TO the Bankers our there LC vs. Cash

[LuminaSS_73]

If anyone could give me some technical information into this matter i would really appreciate it ...

What are the advantages of Lc vs. direct Cash transfer and vice versa plus the disadvantages of it.. this is in refrence when shipping large quantities of raw materials with high monetary value also with high risk factors involved as in the raw materials could be affeced by weather tide etc.

Thanx for any help anyone can give :hue:

[designo]

If you want an acurate answer, you need to tell me the following:

Are you the buyer or the seller?

[MAX]

actully in banking LC prevent the seller fraud and not shipping the goods after receving the payment so it's like the bank's gurantee for the buyer :dum: thats in general

[MAX]

for more info http://www.infobahnlimited.com/brochureshtml/images/InfoTrade.pdf

[designo]

To put it in a nutshell...

If you are the seller, then go for it! It is the most reliable way to receive payment for goods sold!

If you are the buyer, DONT! And if the seller insists on an LC, make sure you do the following!

1. Agree that all bank charges will be paid by seller!
2. Make sure your freight forwarder checks the goods to make sure they are exactly what you ordered!

LC's are only there to protect the seller ONLY! The wrong goods can be sent and the bank will still release your payment to them, as long as the documents tally with the banks records.

Shipments can also get lost or damaged, and the bank will still release your payment to them after the limit period has expired! Thats why you need to make sure your shipment is insured!

[MAX]

:up:u r the best

[4ced]

Well designo is correct mostly but there are a few ways you can protect yourself as a buyer.

LC's are a very complicated and detailed subject, but ill try to put it in the simplest terms with an example:

1- The buyer in Bahrain finds a Swedish company selling some stuff... contacts them and tells them he wants to buy whatever from them for $100, so they request an LC

2- The buyer in Bahrain contacts his bank and says he wants to buy $100 worth of parts (or whatever) from some company in Sweden. He then pays (or gets an overdraft or whatever).

3- The bahraini bank contacts their swedish bank contact and confirms payment if they recieve the goods here.

4- Swedish bank contacts swedish company and confirms payment if the goods are shipped.

5- Swedish company ships stuff and takes shipping docs to their bank, then receieves payment from swedish bank.

6- Swedish bank sends shipping docs to Bahraini bank and recieve payment from them

7- Bahraini bank sends docs to customer to receive goods from the port.

Now, there are a million and one variations to this but this is the basic idea. Remember one thing, the banks are only dealing in documents, they dont even see the actual goods, so that is the only thing they need to confirm. Here are some things you can do as a buyer to protect yourself:

Request that payment only be made when the bank recieves:
1- Actual bill of lading (shipping documents)
2- Insurance documents (make sure the shipment is fully protected with you as the beneficiary)
3- Inspection certificates by third party company (to verify all the goods are actually there and in good condition)

This way, if the seller doesnt have these documents completed and sent, you dont lose your money. overall its a good way of doing business but you need to be careful.

[Fast Lane]

4ced always explaining everything in detail! Amazing walla! :up: :up:

[4ced]

well u never know. the guy might strike gold in this deal and become a millionaire, who else would he have to thank but me?



anyway... about advantages and disadvantages of paying by cash? it depends WHEN youre going to pay! if the seller requests payment before he ships then obviously hes at an advantage, but if you both agree that payment is after the reciept of goods then obviously thats to the buyers advantage

[LuminaSS_73]

Designo and 4ced induction thanx so much for your times this has really been useful info for me .... and just to answer designos question i am the buyer at this point ... thanx guys again