LOI>FCL>LC THE RATIONALE FOR THE PROCEDURES

LOI>FCL>LC?? THE RATIONALE FOR THE PROCEDURES

Everything we do in the early stages are informal exchanges of information, is designed to insure that when the time for written, legally binding commitments are to be made by both seller and buyer, all the terms and conditions are not only perfectly understood, but have been accepted by both parties. No one likes to waste time; CERTIANLY not us sellers as we waste enough time with buyers whoa re not serious; Nor do buyers whom waste time with not serious sellers. Thus?there is an internationally-accepted?simple procedure.

1. LOI: tells our seller exactly what the buyer wants and reveals which bank he will be using through which he will pay the supplier, and how he will be paying. Seller now knows specifications, shipping schedule, etc., and can decide if he can meet all those buyer conditions. If not, he will inform the buyer and that part of the LOI is negotiated to an acceptance point by both principals.
2. Now that the seller knows he can indeed meet the LOI requirements, he must pass the text of the LC in front of his bank for their informal acceptance of all its terms and conditions. There may be something in that LC that is unacceptable to the seller’s bank, and would eventually be rejected and subject to expensive amendments AFTER the LC is formally presented to the seller’s bank. We avoid all of these potential pitfalls by having the LC text reviewed early on and informally. To this point the seller’s bank is not formally “engaged” in the transaction, so there are no fees or expenses incurred by the buyer.
3. FCO can now be issued by the seller since he knows exactly all the terms and conditions of the transaction and has agreed to legally meet them all, including price.
4. With the LC text agreed on both buyer and seller (and the seller ‘s bank) we move to a draft of the contract. This should go quickly because it is based on the terms and conditions already approved in the LOI and the LC. There should be no surprises at all in this document. This can be the first time the seller and buyer know each other since intermediaries can be used up to this point.
5. The buyer can, at this point, request a Proof of Product from the seller. This allows him to safely, comfortably and legally sign the contract. At this time a POF (Proof of Funds) will be required from the buyer’s bank.
6. With signing of the contract the LC can safely be opened by the buyer, with no possibility of problem occurring with either the method of payment on his side or performance by the seller on the other.

You can now see why we structure all of our transactions this way. The procedures do not favor either the buyer or seller but do favor the successful completion of the transaction. These procedures will very quickly stop a transaction dead in its tracks if either the buyer or seller is not serious. It does stop a broker chain immediately.