges include the following:

Advising

- Compensates the advising bank for authenticating the L/C, sending the L/C to the beneficiary, and logging the L/C into the bank’s liability system.

Payment

- Expressed as a percentage of the drawing amount but subject to a minimum charge. Compensates the bank for examining the documents compared to the terms and conditions of the letter of credit.

Discrepancy

- Compensates the bank for additional work involved in clearing a discrepancy or arranging for payment with discrepant documents. The advising bank charges for discrepancies and increasingly so does the issuing bank.

Telex or Communication Charges to Buyer’s Bank

- These are often incurred when there are discrepancies or to follow-up on a payment. The exporter should try to fax its buyer on payment follow-ups because it is cheaper than going through the bank.

Courier & Postage

- For sending documents and drafts to the issuing bank/reimbursing bank.

Reimbursement Bank Charge

- The issuing bank often selects a U.S. reimbursing bank and the reimbursement charge for L/C drawings is usually paid by the beneficiary.

The total of these charges typically ranges from $150 to $250 dollars.

Bank - to - Bank Reimbursement Arrangement s

The issuing bank selects which U.S. bank will provide the dollars for drawings under export letters of credit. This is a specialized service, which some U.S. banks offer foreign banks in order to expedite payments and ease the foreign bank’s reconcilement work on export L/C reimbursements. Since the issuing bank is selecting the reimbursing bank, the issuing bank is accurately aware of the charge being assessed - usually for the account of the beneficiary.

The exporter should be aware that Article 19 (e) of the UCP 500 states that “the Reimbursing Bank’s charges should be for the account of the Issuing Bank. However, in cases where the charges are for the account of another party, it is the responsibility of the Issuing Bank to so indicate in the original Credit and Reimbursement Authorization.”

Since the reimbursing bank charge should be for the account of the Issuing Bank, the exporter should try to have the buyer absorb that cost. Passing this cost to the account party (buyer) eliminates one of the more costly L/C charges: typically ranging from $25 to $150 and averaging about $50. If the buyer is absorbing the reimbursement cost, the buyer has leverage with its bank to reduce that charge.

Controllable Fee s

There are two types of fees where the exporter can control its cost: the advising and discrepancy fees. The exporter should instruct the buyer to have the export letter of credit advised directly to Bank of the West. This will save the exporter the cost of having the L/C advised through a first advising bank and then through us. Quite often the issuing bank has an arrangement with a U.S. correspondent bank to have export letters of credit directed through that correspondent bank, which in turn gives the issuing bank a rebate. Thus, the exporter should push for direct advising to us, which is usually possible, if we have testing arrangements. If we do not have testing arrangements, we will immediately arrange for the exchange of Swift Authenticator Keys over the SWIFT network.

There are instances where the foreign bank is small and has a special arrangement with its preferred U.S. correspondent bank for advising letters of credit. For these cases it may be difficult for the small foreign bank to advise the L/C directly to us.

The exporter should read carefully the section on “Payment and Discrepancies” in order that clean documents are presented, thereby expediting payment and eliminating discrepancy charges.

Buyer’s Letter of Credit Fee s

Exporters often are not fully aware of the credit implications and cost involved for the buyer in opening a letter of credit. In order for the buyer to open a letter of credit with its bank, the buyer must have an appropriate credit facility with the issuing bank. Although the cost of opening a letter of credit varies from country to country, as a rule of thumb, the exporter can estimate that for developed countries the all-in, flat percentage cost for opening and paying a letter of credit will be 3/4% for letters of credit in excess of $100,000 (minimums vary from bank to bank); for developing countries, the issuing and negotiation cost can easily be double the3/4% with cash margins required to insure that scarce foreign exchange is available.

The cost for the buyer in opening its L/C and for subsequent negotiation is a valuable piece of information. The exporter should ask the buyer what the typical charges are in its country and how much its bank charges for opening and negotiating letters of credit.

For the buyer with scarce credit availability, there is also the heavy implicit cost of using its credit line for opening a letter of credit. If credit availability is a problem, the buyer often issues the letter of credit only two to three weeks before the latest shipping date so that the L/C does not unduly clog up the buyer’s credit line.

Exporter Should Quote Its Price Taking Into Account th e L/C Charge s

It is always important for the exporter to quote its export selling price knowing all the costs involved: freight, insurance, duty, U.S. bank export L/C charges, and issuing bank opening and payment fees. Obviously, export L/C charges of $200 will loom very large indeed on a $10,000 L/C and may significantly impact the profit margin.

Please refer to the “Export Quotation Worksheet” in this handbook for a cost calculation framework.

BANK OF THE WEST

EXPORT L/C'S AS LOAN "COLLATERAL"

Trade Finance Bankers are often asked if a commercial letter of credit in a middleman-exporter’s favor is acceptable “collateral” for a Back-to-Back L/C or for a loan to purchase merchandise for export. The assumption is that the export L/C, as the repayment source, is excellent collateral, “guaranteeing” payment.

Before approaching their banker, the exporter should consider the following two key points:

A. A letter of credit is not a "guarantee" of payment, but rather a payment mechanism based on performance. The issuing bank has an obligation to pay only if all of the terms and conditions stated in the letter of credit have been met.

B. The extension of credit must be based on the exporter’s creditworthiness as demonstrated by financial statements. If collateral is needed to buttress the credit facility, the collateral must be an asset, which can be liquidated if the underlying transaction does not perform as expected.

In analyzing an export L/C as the primary source of repayment, the following considerations must be fully understood.

1. What is the reputation and strength of the issuing bank? Do they have experience and expertise withL/C’s?

2. When the issuing bank is foreign, are the economic and political risks associated with the country acceptable?

3. Are the terms and conditions of the letter of credit acceptable to the exporter’s bank? Any ambiguous or non-documentary conditions on which the issuing bank could refuse payment? Will the shipments be insured? How are the goods consigned?

4. Will the exporter be able to obtain all the required documents and comply with the L/C terms and conditions, before the latest shipment and expiry dates?

5. As beneficiary (and borrower), has the exporter demonstrated knowledge and experience with exporting? Has he ever exported using an L/C or heard of the UCP 500?

6. In the normal course of business, does the exporter deal with the same product(s) he plans on exporting?

7. Are the goods involved, a product or commodity with historically volatile prices, which if falling, may induce the buyer to refuse discrepant document?

8. What happens if discrepant documents are presented; the goods are halfway across the Pacific; and because of discrepancies, the buyer refuses to authorize payment?

9. How would the bank, making the loan, perfect a security interest in the merchandise or rights to the proceeds of the L/C?

No matter what the answers are, keep in mind that while a commercial L/C may be acceptable to a bank as a primary source of repayment, it cannot be considered collateral to be liquidated to provide a secondary source of repayment. As the ratio of the export L/C to the exporter’s capital increases so does the risk to the exporter’s bank.

What alternatives does the undercapitalized middleman-exporter have? If the ultimate supplier is willing to wait for its money until after shipping , a transferable letter of credit or an authorization to pay might be appropriate depending on the circumstances. In the event the ultimate supplier wants its money from the middleman- exporter as a purchase deposit before shipping , the middleman-exporter with no underlying creditworthiness will find such an extension of credit from a bank difficult to arrange.

For some middlemen-exporters with a demonstrated record of financial performance, a working capital loan, which is 90% guaranteed by the Ex-Im Bank or by the California Export Finance Office, may be arranged. These programs require product, which is 51 % U.S. content for Ex-Im or 51 % California content for CEFO. Please see our examples of this type of program for a description of the mechanics.

BANK OF THE WEST

CHOOSING A FREIGHT FORWARDER

Asking the questions listed here may assist the “new exporter” with the process of selecting a freight forwarder.

Does the freight forwarder:

Demonstrate experience handling your type of product?

Provide that extra personal service to enhance your learning curve and demonstrates willingness to work with new exporters?

Specialize in the part of the world you are shipping to?

Evidence knowledge of the documentation required by your importing customer’s country?

Give regular customer updates on changes in foreign government import regulations, which could affect your export sales?

Possess a reputation for customer satisfaction and a willingness to provide references?

Maintain a network of offices or agents in your buyers’ countries?

Show evidence of financial stability? How long in business?

Maintain a facility large enough to handle your business?

Carry errors and omissions insurance

Sell/provide cargo insurance? Possess a license from the Federal Maritime Commission for the handling of marine cargo?

Have a license from the International Air Transport Association for the handling of air cargo?

Have a well worn, dog eared copy of the “Uniform Customs and Practices

for Documentary Credits, ICC Publication No. 500” that he can show you?

Have references which vouch for its ability to prepare error free documents under letters of credit?

Provide a printed price sheet of fees for their services?

BANK OF THE WEST

TERMS OF TRADE

INTERNATIONAL COMMERCIAL TERMS (INCOTERMS)

Trade terms are key elements of international contracts of sale, since they tell the parties what to do with respect to;

Carriage of the goods from the seller to the buyer and

Customs clearance.

They also explain the division of costs and risks between the parties such as:

who should pay the costs of loading and unloading the goods;

who is responsible for the risk of loss or damage to the goods and who should take out insurance as a protection against these risks?

The Incoterms were first published by the International Chamber of Commerce (ICC) in 1936. Periodically, these rules are amended to bring them in line with current trade practices. The last amendment was in 2000.

All sellers and buyers in international contracts want their deals to be completed successfully. Sending goods from one country to another, as part of a commercial transaction, can be a risky business. If, when negotiating their contract, the buyer and seller specifically refer to one of the Incoterms, they can be sure of defining their respective responsibilities mitigating a significant portion of the risk.

While Incoterms specifically deal with questions of division of risk of loss or of damage of the goods between the seller and buyer, they do not involve questions relating to title or ownership of the goods. Therefore, the contract between buyer and seller should specifically address when title or ownership transfer occurs.

Incoterms do not deal with a breach of contract and its consequences. A breach should be resolved by specific contract provisions. There is an interrelation between the trade term and a breach of contract, since the trade term determines when the goods is considered to have been delivered from the seller to the buyer.

The Incoterms range from the minimum obligation of the seller (Ex-Works) to the maximum obligation ofDelivered terms. The complete range of terms is listed below: Group EDeparture EXW Ex Works

Group FMain Carriage Unpaid FCA Free Carrier

FAS Free Along Ship

FOB Free On Board

Group CMain Carriage Paid CFR Cost and Freight

CIF Cost, Insurance and FreightCPT Carriage Paid ToCIP Carriage and Insurance

Paid To

Group DArrival DAF Delivered at Frontier

DES Delivered Ex Ship DEQ Delivered Ex Quay DDU Delivered Duty Unpaid DDP Delivered Duty Paid

THE ABBREVIATIONS: E-, F-, C- AND D- TERMS

There are four categories of trade terms with the first letter of the term indicating the category. The first group has only one trade term namely Ex - Works (EXW). In the other three groups there are multiple terms.

EXW represents the seller’s minimum obligation, since the exporter only has to make the goods available at its premises.

The letter F signifies that the seller must hand over the goods to a nominated carrier Free of risk and expense to the buyer. Under the F- terms the seller has to arrange any necessary pre-carriage to reach the agreed point for handing the goods to the carrier. It is the buyer’s responsibility to arrange and pay for the main carriage and associated costs.

The letter C signifies that the seller must bear certain Costs even after the critical point where title or ownership has passed. Under the C-Terms the seller arranges and pays for the main contract of carriage and in some instances associated costs including insurance coverage.

The letter D signifies that the goods must arrive at a stated Destination. Under the D-Terms the seller undertakes to arrange and pay for the main contract of carriage and associated costs including insurance coverage.

C-Terms differs from D-Terms as the seller fulfills its obligation by shipping the goods from its country under the C-Terms. Under the D-Terms the seller fulfills its obligation only when the goods reach a stated destination.

EXAMPLE OF A SPECIFIC INCOTERM:

One of the most common terms of sale on international transactions is CFR or Cost and Freight. Under this term the seller must arrange and pay the costs and freight necessary to bring the goods to the named port of destination and load them on board. The risk of loss or damage to the goods after the time the goods have been loaded on the vessel is with the buyer.

Under the CFR -Term:

THE SELLER MUST THE BUYER MUST

- Provide the goods and a commercial invoice conforming to the contract of sale.

- Pay the price as stated in the contract of sale.

- Arrange and pay for the carriage of the goods to the named port of destination on or before the agreed date.

- Obtain and pay for any import licenses and duties.

- Arrange and pay for the loading and unloading the goods on and off the vessel.

- Accept delivery of the goods from the carrier at the named port of destination.

- Pay the necessary costs associated withCustoms in order to export the goods.

- Bear all risks of loss after the goods have been loaded on the vessel.

- Give sufficient notice to the buyer and provide transport documentation.

- Pay any costs associated with checking, packaging and marking the goods in accordance with the contract of sale.

Key elements of the CFR term are:

1. The CFR term can only be used for sea and inland waterway transport.

2. Since the point of destination is mentioned after the CFR term (i.e. Hong Kong) the critical point where the seller fulfills its obligation is usually omitted (i.e. Oakland).

3. In order to be consistent with the CFR term, the sales contract should not specify that delivery should take place not later than a specified date of destination. The seller has fulfilled its contract upon shipment, not upon arrival.

4. All Incoterms are based on the same principle that the risk of loss or damage to the goods is transferred from seller to buyer when the seller has fulfilled its delivery obligation. The CFR term specifies that the risk is transferred when the goods have passed the ship’s rail at the named port of shipment.

THE GUIDE TO INCOTERMS 2000 IS AVAILABLE FROM:ICC PUBLISHING SA and Oceana Publications, Inc. (www.iccbooks.com)156 Fifth Ave, Suite 417New York, NY 10010Tel: (212) 206-1150; Email: [email protected]: (212) 633-6025

The “Guide” is a detailed examination of each Incoterm and should be required reading for anyCompany engaged in international trade.

INCOTERMSBREAKDOWN OF RESPONSIBILITY AND CHARGES BETWEEN BUYER (IMPORTER) AND SELLER (EXPORTER)

FAS FOB US PORT CIF CIP** DEQ DDUFCA FREE FREE CFR COST, CPT** CARRIAGE DAF DES DELIVERED DELIVERED DDP

EXW FREE ALONGSIDE ONBOARD COST & INSURANCE CARRIAGE INSURANCE DELIVERY AT DELIVERED AT

EX QUAY DUTY DELIVERY

SERVICE EX WORKS CARRIER SHIP VESSEL FREIGHT FREIGHT PAID TO PAID TO FRONTIER EX SHIP DUTY PAID UNPAID DUTY PAIDRESPONSIBILITY

RESPONSIBILITY RESPONSIBILITY RESPONSIBILITY RESPONSIBILITY RESPONSIBILITY RESPONSIBILITY RESPONSIBILITY RESPONSIBILITY RESPONSIBILITY RESPONSIBILITY RESPONSIBILITY RESPONSIBILI& CHARGES & CHARGES & CHARGES & CHARGES & CHARGES & CHARGES & CHARGES & CHARGES & CHARGES & CHARGES & CHARGES & CHARGES TY &

CHARGESWAREHOUSE STORAGE AT

POINT OF ORIGIN

WAREHOUSE LABOR CHARGE

ATPOINT OF ORIGIN

EXPORT PACKING

LOADING AT POINT OF ORIGININLAND FREIGHT

PORT RECEIVING CHARGES

FORWARDERS FEES

LOADING ON OCEAN CARRIER

OCEAN/AIR FREIGHT

CHARGES IN FOREIGN

PORT/AIRPORTCUSTOMS

DUTIES AND TAXES ABROAD

DELIVERY CHARGES TO

FINAL DESTINATION

SELLER SELLER SELLER SELLER SELLER SELLER SELLER SELLER SELLER SELLER SELLER SELLER SELLER



BUYER SELLER SELLER SELLER SELLER SELLER SELLER SELLER SELLER SELLER SELLER SELLER SELLER

BUYER BUYER SELLER SELLER SELLER SELLER SELLER SELLER SELLER SELLER SELLER SELLER SELLER

BUYER BUYER SELLER SELLER SELLER SELLER SELLER SELLER SELLER SELLER SELLER SELLER SELLER

BUYER BUYER SELLER* SELLER* SELLER SELLER SELLER SELLER SELLER SELLER SELLER SELLER SELLER

BUYER BUY ER BUYER SELLER SELLER SELLER SELLER SELLER SELLER SELLER SELLER SELLER SELLER

BUYER BUYER BUYER BUYER SELLER SELLER SELLER SELLER SELLER SELLER SELLER SELLER SELLER

BUYER BUYER BUYER BUYER BUYER BUYER SELLER SELLER SELLER BUYER SELLER SELLER SELLER

BUYER BUYER BUYER BUYER BUYER BUYER BUYER BUYER BUYER BUYER SELLER BUYER SELLER

BUYER BUYER BUYER BUYER BUYER BUYER BUYER BUYER BUYER BUYER BUYER SELLER SELLER

Regardless of the Incoterms in use, the seller must supply the goods as agreed in the contract of sale, together with such evidence of conformity as may be required by the contract. Regardless of the Incoterms in use, the buyer must take receipt and pay for the goods delivered, as provided in the contract. * The payment of the forwarder's fees is sometimes controversial, depending on the contract of sale.** Risk of loss or damage is transferred from the seller to buyer when goods have been delivered to carrier.

BANK OF THE WEST

FINANCING FOREIGN SALESTHE EXPORT USANCE LETTER OF CREDIT

An exporter in the United States can offer terms to an overseas buyer through the usance (time) letter of credit mechanism. An export letter of credit may call for the beneficiary’s drafts to be drawn at a certain number of days after sight or after the bill of lading date. Typically, the drafts are drawn on the exporter’s bank. Once the buyer’s bank has accepted the documents under the letter of credit as a conforming drawing, the “accepted” draft becomes a banker’s acceptance.

The advantages of the usance (time) letter of credit are:

The exporter can give the foreign buyer the option of financing its trade cycle at the banker’s acceptance rate in the United States.

For buyers in developing countries, the banker’s acceptance rate is usually a much better rate than they can access in their own country.

The exporter’s credit risk is the U.S. bank or foreign bank on which the draft is drawn as an irrevocable undertaking to pay the exporter at maturity.

In many cases, the exporter can finance the foreign sale at a better rate under the usance letter of credit than under its own bank line of credit based on Prime.

The exporter can extend financing terms without using its own line of credit.

Example

A Mexican company, Serfinsa, opens a $250,000 time letter of credit with its bank, Citimex, in favor of the beneficiary in the United States, Fulcrum Industries. The time letter of credit calls for the draft to be drawn on Bank of the West at 90 days after the bill of lading date. Since the draft is drawn on Bank of the West, they are taking the credit risk of Citimex. Thus, it is important for the exporter to check with Bank of the West before the letter of credit is issued to determine if Bank of the West has sufficient availability under its credit limit to Citimex to accept this transaction.

(An alternative to having the draft drawn on Bank of the West is to have the draft drawn on Citimex. The exporter thus upgrades the credit risk from that of his buyer to that of the buyer’s bank. Bank of the West no longer has credit exposure to Citimex under this alternative.)

The goods are shipped on Tuesday, April 4. Fulcrum presents the documents required by the letter of credit to Bank of the West on April 10, accompanied by a 90-day draft maturing on Monday, July 3. Bank of the West examines the documents; finds two discrepancies, and sends the documents to Citimex in Mexico City by courier. On April 14 Citimex notifies Bank of the West by an authenticated SWIFT transmission that the buyer has waived the discrepancies, enabling Citimex to give Serfinsa the title documents and obligating Citimex to pay Bank of the West on July 3. This discrepancy waiver in turn enables Bank of the West to stamp the draft drawn on it as “accepted”, thereby creating a banker’s acceptance.

Once the banker’s acceptance has been created, the exporter has two choices:

Wait until July 3 to get the $250,000, knowing that its credit risk is now Bank of the West. If this option is picked, Fulcrum will be charged a per annum commission of 1.5% ($833.33) representing Bank of the West’s price for accepting Mexican bank risk for 80 days.

On April 14, discount the draft with Bank of the West at the banker’s acceptance discount rate of6.4% plus the commission of 1.5%. In this example, Fulcrum would be discounting the banker’s acceptance for the time period of 80 days left until maturity at a rate of 7.9% based on a year of 360 days, giving a total discount of $4,388.88. Fulcrum would receive the net proceeds of $245,611.12.

A significant advantage to Fulcrum Industries is that Fulcrum can finance this foreign receivable at a cheaper rate than under its bank line of $2 million, priced at one percent over Prime (9.5%). In this example, Fulcrum is saving 2% and does not have to utilize its own bank line to finance the export sale.

The Mexican buyer could not receive such advantageous pricing from Citimex based on its credit rating. If it were financing this transaction with Citimex under its Peso denominated line of credit, it would be paying 16% to 18%. However, Serfinsa does have the commission costs of opening the letter of credit as well as the 25% cash margin requirement required by Citimex for credit and foreign exchange reasons.

Banker’s Acceptance Discount Rates

These rates vary with the amount and tenor; the larger the amount and the smaller the number of days, the less the rate will be. Banker’s acceptance rates are quoted in the third section of the Wall Street Journal under “Money Rates” for periods of 30, 60, 90 and 180 days. These quoted rates are for million dollar transactions and represent the “best” rates. Since the banker’s acceptance discount rate is approximately equal to the bank’s “cost of funds”; the all-in discount rate includes the commission, which covers the credit risk and operational overhead assumed by the U.S. bank. The U.S. bank can, in turn, re-discount or sell these bankers' acceptances to investors in the money markets, thereby providing a liquid source of funding for the bank.

Banker’s Acceptance Rules

The rules for banker’s acceptances were established by the Federal Reserve Bank. Although banker’s acceptances can be created for the domestic storage of commodities, they are most commonly created to finance current (within 30 days of the bill of lading date) import and export transactions. Banker’s acceptances can be automatically created within the structure of a time letter of credit or they can be requested by an importer or exporter from its bank to finance its trade cycle up to six months. The tenor (number of days) of the acceptance should match the cash conversion cycle from inventory, to accounts receivable, to cash.

BANK OF THE WEST

LETTERS OF CREDIT- ADVISED vs. CONFIRMED

The letter of credit transaction usually involves two banks: the buyer's bank issuing the letter of credit and a bank in the seller's country, which advised the letter of credit to the beneficiary. The advising bank may also assume the role of confirming bank. Whether advising and/or confirming, the seller's bank assumes certain responsibilities.

ADVISING

An advising bank acts as the agent of the issuing bank. The function of the advising bank is to take reasonable care to verify the authenticity of credits received and then accurately transmit them to their beneficiaries. When advising a letter of credit, the bank assumes no other liability. On receipt of the documents for examination and payment, the advising bank will pay the seller only if it has received good funds from the issuing bank, even if it was specifically nominated as paying bank in the letter of credit.

CONFIRMATION

By confirming a letter of credit, the advising or another bank assumes the same responsibilities as the issuing bank, including the obligation to pay against presented documents if they are in order and all of the letter of credit terms are met. In effect, the beneficiary has the individual promise of two banks to pay against conforming documents.

HOW IS A LETTER OF CREDIT CONFIRMED?

When negotiating the terms of sale, the seller would require a letter of credit requesting the advising bank to add its confirmation. The buyer includes this request when submitting the application for L/C issuance to his bank. In most instances the issued credit states: "Please advise beneficiary adding your confirmation" or words to similar effect. Note: This is a request, not a requirement. The advising bank for various reasons may decline to add its confirmation and simply advise the L/C without engagement on its part. When adding confirmation, typical language included in the cover letter would be, "We hereby confirm this credit and thereby undertake that all drafts drawn under, and in strict compliance with the terms stated therein (and any further terms stated herein) will be duly honored on presentation and delivery of documents as specified, if presented, at this office on or before the expiry date."

WHY REQUEST CONFIRMATION?

The beneficiary may have concerns about the political or economic stability of the buyer's country, or the strength and reputation of the issuing bank. Confirmation by a bank known and convenient to the seller promotes the commercial utility of letters of credit. Also in the event of a dispute, jurisdiction will be determined by the confirming bank's location.

BANK OF THE WEST

AUTHORIZATIONS TO PAY

WHAT IS AN AUTHORIZATION TO PAY?

Under a documentary credit, an authorization to pay (ATP) is a means by which the beneficiary of the letter of credit provides an irrevocable undertaking to another party (the supplier of the merchandise) that a specified portion of the proceeds of the letter of credit will be paid to the supplier (designated payee) if, and when, the letter of credit is negotiated and paid. An A.T.P is initiated by the beneficiary of the letter of credit, acknowledged/accepted by the bank, and then delivered by the bank to the designated payee.

ATPs are often erroneously called Assignments of Proceeds.

HOW IS IT USED?

At times, the beneficiary of an export letter of credit does not have adequate funds to purchase merchandise, or the supplier is unwilling to extend sufficient credit. In this situation, the supplier may be willing to extend credit with assurance from the advising or confirming bank that for a specified letter of credit, it holds irrevocable instructions to pay the supplier for the merchandise.

Banks acknowledging authorizations to pay, agree to pay the supplier only if:1) documents are presented under the related letter of credit, and 2) the bank receives funds from the issuing bank. Because of this, suppliers usually accept authorizations to pay only from parties with whom they have had a satisfactory ongoing relationship.

HOW DOES AN AUTHORIZATION TO PAY DIFFER FROM A TRANSFER?

Unlike a transfer, the designated payee is not a beneficiary of the letter of credit and may not perform the obligations of the beneficiary, nor draw on the letter of credit. The designated payee must trust the beneficiary to ship the merchandise and present documents under the L/C to the bank, for only then will the designated payee have a right to the proceeds at the time of payment. Also, ATPs are only used domestically and need not be authorized in the letter of credit text.

WHO PROCESSES AUTHORIZATIONS TO PAY?

Inquiries about obtaining an ATP under a letter of credit should be directed to the advising bank which sent the credit to the beneficiary. ATPs are generally processed by the advising bank's Trade Center Operations Department with policy varying from bank to bank. The beneficiary's domestic branch of account will only be asked to verify the customer's signature as beneficiary of the L/C.

Questions about ATPs under credits advised by Bank of the West should be directed to the TradeDepartment or the Trade Center Operations Department.

BANK OF THE WEST

TRANSFERABLE LETTERS OF CREDIT

WHAT IS A TRANSFERABLE LETTER OF CREDIT?

A transferable letter of credit is one, which specifically states that it is transferable. This will only occur if the applicant for the letter of credit (buyer) agrees. In a transferable letter of credit, the rights and obligations of the beneficiary are transferred to another party, usually a manufacturer or wholesaler. Transfer may be either full or partial.

WHY TRANSFER AN L/C?

Most transfers involve a seller who, as beneficiary of the letter of credit, has a pending sale, but is unable to purchase the merchandise from the manufacturer on open account. Export brokers most often use transferable L/C’s. Transferring a portion of the export L/C to the manufacturer allows the broker to leverage the buyer's banker's credit by providing the manufacturer with assurance of payment if the manufacturer performs under the transferred L/C terms and conditions.

WHAT CRITERIA APPLY TO TRANSFERS?

Transfer of letters of credit is governed by Article 48 of the UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS, ICC Publication No. 500 (1993 Revision) which states that banks are under no obligation to transfer a credit except to the extent and in the manner expressly consented to. Further, the transferring bank must be specifically nominated in the letter of credit as the bank authorized to effect the transfer.

Transfer criteria vary from bank to bank, but may include such requirements as:

The transferor being a customer of the transferring bank.

"Negotiation" of the credit being restricted to the transferring bank.

The issuing bank being a correspondent of the transferring bank.

All terms and conditions of the credit being acceptable to the transferring bank.

WHAT IF THE L/C DOES NOT MEET THE BANK'S TRANSFER CRITERIA?

The bank always retains the right to decline a transfer request. It may consent if certain terms and conditions of the letter of credit are amended to meet its requirements. Any amendment to a letter of credit is subject to agreement of the buyer, the buyer's bank, and the beneficiary who is requesting the transfer. Banks retain the right to decline any transfer request.

WHAT CAN BE CHANGED WHEN TRANSFERRING A LETTER OF CREDIT?

Article 48 of the UCP 500 limits changes to the following:

The L/C amount may be reduced.

Unit prices may be reduced.

The expiry and latest shipping dates may be curtailed.

The time period after the date of shipment for presenting documents to the bank may be curtailed.

The name of the beneficiary is substituted for the name of the applicant (buyer), but if the applicant's name is required to be stated in any document other than the invoice, this requirement must be adhered to.

If an insurance document is required, the coverage may be increased to provide coverage as required by the original L/C.

The place of payment or negotiation may be changed to the location of the transferee.

WILL THE SUPPLIER AND THE BUYER BE ABLE TO IDENTIFY EACH OTHER?

Probably so, even if the bills of lading do not give the buyer as "consignee" and the "notify party" is shown as the buyer's customs broker. Also, the entire supplier's documents (except for invoice and draft) are forwarded to the buyer through their banks, and a packing list for instance is sure to have the supplier's name and address.

BANK OF THE WEST

STANDBY LETTERS OF CREDITWHAT IS A STANDBY LETTER OF CREDIT?

A standby letter of credit is similar to a commercial letter of credit used for import/export transactions in that a bank substitutes its credit worthiness for that of its customer. The commercial letter of credit facilitates trade through the use of documents evidencing performanc e and drafts. The standby letter of credit, however, often represents an obligation of the issuing bank to the beneficiary to 1) repay money borrowed by or advanced to or for the account party, or 2) make payment on account of any indebtedness undertaken by the account party, or 3) make payment on account of any claimed default by the account party in the performance of an obligation.

Note that in each of these cases, payment is effected against the beneficiary's claim that default has occurred. In no case does the issuing bank agree to guarantee the completion of any project or contract, nor is it bound to make determination of fact regarding the underlying transaction. The bank's liability is financial only.

WHAT ARE THEY USED FOR?

TRADE SUPPORT

When a trading relationship is established between a buyer and a seller on either a "cash in advance" or"open account" basis, a standby can be used as financial security. In these situations, payments are made directly between buyer and seller, but each has recourse to the issuing bank in the event of default.

BID BONDS

Contracting parties involved in sizeable projects frequently request contractors bidding on the project to post a bond or standby letter of credit for a percentage of the contract amount. These are used for the bidding process only, and assure the contracting party that the contractor they selected will honor the original bid.

ADVANCE PAYMENT BONDS

When the contractor, who has been awarded the project, begins work, an advance payment may be required for materials, start up costs, or general working capital. The contracting party generally requires a bond or standby letter of credit to be assured that the advance payment will be used for the project. In the event of contract default, the payment can be recovered from the bank, which issued the standby credit. These standby letters of credit can be issued to progressively decrease in amount through the life of the credit.

PERFORMANCE BONDS

Throughout the life of the project, the contracting party is interested in ensuring that the project will be completed in accordance with its terms and conditions. A standby credit may be required to provide financial reimbursement in the event of default by the contractor. These are generally designed to decrease in amount over the life of the project.

OTHER USES INCLUDE:

to back up equity contributions to secure earnest money or liquidated damages to secure promissory notes to secure rental & lease transactions in lieu of appeal & attachment bonds in settlement of civil litigation credit rating enhancement for debt securities coverage of airline tickets for travel agencies installment payments & sales

WHO DETERMINES THE LANGUAGE IN A STANDBY?

Customers, as applicants for a standby letter of credit, are encouraged to ask the beneficiary what language they want in the standby. Most beneficiaries, who regularly accept standbys, will provide the applicant with an example of their format. Before the standby is issued, the customer, bank, beneficiary, and confirming bank, if any, should all agree on the language to be included. This prevents delays and saves amendment expense.

WHEN/HOW IS PAYMENT MADE?

To be paid, the beneficiary must comply with the standby's terms and conditions and submit the required statement. When paying, the bank is interested only in the conforming documents required by the letter of credit. In no instance would a bank investigate the accuracy or correctness of any statement made by the beneficiary. Also, the bank is not interested in the underlying transaction's terms and conditions. .

Standby credits can be governed by the same rules as commercial letters of credit, the UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS, International Chamber of Commerce Publication No. 500, 1993 Revision, (UCP500). The applicant can also elect to have standby credits covered by International Standby Practices of 1998 (ISP98) also issued by the International Chamber of Commerce Publication No. 590.

BANK OF THE WEST

STANDBY L/C PROCEDURES

To: CustomerBasics of Standby Letters of Credit

Banks in the United States historically have not been allowed to issue guarantees. U.S. banks issue standby letters of credit, which act as a substitute in part for a guarantee.

The drawing under the standby letter of credit is triggered by the beneficiary’s statement of non- performance of the underlying transaction.

Under letters of credit, banks only deal with documents. Banks do not research the “truth” of the non-performance (i.e. unpaid invoices, late delivery of product, etc.) nor do they make determinations of fact.

The “trigger” language in the standby is the critical element of the standby letter of credit, and it is basically a statement by the beneficiary that non-performance has occurred. Most beneficiaries, who regularly accept standbys, have their own preferred text for the standby letter of credit.

The applicant and the beneficiary of the letter of credit should give us the trigger language as it relates to the underlying transaction, keeping in mind that the legal jargon in any underlying contract should not be repeated in the letter of credit.

Drafting the L/C

There are three parties who must agree on the text of the letter of credit: you as the applicant, the beneficiary, and the bank.

Once we receive your trigger language, we will draft the L/C using your basic language to conform to the rules of letters of credit, the UCP 500 or ISP 98, and our own internal requirements.

We will give you an “attachment” to accompany your completed Standby Letter of Credit Application. The

Standby Letter of Credit “attachment” has the essential boilerplate and “trigger” wording for theletter of credit. PLEASE REVIEW IT CAREFULLY TO SEE THAT IT MEETS YOUR REQUIREMENTS AND MATCHES THE PARAMETERS OF THE UNDERLYING TRANSACTION, WITHIN THE STRUCTURE OF THE UCP 500 OR ISP98.

Please fax the “attachment” to the beneficiary before the letter of credit is issued to obtain the beneficiary’s concurrence that the text is satisfactory. It is better to find out if the beneficiary has any objections prior to the standby L/C being issued; after the L/C is issued, changes to the L/C text must be done through the costly and time consuming process of amendments to the letter of credit.

Text is Tailor - Made/Timeliness of Drafting and Issuance Process

Since the text is custom drafted for each standby letter of credit, sufficient time must be allowed: to draft the text; obtain your consent as well as the approval of the beneficiary. The time frame must also take into account your internal approvals as well as the bank’s credit approval process. The final steps, which also take time, are the preparation of the actual L/C in the Letter of Credit Department, careful proof reading of the text, and the sending out of the L/C by courier to the beneficiary or by authenticated teletransmission to the beneficiary’s advising bank.

We recommend that ten (10) business days be allowed for the entire standby letter of credit process, from drafting to receipt by the beneficiary of the issued L/C.

Credit Approval

The issuance of a standby letter of credit requires specific credit approval for this type of transaction, especially with regard to the length of time (validity) the standby L/C will be outstanding. Many standby letters of credit involve a validity in excess of a year, which exceeds the maturity of the annual line of credit. This may be solved by an automatic extension clause, which gives the bank the option of renewing or not renewing the standby L/C.

Procedural Mechanics

On the Standby Letter of Credit Application form, where there is a large blank space, you should type“see attached” referring to the “attachment”. In the space on the Application for the beneficiary’s address, please use a street address (not a P.O. Box) because we, or the advising bank, typically send out the standby letter of credit by courier. It is also good practice to include under the beneficiary’s address “attention to” details such as name of the department at the beneficiary’s company as well as phone/fax numbers. These communication details are especially important for communicating on non- renewal notices for standbys with automatic renewal clauses.

The company should sign the Application and the Attachment. Your account officer must also sign theAttachment and the Application.

Once your account officer has signed both the Application and Attachment, the Attachment and Application must be faxed to Trade Center Operations at 323-727-6405. Your account officer should send the original Application and Attachment by interoffice mail to the Trade Center Operations Mail Sort W6-1. Your account officer should confirm with the Trade Center Operations (323-727-6339) that the faxed application has been received in readable, good order and that the credit authorization is in place with our Loan Operations Center.

Your account officer should not send or fax either the signed Application and/or Attachment to officers of Trade Department because ITF does not issue the letter of credit.

Questions about the issuance of the letter of credit should be directed to the Import Issuance Section at323-727-6339.

Fees

Compensation for the credit risk is set by your account officer and is reflected in the per annum percentage issuance fee paid at the time of issuance. The minimum fee and processing charge, as well as other out-of-pocket expenses, are detailed in the International Schedule of Fees and Charges. Depending on the complexity of your standby and the completeness of the trigger language supplied by you, there may be special handling/consultation charges of $100 per hour assessed for the drafting of the standby letter of credit.

BANK OF THE WEST

EXPORT FINANCING ASSISTANCEExpor t - Import Bank of the United States

Ex-Im Bank programs require that the goods have a 51% U.S. content and are not to be used for military purposes.

Ex-Im Bank has a variety of programs, which finance the foreign buyer, usually with the guarantee of the buyer’s bank, or finance the exporter who needs working capital to manufacture or procure the needed goods to export.

EXPORT -IMPORT BANK of the United StatesOne World Trade Center, Suite 1670

Long Beach, CA 90831Tel: (562) 980-4580 Fax: (562) 980-4590

www.exim.gov

The Ex-Im Bank can be reached at its Toll Free Hotline in Washington at (800) 565-3946. This number provides an automated menu to information, which can be automatically faxed to you.

User’s Guide: 1-800-565-3946, ext. 3912Fax Retrieval: 1-800-565-3946, at voice prompts press 1, and 2

California Export Finance Office (CEFO)

The California State World Trade Commission's Export Finance Office provides working capital loan guarantees to financial institutions on behalf of small and medium sized California companies in support of export transactions. CEFO's guarantees over 90% of an export loan, allowing for a maximum guarantee of$750,000 (or a loan of $833,000). California content of product must be in excess of 50%.

Headquarters: TradeCA.com [email protected]

1102 Q Street, Suite 6000Sacramento, CA 95814Tel: (916) 327-5807 Fax: (916) 323-3848 Www.commerce.ca.gov

CEFO Regional Offices

750 B Street 5201 Great America Parkway 3550 Wilshire BoulevardSuite 1620 Suite 350 Floor 5

San Diego, CA 92101 Santa Clara, CA 95054 Los Angeles, CA 90010-2314Tel: (619) 645-2492 Tel: (408) 980-0311 Tel: (213) 480-6334Fax: (619) 645-2663 Fax: (408) 980-0280 Fax: (213) 480-6337

U.S. Small Business Administration U.S. SMALL BUSINESS ADMINISTRATION www.sba.gov

330 N. Brand, Suite 1200 200 West Santa Ana Blvd., Suite 700Glendale, CA 91203 Santa Ana, CA 92701Tel: (818) 552-3210 Fax: (818) 552-3260 Tel: (714) 550-7420 Fax: (714) 550-0191

The SBA has a program to help small businesses obtain working capital to complete their export sales. The Export Working Capital Program (EWCP) can support single transactions or multiple export sales. Under the program, SBA can guarantee up to 90% of a private sector loan up to $1,000,000. Collateral may include inventory, insured foreign receivables, domestic receivables, and assignment of export contract or letter of credit proceeds.

Questions on the program may be directed to the U.S. Export Assistance Center or the Export Small Business Development Center (see below) or you may call SBA's Washington office for International Trade at 202-205-6720.

U.S. Export Assistance Center ("USEAC")

The federal government has established four export assistance centers in the United States to provide support for export-ready companies. The USEAC staff will guide firms that are not yet export-ready to local export development partners for basic education, training and assistance most relevant to their needs. At the Long Beach Center there are four (4) federal government agencies represented: Department of Commerce, U.S. Small Business Administration, Ex-Im Bank, and the Agency for International Development.

U.S. EXPORT ASSISTANCE CENTERA Full Service Office Featuring the Export Services of the Department of

Commerce, EXIM Bank, and the Small Business Administration One World Trade Center, Suite 1670 Tel: (562) 980-4550Long Beach, CA 90831 Fax: (562) 980-4561

Export Small Business Development Center

The Export Small Business Development Center is a unique partnership between the public and private sectors, represented by the Small Business Administration, the State of California Trade and Commerce Agency and the Export Managers Association of California. The Center, one of 700 SBDC's nationwide and the only one devoted exclusively to export activities, helps Southern California businesses increase their exports through a plan combining consultants, hands-on training programs and access to information about exporting. The Center pays top professionals from the private sector to provide in-depth, export consulting services at no cost to the client.

EXPORT SBDC HEADQUARTERS San Gabriel Valley Outreach Center222 N. Sepulveda Blvd., Suite 1690 10507 Valley Blvd., #888El Segundo, CA 90245 El Monte, CA 91731Tel: (310) 606-0166 Fax: (310) 606-0155 Tel: (626) 459-4112 Fax: (626) [email protected]

California Trade & Commerce Agency www.commerce.ca.gov

Santa Fe Springs Outreach Center10100 Pioneer Blvd., #1000Santa Fe Springs, CA 90670Tel: (562) 906-3900 x6636 Fax: (562) 906-5881

The International Trade & Investment Division of the above Agency is responsible for developing programs and policies to increase jobs in the State of California by promoting international business.

International Trade and Investment Division 801 K Street, Suite 1926 www.TradeCA.comSacramento, CA 95814 Tel: (916) 324-5511

Fax: (916) 324-5791Office of Export Development One World Trade Center, Suite 990 Tel: (562) 590-5965Long Beach, CA 90831-0990 Fax: (562) 590-5958California Export Finance Office 3550 Wilshire Boulevard, Floor 5 Tel: (213) 480-6334Los Angeles, CA 90010-2314

Northern California District Export Counci l

This Council works in cooperation with the U.S. Department of Commerce International Trade Administration, located at the same address below, to help small and medium sized firms enter overseas markets.

California Council for Intl. Trade U.S. Dept. of Commerce – N. Calif.Joseph Harrison, President James S. Kennedy250 Montgomery St., 14th floor 250 Montgomery St., 14th floorSan Francisco, CA 94104 San Francisco, CA 94104Tel: (415) 788-4127 Fax: (415) 788-5356 Tel: (415) 705-2301Email: [email protected] t Fax: (415) 705-2297Internet: www.ccit.net Internet: www.doc.gov

Selected Chambers of Commerce with International Trade Services

California Chamber of Commerce U.S. Chamber of CommerceSusanne Stirling, Vice President, Intl. Affairs Meg Jacobsen, Executive Director1215 K Street, 14th floor 477 Ninth Ave., #107Sacramento, CA 95814 San Mateo, CA 94402Tel: (916) 444-6670 Fax: (916) 325-1284 Tel: (650) 685-8790 Fax: (650) 343-2848Email: [email protected]: www.calchamber.com

Concord Tel: 510-685-1181 Fax: 685-5623

Fremont Tel: 510-795-2244 Fax: 795-2240

Hayward Tel: 510-537-2424 Fax: 537-2730

Los Angeles Tel: 213-580-7500 Fax: 580-7511

Oakland Tel: 510-638-7276 Fax: 839-8817

Orange County Tel: 714-634-2900 Fax: 978-0742

San Francisco Tel: 415-392-4511 Fax: 392-0485

Santa Barbara Tel: 805-965-3023

Torrance Tel: 310-540-5858 Fax: 540-7662

Selected Community Colleges with International Trade Development Offices

Center for Intl. Trade Dev. Center for Intl. Trade Dev.-Citrus College -Riverside Community College

Eugene Bohatch, Director Jeffrey Williamson, Manager375 South Main Street, Suite #101 3985 University Ave. Pomona, CA 91766 Riverside, CA 92501Tel: (909) 629-2247 Fax: (909) 397-5769Email: [email protected]: www.discover.net/~trading/

Tel: (909) 682-2923 Fax: (909) 682-2441Email: [email protected]

Oxnard College Sacramento City College4000 S. Rose Avenue 1787 Tribute Road, Suite A Oxnard, CA 93033-6699 Sacramento, CA 95815Tel: (805) 986-5831 Fax: (805) 986-5883Internet: www.oxnard.cc.caus/caltrade

Tel: (916) 263-6578Fax: (916) 263-6571

Coastline Community College Vista Community College11460 Warner Ave. 2020 Milvia Street, Suite 309Fountain Valley, CA 92708 Berkeley, CA 94704Tel: (714) 241-6258 Fax: (714) 241-6207 Tel: (510) 841-8860 x270 Fax: (510) 841-7333

Orange County Intl. Trade Center El Camino Community College20 Civic Center Plaza M 25 2377 Crenshaw Ave., Suite 120Santa Ana, CA 92701 Torrance, CA 90501Tel: (714) 647-5360 Fax: (714) 647-6549 Tel: (310) 787-6466 Fax: (310) 782-8607

Internet: www.citd.org

Merced CITD Long Beach City College301 West 18th Street, Suite 203 One World Trade Center, Suite 350Merced, California 95340 Long Beach, CA 90831Tel: (209) 384-5892 Fax: (209) 384-9268 Tel: (562) 491-2111 Fax: (562) 491-7319

Southwestern CITD Ventura CITD900 Otay Lakes Road, Building 1600 5700 Ralston, Suite 310Chula Vista, California 91910 Ventura, CA 93003Tel: (619) 482-6392 Fax: (619) 893-5532 Tel: (805) 644-9981 Fax: (805) 658-2262

Rancho Santiago CCD901 East Santa Ana Blvd. Santa Ana, CA 92701Tel: (714) 564-5533 Fax: (714) 647-1168

Selected F oreign Trade Organizations

Foreign Trade Association of So. California Export Managers Association of California900 Wilshire Boulevard, Suite 1434 222 N. Sepulveda Blvd., Suite 1690Los Angeles, CA 90017 El Segundo, CA 90245Tel: (213) 627-0634 x204 Fax: (213) 627-0398 Tel: (310) 606-0161 Fax: (310) 606-0150Email: [email protected] Email: [email protected]: www.ftasc.org

San Francisco World Trade Association Bay Area World Trade Center465 California Street, 9th Floor 250 Montgomery Street, 14th FloorSan Francisco, CA 94104 San Francisco, California 94104Tel: 415-392-4520 Tel: (415) 705-2300 Fax: (415) 705-2297

San Diego World Trade Center World Trade Center Los Angeles1250 Sixth Ave., Suite 100 350 South Figueroa Street, Suite 172San Diego, CA 92101-4368 Los Angeles, CA 90071Tel: (619) 615-0868 Fax: (619) 615-0876 Tel: (213) 680-1888 Fax: (213) 680-1878Email: [email protected] Email: [email protected]

World Trade Center Assoc. of San Diego World Trade Center Long BeachHugh Constant One World Trade Center, Suite 2951250 Sixth Ave. Long Beach, CA 90831San Diego, Ca 92101 Tel: (562) 495-7070 Fax: (562) 495-7071Tel: (619) 685-1450 Fax: (619) 685-1460 Email: [email protected]: [email protected]

California Council for International Trade Women in International Trade – Los Angeles700 Montgomery St., Suite 305 P.O. Box 4250San Francisco, CA 94111 Sunland, CA 91041Tel: (213) 617-2248 Fax: (415) 788-5356 Tel: (310) 535-0127 Fax: (818) 353-5976Internet: www.ccit.net Email: [email protected]

Women in International Trade – Orange County3972 Barranca Parkway, Suite J-200Irvine, CA 92604Tel: (714) 851-1888 Fax: (714) 535-6338

LA Trade

LA Trade is a five-county partnership to promote exports. LA Trade targets industries, for which the region has a competitive edge, including Computer and Related Electronics; Telecommunications; Multimedia and Information Technologies; Environmental Technologies; Bioscience/Biomedical Technologies and Instruments; and Agriculture and Processed Food.

LA Trade can help your company by providing:

Export Counseling: Basics of exporting and export plan development. Market Support: International trade shows and industry matchmaker missions. Electronic Network for Export Opportunities: Trade leads, market research, economic data. Export Finance Assistance: Loan counseling and access to government programs.

LA Trade has four service centers:

Los Angeles Area Chamber of Commerce City of Compton Economic/Resource Development350 South Bixel Street 205 S. Willowbrook Ave. Los Angeles, CA 90017 Compton, CA 90220Tel: (213) 580-7528 Fax: (213) 580-7511 Tel: (310) 605-5580 Fax: (310) 761-1419Internet: www.tradeport.org

Asian Business Association Inland Empire International Trade988 N. Hill Street, Suite 119 1157 Spruce StreetLos Angeles, CA 90012 Riverside, CA 92507Tel: (213) 625-2221 Fax: (213) 625-2087 Tel: (909) 781-2345 Fax: (909) 781-2353

Bay Trade Bay Trade is the Northern California equivalent of LA Trade and offers identical services through the following six service centers:

San Jose Office of Economic Development Sonoma County Economic Development Board50 South Market Street, Suite 470 401 College Avenue, Suite DSan Jose, CA 95113 Santa Rosa, California 95401-5159Tel: (408) 277-5880 Fax: (408) 277-3615 Tel: (707) 565-7170 Fax: (707) 565-7231

Internet: www.Sonoma-county.org

Bay Area World Trade Center Silicon Valley Global Trading Center530 Water Street, Suite 740 5201 Great America Parkway, Suite 429Oakland, CA 94607 Santa Clara, California 95054Tel: (510) 251-5900 Fax: (510) 251-5902Internet: www.bawtc.com

Bay Area World Trade Center Monterey Bay International Trade Association250 Montgomery Street, 14th Floor 725 Front Street, Suite 104San Francisco, California 94104 Santa Cruz, California 95060Tel: (415) 705-2300 Fax: (415) 705-2297 Tel: (831) 469-0148 Fax: (831) 469-0917

Trade Port TradePort is a web site on the Internet dedicated to trade and export information. It is a unique venture between LA Trade and BayTrade that combines the extensive export/trade resources of the U.S. Commercial Service, the California Trade and Commerce Agency and other nationwide trade resources.

The TradePort web site has general information in the following areas:

How to Export Export Planning Finding Buyers Moving the Goods Obtaining Financing

The web site also has more specific information in three major categories: Trade Directory, Trade Signals, and Trade Assistance.

TRADE DIRECTOR Y TRADE SIGNAL S TRADE ASSISTANCE Events in California World News Trade Expert

Trade Shows & Missions Hall of Fame Trade Q&A Company Search Feedback Export Assistance Sponsors News Groups Service Centers

In order to view TradePort all you need is Internet access and a web browser program. The web site address is: http://tradeport.org

Mexico The Trade Commission of Mexico350 S. Figueroa St., Suite 296Los Angeles, CA 90071 USATel: (213) 628-1220 Fax: (213) 628-8466Email: Mextrade@Earthli n k.ne t Home Page: http://www.mexico - trade.co m Trade Commissioner: Herminio Hernandez

The Trade Commission of Mexico has a web site, which assists American companies sourcing Mexican products and those seeking foreign investment opportunities in Mexico. The Trade Commission of Mexico’s home page is a one-stop information service, geared to assist companies interested or actively doing business with Mexico. The web site is at http://www.mexico-trade.com.

Foreig n Credit Insurance Foreign Credit Insurance on short and long-term receivables enables commercial banks to lend against these receivables and allows exporters the opportunity to extend open account terms to increase sales. Information on the various government and private export credit insurance programs may be directed to an insurance broker specializing in this area.

Arlene Parkhurst Gary MendellInternational Insurance Associates Meridian Finance Group8202 Florence Avenue, Suite 200 12304 Santa Monica BoulevardDowney, CA 90240 Suite #214Tel: (562) 861-0309 Los Angeles, California 90025Fax: (562) 923-6354 Tel: (310) 442-3600

Fax: (310) 207-2810Ernest Kangas Internet: www.meridianfinance.comAon Trade Credit1211 SW Fifth Avenue, Suite 600Portland, OR 97204-3799Tel: (800) 638-0448Fax: (503) 295-0923

General Requirements for Export Loans via Government Agencies

Your company's probability of obtaining export finance will be greatly increased if a professional package with the following information is presented to both your bank and the appropriate government agency. In most cases your bank and the government agency will be working together to provide the export financing. Thus, it is important to demonstrate that your company, as the seller, is a viable, creditworthy company, which has the ability to produce or source the product with a clear repayment source from your foreign

buyer and/or its bank. We would be pleased to review your information package to insure that it maximizes your potential to gain approval from the government agency and our bank.

Background: History of your company, background on owners and key employees, and a copy of your business

plan.

Transaction: Explanation of the transaction requiring export financing. Copy of the buyer's order/contract with your company. If the buyer will issue a letter of credit, the name of the foreign bank issuing the L/C and the general

terms you are requiring. If applicable, information on foreign credit insurance program your company is using. Copy of validated export license or application for export license, if required.

Financials: Your annual financial statements for the last three years, accompanied by an analysis of those

financials. Current, interim financial statements within 90 days of the application for export financing. Agings of accounts receivable and payables with an appropriate analysis. Most recent federal and state tax returns. Personal financial statements of the owners and their most recent tax returns. Estimate of monthly cash flow needs required to export the product.

Foreign Buyer: Background on foreign buyer and its bank.

Credit Insurance: Aging of foreign receivables, terms of sale, experience with slow pays and bad debts, and credit

reports on foreign buyers.

Publications

Since letters of credit are the basic instrument of international trade and their use is governed by the UCP500, the exporter should have standard reference publications to explain the “rules of the game” and the terms of trade which are routinely used in letters of credit. The International Chamber of Commerce publishes the following, which are basic recommended reference works:

“ICC Guide to Documentary Credit Operations for the UCP 500”

“Guide to Incoterms” (explains trade terms: FOB, CIF, C&F, DDP, DEQ etc.)

“Uniform Customs and Practice for Documentary Credits”

ICC Publishing, Inc.156 Fifth Avenue, Suite 417New York, N.Y. 10010Tel: 212-206-1150 Fax: 212-633-6025Email: [email protected]

“A Basic Guide to Exporting” is published by the U.S. Department of Commerce and can be obtained atU.S. Government printing office stores (downtown Los Angeles, for example).

The California Chamber of Commerce publishes the following guides, which can be purchased by calling1-800-331-8877:

“International Trade Resources Guide” - the Guide lists more than 1,600 resources in public and private sectors ($17.50).

“Exporting Guide for California” - a step-by-step manual to help the California company wishing to become involved in exporting or expand existing export volumes ($17.50)

“North American Free Trade Guide” - a handbook to help businesses take advantage of opportunities created by NAFTA ($19.50)

Owens OnLine, Inc. has a 97-page catalog listing books and other reference works relating to international business. Owens OnLine also has a foreign credit report service, and it sells software to assist in tracking sales and accounts receivable for the purpose of compliance with foreign credit insurance requirements.

Owens OnLine, Inc. Publication Department4707 140th Avenue North, Suite 208Clearwater, Florida 34622Tel: 800-745-4656 Fax: 813-535-7786

The Maritime Administration of the U.S. Department of Transportation publishes a 79-page “Glossary ofShipping Terms”. Please contact either of the following offices:

Long Beach Tel: 562-432-6185 Fax: 562-435-5294San Francisco Tel: 415-744-2580 Fax: 415-744-2576

Scams and Frauds

Various scams and frauds in the international business arena are prevalent in the market today. These frauds often involve standby letters of credit and the “discount” of these letters of credit through some trust arrangement. There is a commonality in the language used in these fraudulent transactions. For example, standby letters of credit are not discounted, bankers never use the term “coordinates”, and linking letters of credit and a trust never occurs in normal banking practice.

If you have any question about the validity of your international transaction, please call one of our TradeDepartment staff.

National Fraud Information Center provides daily news reports, advice and other helpful information. This site can be reached at http://www.fraud.org. The Center’s telephone number is 800-876-7060.

National Fraud Information CenterP.O. Box 65868

Washington, DC 20035

Board of Governors of the Federal Reserve System Office of the Comptroller of the CurrencyDeputy Associate Director Law DepartmentEnforcement and Special Investigation Sections Enforcement and Compliance DirectorDivision of Banking Supervision and Regulation 250 E Street, S.W.Mail Stop 175 Washington, D.C. 20219Washington, D.C. 20551 202-874-4800 (phone)202-452-2620 (phone) 202-874-5301 (fax)202-736-5641 (fax)

ICC Commercial Crime Bureau United States Secret Service(A specialized division of the International Financial Crimes DivisionChamber of Commerce) 1800 G Street, N.W., Room 942Martime House Washington, D.C. 202231 Linton Road, Barking Financial: 202-435-5850Essex 1G11 8GH, United Kingdom Fax: 435-7481Tel: (081) 591-3000 Electronic: 202-435-5850Fax: (081) 594-2833 Fax: 435-7607

BANK OF THE WEST

COMPARISON CHART OF FOREIGN CREDIT INSURANCE PROGRAMS

FCIA (GREAT AMERICAN INSURANCE COMPANY)

RESTRICTIONS No U.S. content restriction. Product may be 100%

foreign content

COVERAGE Commercial and Political Option 1: 95% for monthly reporting policy. Option 2:90% for country limit policy

with a % refund for noclaims bonus.

EXPORT IMPORT BANK

Products must be 51% U.S. content on cost basis. Military goods and/or

services not eligible. Must be shipped from U.S.

Commercial and Political Option 1: 95% for both

commercial and political. Option 2: 90%

commercial and 100% political.

FIDELITY AND DEPOSIT

Product may be 100% foreign content. No

coverage to government buyers. Insolvency must occur while policy is in

force.Defined Insolvency and

protracted default in eligible countries.

Excludes insolvency due to war. Normally 85%

coverage.

AMERICAN CREDIT INDEMNITY


coverage to g overnment buyers. Insolvency

must occur while policy is in force.

Defined insolvency and protracted default in eligible countries.

Excludes insolvency due to political events

including war. Percentage cover

determined by country.

CONTINENTAL INSURANCE COMPANY


coverage to government buyers. Insolvency must occur while policy is in

force.Defined insolvency and

protracted default in eligible countries.

Excludes insolvency due to war. 100% insolvency coverage, 75% protracted

default.

COUNTRY ELIGIBILITY

CREDIT APPROVALS

All countries can be considered. Determined by each country’s economic and political climate. Can include domestic sales.

Policy endorsed for countries covered.

Flexible Discretionary Credit Limits giving insured option

to approve accounts to approved limits.

Dependent on U.S. government foreign policy.

Specified by country limitation schedule.

Discretionary Credit Limits giving insured option to

approve accounts to approved limits.

List of eligible countries, primarily developed

countries.

F & D gathers information and establishes credit limits for each buyer.


countries.

ACI gathers information and establishes credit limits for each buyer.


countries.

Continental gathers information and

establishes credit limits for each buyer.

BANK OF THE WEST

COMPARISON CHART OF FOREIGN CREDIT INSURANCE PROGRAMS

FCIA (GREAT AMERICAN INSURANCE COMPANY)

EXPORT IMPORT BANK

FIDELITY AND DEPOSIT



DEDUCTIBLE Policy year deductible, but one deductible can apply to shipments made to a buyer within 90 days of each other

even if shipments were made in two policy years.

Per policy year deductible, based on date of shipment

No deductible. Per policy year deductible. Per policy year deductible.

PREMIUM PAYMENT

Monthly or prepay, determined as a

percentage of insured sales. Requires spread of

risk normally whole turnover.

Monthly determined as a percentage of insuredsales. Requires spread of risk normally whole

turnover.

Prepayment, with yearend adjustment. Determined as a percentage of insured

sales.

Prepayment with adjustments for changes in

buyer credit limits.Premium based on

approved credit limits, endorsements, face value

of policy. Premium charged per credit limit

approved, based on quality of each buyer’s credit

rating.

Prepayment with adjustments for changes in buyer creditlimits. Premium based on

approved credit limits, endorsements, face value of policy. Premium charged per credit limit approved, based on quality of each buyer’s

credit rating.

MINIMUM PREMIUM

$10,000 per policy year. Minimum insured volume of

$3,000,000.

$500 per policy year. $2, 500 per policy year. $5,000 per policy year. $2,500 per policy year.

CLAIM FILING 90 days after due date, but within 240 days.

90 days after due date. Insolvency claims can be filed at any time during

policy period as soon as practicable after acquiring

knowledge. Protracted default 180 days after due

date.

Insolvency claims can be filed at any time during

policy period after acquiring knowledge but no later than the account becoming 180

days past due within 45 days after the end of the

policy period whichever is earlier. Past due claims must be filed within 180

days after due date. May have collection

charges.

Insolvency claims can be filed at any time during policy

period but must be within 20 days after acquiring

knowledge or 90 days from the date of insolvency,

whichever date is earlier. Past due claims must be filed

within 3 months after due date. May have collection

charges.

BANK OF THE WEST

EXPORT-IMPORT BANK FACT SHEETThe Export-Import Bank of the United States (Ex-Im Bank) is an independent U.S. government agency that helps finance the overseas sales of U.S. goods and services. During its 60 years, Ex-Im Bank has supported more than $300 billion in U.S. exports.

WHAT IS EX -IM BANK'S MISSION?

Ex-Im Bank's mission is to create jobs through exports. It guarantees both working capital loans for U.S. exporters and the repayment of loans by foreign purchasers of U.S. goods and services. Ex-Im also provides credit insurance that protects U.S. exporters against the risks of non-payment by foreign buyers for political or commercial reasons. The Bank does not compete with commercial lenders, but assumes the risks they cannot accept. It always must have a reasonable assurance of repayment.

WHEN CAN EX-IM BANK HELP?

Ex-Im Bank helps to provide a level playing field for U.S. exporters by countering the export credit subsidies of other governments. It also provides financing to creditworthy foreign buyers when private financing is unavailable. To qualify for Ex-Im Bank support, the product or service must have at least 50 percent U.S. content and must not affect the U.S. economy adversely.

Ex-Im Bank supports the sales of U.S. exports worldwide. In recent years, its focus shifted to the developing nations whose economies are growing at twice the rate of the industrial nations.

Ex-Im Bank will finance the export of any type of goods or services, including commodities, as long as they are not military-related. Two of its major goals are to increase the export of environmental goods and services, which are in strong demand among the developing nations, and to expand the number of small businesses using Ex-Im programs.

While Ex-Im Bank is not a foreign aid or development agency, its programs often help U.S. exporters participate in development projects. Ex-Im Bank has co-financed projects with the U.S. Agency for International Development (USAID), the World Bank, and regional development banks.

WHAT PROGRAMS DOES EX-IM BANK OFFER?

1. Working Capital Guarantee Progra m is a pre-export financial tool to enable exporters to obtain necessary working capital in order to bid, construct or enhance production and complete foreign contract awards. Delegated authority is available to lenders enabling them to commit Ex-Im Bank’s guarantee and to share in the fee income. Bank of the West is a delegated authority lender under this program.

2. Export Credit Insurance policies protect against both the political and commercial risks of a foreign buyer defaulting on payment. Policies may be obtained for single or repetitive export sales and for leases. They generally cover 100 percent of the principal for political risks and 90-95 percent for commercial risks, as well as a specified amount of interest.

Short-term policies are used to support the sale of consumer goods, raw materials and spare parts on terms up to 180 days, and agricultural commodities, consumer durables and capital goods on terms of up to 360 days.

Capital goods may be insured for up to five years, depending upon the contract value, under medium- term policies. Ex-Im Bank's credit insurance allows exporters to finance receivables more easily by assigning the proceeds of the policy to their lender.

3. Guarantees of commercial loans to foreign buyers of U.S. goods or services cover 100 percent of principal and interest against both political and commercial risks of non-payment. Medium-term guarantees cover the sale of capital items such as, trucks and construction equipment, scientific apparatus, food processing machinery, medical equipment, or project-related services, including architectural, industrial design, and engineering services. Long-term Guarantees are available for major projects, large capital goods and/or project-related services. Ex-Im Bank's Credit Guarantee Facilities also can be used to extend medium-term credit to buyers of U.S. capital goods and services through banks in certain foreign markets.

4. Loans, extended directly or through an intermediary, provide foreign buyers with competitive, fixed-rate financing for their purchases from the United States.

Ex-Im Bank's loans and guarantees cover 85 percent of the contract price (100 percent of the financed portion). The foreign buyer is required to make 15 percent cash down payment. The fees charged by Ex- Im Bank for its programs are based on the risk assessment of the foreign buyer or guarantor, the buyer's country, and term of the credit. Ex-Im Bank's fees are competitive with those charged by the export credit agencies of other exporting countries.

When there is no foreign competitor, exports can obtain an Ex-Im Bank Letter of Interest (LI) to assist in negotiations with a potential foreign buyer. The LI indicates the Bank's willingness to consider a financing offer if sale is completed. An LI can be issued within seven (7) days of a request for financing and remains in effect for six (6) months.

WHERE TO APPLY FOR EX-IM BANK PROGRAMS

Ex-Im Bank's programs are easily accessible. Any responsible party--the foreign buyer, the U.S. exporter, a lending institution, or a firm representing either the buyer or the exporter--can apply directly to Ex-Im Bank for a PC or LI. For more information, please contact the Trade Department, Bank of the West, 1-(888) 600-TRADE.

BANK OF THE WEST

THE CALIFORNIA EXPORT FINANCE OFFICE (CEFO)

The California Export Finance Office (CEFO) helps facilitate export sales by providing Loan Guarantees to financial institutions on behalf of small and medium-size California companies. CEFO Guarantees cover up to 90 percent of an export loan, allowing for a maximum guarantee of $750,000 and a loan of $833,000.

CEFO offers the following Export Loan Guarantees in support of short-term (up to 18 months)transaction-specific loans for: Pre-shipment (Working Capital) Letter of Credit financing Post-Shipment (Accounts Receivable) Open Account financing Easy access to Foreign Credit Insurance through government and private insurance Standby Letter of Credit financing for Performance Bonds

Co-guarantees with SBA and EXIM Bank enable CEFO to double its guarantee capacity, providing the exporter with a guaranteed loan of up to $1.6 million. As a City/State Partner with EXIM Bank, CEFO has the authority to administer their loans, guarantees, and insurance products for California companies.

CEFO Guarantees may be used to finance the purchase of materials, services, and labor to carry out an export sale. Guaranteed loans may also be used to extend post-shipment payment terms to approved foreign buyers. Requests for CEFO Guarantees may be submitted by the exporter or by the lending institution.

CEFO Pre-Shipment Working Capital Guarantee

Guarantees a working capital loan used to purchase materials, services, and labor for specific export orders. CEFO must be satisfied that the transaction is economically sound and that the exporter can fulfill the performance requirements, as stipulated in the purchase order or letter of credit, to complete the export sale.

CEFO Post-Shipment Accounts Receivable Guarantee

Allows exporters to extend open account terms to foreign buyers for the purchase of California goods and services, usually extended in conjunction with EXIM Bank or private credit insurance. CEFO Guarantees cover post-shipment risks pertaining to exporter performance not normally covered by EXIM Bank or private insurers.

For exporters shipping on open account, CEFO may provide EXIM Bank insurance through a state-held umbrella policy. The exporter must only qualify the foreign buyers and pay the insurance premiums on the transaction.

CEFO Combination Guarantee

This guarantee applies when pre-shipment financing is required, but the nature of the transaction includes post-shipment exposure. The guarantee conditions are similar to those stated for the Pre-Shipment and Post-Shipment Guarantees.

EXPORTER AND EXPORT PRODUCT ELIGIBILIT Y

The goods, services or commodities comprising the export transaction to be financed must have a California content in excess of 50% of the total F.O.B. carrier value. The exporter in all cases must be domiciled in California and, if any doubt exists, must present proof of the filing of California State Tax Returns. Additionally, the exporter must have the equivalent of at least one year of successful business experience germane to the transaction in question, and evidence of a meaningful equity interest in the business and the transaction involved. The exporter must also be able to prove a satisfactory "track record."

HOW TO APPLY

The exporter may apply directly to CEFO by requesting an application package at (562) 499-6014. Concurrently, the exporter may submit a financial package to a commercial lender at Bank of the West for bank approval of the same request, subject to a CEFO commitment. Any questions, please contact Hana Hrabec-Snyder/Caroline Brown, Trade Department, Bank of the West, at 1-(888) 600-TRADE.