Export Payement

Bank Payment 

Bank, being one of financial institutions, facilitates payment for merchandise shipped and services rendered, layouts funds for buyer and seller, and gives its professional advices to traders. Bank payment are very significant procedures of international trade. Applicable modes of bank payments are;

Advance Payment – ensures that payment is cleared before the goods are shipped. A bank transfer is the quickest method of clearing funds.

Cash Against Document – this is raised by the exporter and made out to the customer’s bank. It is then sent to the customer for acceptance and can be guaranteed by the bank for additional safety.

Open Account – credit terms can be 30, 60 days or more. This method of payment is recommended only when none of the above methods are suitable. Payments should be by bank transfer rather than cheque that could take months to clear.

Letters of Credit (LC)

For any company entering the international market, Letters of Credit are important payment mechanisms which help eliminate certain risks.

Types of Letter of Credit 

Irrevocable    

An irrevocable letter of credit can neither be amended nor cancelled without the agreement of all  parties (traders) to the credit.

Unconfirmed   

The advising bank forwards an unconfirmed letter of credit directly to the exporter without  adding its own undertaking to make payment or accept responsibility for payment at a future date, but confirming its authenticity.

Confirmed       

A confirmed letter of credit is one in which the advising bank, on the instructions of the issuing bank, has added a confirmation that payment will be made as long as compliant  documents are presented. A bank will make an additional charge for confirming a letter of                          credit.  In many cases, the confirming bank is located in Beneficiary’s country.

Standby Letters of Credit  

 A standby letter of credit is used as support where an alternative, less secure, method of payment has been agreed. They are also used in the United States of America in place of bank guarantees. Should the exporter fail to receive payment from the importer he may claim under the standby letter of credit? Certain documents are likely to be required to obtain payment including: the standby letter of credit itself; a sight draft for the amount due; a copy of the unpaid invoice; proof of dispatch and a signed declaration from the beneficiary stating that payment has not been received by the due date and therefore reimbursement is claimed by letter of credit.

Revolving Letter of Credit

The revolving credit is used for regular shipments of the same commodity to the same importer. It can revolve in relation to time or value. If the credit is time revolving once utilized it is re-instated for further regular shipments until the credit is fully drawn. If the credit revolves in relation to value once utilized and paid the value can be reinstated for further drawings. The credit must state that it is a revolving letter of credit and it may revolve either automatically or subject to certain provisions. Revolving letters of credit are useful to avoid the need for repetitious arrangements for opening or amending letters of credit.

Transferable Letter of Credit

A transferable letter of credit is one in which the exporter has the right to request the paying, or negotiating bank to make either part, or all, of the credit value available to one or more third parties. This type of credit is useful for those acting as middlemen especially where there is a need to finance purchases from third party suppliers.

Back-to-Back Letter of Credit

A back-to-back letter of credit can be used as an alternative to the transferable letter of credit. Rather than transferring the original letter of credit to the supplier, once the letter of credit is received by the exporter from the opening bank, that letter of credit is used as security to establish a second letter of credit drawn on the exporter in favor of his importer. Many banks are reluctant to issue back-to-back letters of credit due to the level of risk to which they are exposed, whereas a transferable credit will not expose them to higher risk than under the original credit.

Parties involved in Letter of Credit

  • The Applicant is the party that arranges for the letter of credit to be issued.
  • The Beneficiary is the party named in the letter of credit in whose favor the letter of credit is issued.
  • The Issuing or Opening Bank is the applicant’s bank that issues or opens the letter of credit in favor of the beneficiary and substitutes its creditworthiness for that of the applicant.
  • An Advising Bank may be named in the letter of credit to advise the beneficiary that the letter of credit was issued. The role of the Advising Bank is limited to establish apparent authenticity of the credit, which it advises.
  • The Paying Bank is the bank nominated in the letter of credit that makes payment to the beneficiary, after determining that documents conform, and upon receipt of funds from the issuing bank or another intermediary bank nominated by the issuing bank.
  • The Confirming Bank is the bank, which, under instruction from the issuing bank, substitutes its creditworthiness for that of the issuing bank. It ultimately assumes the issuing bank’s commitment to pay.

Letter of Credit Flow

  • Applicant approaches Issuing/ Opening Bank with LC application form duly filled and requests Issuing Bank to issue a Letter of Credit in favor of Beneficiary.
  • Issuing Bank issues a Letter of Credit as per the application submitted by an Applicant and send it to the Advising Bank, which is located in Beneficiary’s country, to formally advise the LC to the beneficiary,
  • Advising Bank advises the LC to the Beneficiary,
  • Once Beneficiary receives the LC and if it suits his/ her requirements, he/ she prepares the goods and hands over them to the carrier for dispatching to the Applicant
  • The exporter then hands over the documents along with the Transport Document as per LC to the Negotiating Bank to be forwarded to the Issuing Bank.
  • Issuing Bank reimburses the Negotiating Bank with the amount of the LC post Negotiating Bank’s confirmation that they have negotiated the documents in strict conformity of the LC terms.
  • Negotiating Bank makes the payment to the Beneficiary.
  • Simultaneously, the Negotiating Bank forwards the documents to the Issuing Bank to be released to the Applicant to claim the goods from the carrier.
  • Applicant reimburses the Issuing Bank for the amount, which it had paid to the Negotiating Bank.
  • Issuing Bank releases all documents along with the titled Transport Documents to the    Applicant

Settlements under a Letter of Credit

Sight payment, the commercial letter of credit is payable when the beneficiary presents the complying documents and if the presentation takes place on or before the expiration of the commercial letter of credit.

Deferred payment, the commercial letter of credit is payable on a specified future date. The beneficiary may present the complying documents at an earlier date, but the commercial letter of credit is payable only on the specified future date.

Acceptance is a time draft drawn on, and accepted by, a banking institution, which promises to honor the draft at a specified future date. The act of acceptance is without recourse as it is a commitment to pay the face amount of the accepted draft. Under negotiation, the negotiating bank, a third party negotiator, expedites payment to the beneficiary upon the beneficiary’s presentation of the complying documents to the negotiating bank.

The bank pays the beneficiary, normally at a discount of the face amount of the value of the documents, and then presents the complying documents, including a sight or time draft, to the issuing bank to receive full payment at sight or at a specified future date.

Advantages of Letter of Credit

  • The beneficiary is assured of payment as long as it complies with the terms and conditions of the letter of credit. The letter of credit identifies which documents must be presented and the data content of those documents. The credit risk is transferred from the applicant to the issuing bank.
  • The beneficiary can enjoy the advantage of mitigating the issuing bank’s country risk by requiring that a bank in its own country confirm the letter of credit. That bank then takes on the country and commercial risk of the issuing bank and protects the beneficiary.
  • The beneficiary minimizes collection time as the letter of credit accelerates payment of the receivables.
  • The beneficiary’s foreign exchange risk is eliminated with a letter of credit issued in the currency of the beneficiary’s country

Verification of Commercial invoice with terms in Letter of Credit

  • The merchandise description- including weight, quantity and price conform exactly with the Letter of Credit and other documents,
  • The name and address of the Importer and Exporter  are exactly as shown in the Letter of Credit,
  • The correct number of originals and copies have been presented and signed if required,
  • It is made out in the same currency as the Letter of Credit?
  • The trade term is listed per the Letter of Credit, e.g. C.I.F. C&F, FOB etc.

Verification of bill of loading with terms in Letter of Credit

  • It has been submitted with all the required originals
  • The merchandise description is consistent with the Letter of Credit
  • The points of loading and discharge are consistent with the Letter of Credit?
  • The Bill of Lading are consigned to the order of the party specified in the Letter of Credit
  • It is dated on or before the latest shipment date stipulated in the Letter of Credit
  • The Bill of Lading is endorsed correctly
  • The Letter of Credit states freight is to be prepaid, if this is clearly indicated on the Bill of Lading

Verification of Insurance document with terms in Letter of Credit

  •  Does the insurance document cover all risks specified in the Letter of Credit?
  •  Does the insured amount meet the percentage requirement of the Letter of Credit and is it in the currency of the Letter of Credit?
  • Is the issue date of the insurance document prior to the shipment date of the goods?
  •  Is the insurance document signed by or endorsed in blank by the insured or endorsed to the order of the party designated in credit?
  • Is the insurance document signed by the insurance company, underwriter or agent?
  •  Is the merchandise described as per the Letter of Credit?

Verification of Certificates of Origin Inspection

  • The documents are dated as of or before the Bill of Lading date.
  • The contents meet the requirements of the Letter of Credit
  • Verification of packing and weight Lists
  • The quantity of units/weight match that which is indicated in the  Commercial Invoice
  •  The breakdown of merchandise/weight per carton shown if requested in the Letter of Credit

Risks involved in Letter of Credit

  • Since all the parties involved in Letter of Credit deal with the documents and not with the goods, the risk of Beneficiary not shipping  goods as mentioned in the LC is still persists.
  • The Letter of Credit as a payment method is costlier than other methods of payment such as Cash Against Document
  • Open Account or Collection
  • The Beneficiary’s documents must comply with the terms and conditions of the Letter of Credit for Issuing Bank to make the payment.
  • The Beneficiary is exposed to the Commercial risk on Issuing Bank, Political risk on the Issuing Bank’s country and Foreign Exchange Risk in case of issuance Letter of Credits.

Document required by banks to export goods

  • Valid foreign trade, industry or investment license for export,
  • Copy of authenticated letter of credit or confirmation for advance payment
  • Bank permit for export of the goods duly completed, signed and sealed
  • 2 original invoices duly completed, signed and sealed.  The invoices could be chamberized as the case may be
  • A copy of sales or purchase contract.

Major mode of payments applicable in export

  • Letter of Credit (at sight and on acceptance)
  • Cash Against Document ( at sight and on acceptance)
  • The maximum allowable amount for a single permit does not exceed USD 30,000 (Thirty Thousand); however, commercial Banks may allow up to USD 200,000(Two Hundred Thousand) depending on the sales terms, the buyers dependability and credibility
  • Consignment for specific goods

The consignment sales are only applicable to perishable items such as fruits, cut flowers, un-frozen meat, live animals, molasses and others as may be approved by NBE

  • Advance Payment received in the form of:-
  • bank transfers;
  • travelers cheques bought by the purchaser from abroad;
  • Credit card/debit card; and
  • cash notes

Verification of L/C document by exporter

  • Is the L/C issuing bank reliable and reputable one that can be relied on for payment? If not, does the Letter of Credit allow for confirmation by another bank?(field 49)
  • Is the Letter of Credit irrevocable? (Field 40A) If it is not stated, the L/C is irrevocable.
  • Are the Importer’s (Applicant’s) name and address spelled correctly? (Field 50)
  • Are your name and address spelled correctly? (Field 59)
  • Are the dollar amount and currency of the Letter of Credit correct? (Field 32B)
  • Does the payment term agree with the sales contract? (Field 42C)
  • If necessary, are partial shipments allowed? (Field 43P)
  • Are the point of shipment (Field 44 A) and destination (Field 44B) as agreed?
  • Is it possible for you to meet the latest shipping date? (Field 44C)
  • Are enough days allowed to present documents? (Field 48) You may need to check with the freight forwarder handling the shipment and preparing documents for you.
  • Is the merchandise description correct and, if needed, does it include unit price, weight and quantities? (Field 45A )
  • If necessary, does the Letter of Credit allow for any variance on the quantity and/or dollar amount?
  • Are the terms of the sale regarding insurance and freight charges as agreed? (Field 45A)
  • Can all documents listed in the Letter of Credit be obtained? (Field 46 A)
  • Which party is responsible for banking charges? (Field 71b)
  • Where is the Letter of Credit payable? (Field 41D) this will affect the length of time required to receive your funds.

Major discrepancies frequently seen on export documents

  • Credit has expired;
  • Shipment is late;
  • Partial shipment is effected, not allowed by credit;
  • Clauses on bill of lading- indicating that there is something wrong with the goods or their packing;
  • Not marks and numbers differ between documents;
  • Typing errors or misspellings;
  • Required signatures have been omitted;
  • Description of goods differs from credit and
  • Insurance cover is insufficient

Export permit applications  

The export permit issued by banks shall be valid up to the end of the issuing month only.

Export tax

In Ethiopia export tax Is levied only on raw and semi-processed hides and skins, and wet-blue cow hide, pickled sheep skins with wet-blue sheep and wet-blue goat skins at a flat rate of 150%

Export Incentives

Any investor who exports or supplies to an exporter as production or service input, at least 60% of his products or services shall be entitled to income tax exemption for 2 years in addition to the exemption period provided.

Duty Drawback Scheme

It offers manufacturers an exemption from the payment of customs duties and other taxes levied on imported and locally purchased raw materials used in the production of export goods. Duties and other taxes paid are drawn back 100 percent at the time of the export of the finished goods;

Voucher Scheme

A voucher is a printed document having monetary value which is used in lieu of duties and taxes payable on imported raw materials. The beneficiaries of the voucher scheme are also exporters; and

Bonded Manufacturing Warehouse Scheme

Producers not eligible for voucher scheme but having licensed for bonded are entitled to operate such warehouse in importing of raw materials duty free.

48 thoughts on “Export Payement

  1. Great beat ! I would like to apprentice while you amend your web site, how could i subscribe for a blog site? The account helped me a acceptable deal. I had been a little bit acquainted of this your broadcast provided bright clear concept

  2. เครดิต ฟรีเป็นเครดิตเงินในเกมสล็อตออนไลน์ได้เสริมเติมเครดิตเงินสำหรับ pg slot เพื่อการเล่นสล็อตฟรีให้ผู้เล่นโดยที่ผู้เล่นนั้นไม่ต้องเสียเงินจ่ายซึ่งสามารถเล่นเครดิตฟรีเกมสล็อตได้

  3. I don抰 even understand how I stopped up right here, however I assumed this post used to be good. I don’t know who you are however definitely you are going to a famous blogger in the event you aren’t already 😉 Cheers!

  4. Thanks for your fascinating article. One other problem is that mesothelioma is generally brought on by the inhalation of fibers from asbestos, which is a carcinogenic material. It truly is commonly viewed among laborers in the structure industry who’ve long experience of asbestos. It is caused by living in asbestos covered buildings for a long period of time, Genetic makeup plays an important role, and some individuals are more vulnerable for the risk compared to others.

  5. Good site! I truly love how it is easy on my eyes and the data are well written. I am wondering how I could be notified when a new post has been made. I’ve subscribed to your feed which must do the trick! Have a nice day!

  6. Wonderful work! This is the kind of information that are meant to be shared across the internet. Disgrace on the search engines for now not positioning this put up higher! Come on over and consult with my site . Thank you =)

  7. It is my belief that mesothelioma will be the most fatal cancer. It contains unusual attributes. The more I really look at it the harder I am persuaded it does not behave like a real solid human cancer. If perhaps mesothelioma is actually a rogue virus-like infection, hence there is the chance of developing a vaccine in addition to offering vaccination for asbestos uncovered people who are open to high risk of developing potential asbestos relevant malignancies. Thanks for revealing your ideas about this important ailment.

  8. Thanks for your tips on this blog. Just one thing I would choose to say is that often purchasing consumer electronics items over the Internet is not new. Actually, in the past 10 years alone, the market for online electronic devices has grown a great deal. Today, you will discover practically virtually any electronic gizmo and other gadgets on the Internet, ranging from cameras as well as camcorders to computer pieces and games consoles.

  9. I抳e been exploring for a little bit for any high-quality articles or weblog posts on this kind of house . Exploring in Yahoo I at last stumbled upon this web site. Reading this info So i抦 happy to show that I have a very good uncanny feeling I came upon exactly what I needed. I so much indisputably will make sure to don抰 put out of your mind this website and give it a glance regularly.

  10. I think this is among the most important info for me. And i am glad reading your article. But wanna remark on some general things, The website style is wonderful, the articles is really excellent : D. Good job, cheers

  11. Have you ever considered about including a little bit more than just your articles? I mean, what you say is valuable and everything. However just imagine if you added some great visuals or video clips to give your posts more, “pop”! Your content is excellent but with images and clips, this website could undeniably be one of the best in its niche. Fantastic blog!

  12. I抳e been exploring for a bit for any high-quality articles or blog posts on this sort of area . Exploring in Yahoo I at last stumbled upon this website. Reading this info So i am happy to convey that I have a very good uncanny feeling I discovered exactly what I needed. I most certainly will make certain to do not forget this website and give it a look regularly.

  13. Hi, i think that i saw you visited my weblog thus i came to 搑eturn the favor?I’m attempting to find things to improve my site!I suppose its ok to use a few of your ideas!!

  14. One more important area is that if you are a senior, travel insurance intended for pensioners is something you should make sure you really consider. The more mature you are, greater at risk you might be for allowing something poor happen to you while in most foreign countries. If you are never covered by a few comprehensive insurance coverage, you could have some serious troubles. Thanks for discussing your suggestions on this blog site.

  15. Thanks for your write-up on this blog site. From my own experience, occasionally softening right up a photograph may provide the photo shooter with an amount of an imaginative flare. Oftentimes however, that soft cloud isn’t precisely what you had at heart and can in many cases spoil a normally good photo, especially if you thinking about enlarging the item.

  16. Thank you for your sharing. I am worried that I lack creative ideas. It is your article that makes me full of hope. Thank you. But, I have a question, can you help me?

  17. Thanks for the suggestions shared in your blog. One more thing I would like to state is that weight loss is not all about going on a dietary fad and trying to get rid of as much weight as possible in a few days. The most effective way to burn fat is by using it slowly and gradually and using some basic points which can allow you to make the most through your attempt to shed pounds. You may understand and already be following some of these tips, nonetheless reinforcing information never hurts.

  18. Thanks for the various tips contributed on this web site. I have observed that many insurance firms offer consumers generous special discounts if they decide to insure more and more cars with them. A significant quantity of households currently have several cars or trucks these days, particularly people with elderly teenage children still dwelling at home, plus the savings for policies could soon begin. So it will pay to look for a great deal.

  19. Thanks for discussing your ideas. I’d personally also like to state that video games have been ever evolving. Technology advances and innovative developments have made it easier to create reasonable and enjoyable games. These types of entertainment games were not really sensible when the real concept was first being used. Just like other designs of technological know-how, video games also have had to progress through many ages. This is testimony for the fast development of video games.

  20. Thanks for your interesting article. One other problem is that mesothelioma cancer is generally attributable to the inhalation of dust from asbestos fiber, which is a dangerous material. It’s commonly observed among staff in the engineering industry who definitely have long experience of asbestos. It’s also caused by residing in asbestos covered buildings for years of time, Genes plays a crucial role, and some people are more vulnerable to the risk as compared to others.

  21. One more thing I would like to say is that rather than trying to suit all your online degree training on days that you complete work (considering that people are worn out when they return home), try to get most of your sessions on the weekends and only a couple courses in weekdays, even if it means taking some time away from your weekend break. This is really good because on the weekends, you will be far more rested and also concentrated on school work. Many thanks for the different recommendations I have mastered from your web site.

  22. Hello there! I know this is kinda off topic but I was wondering which blog platform are you using for this site? I’m getting sick and tired of WordPress because I’ve had problems with hackers and I’m looking at options for another platform. I would be awesome if you could point me in the direction of a good platform.

  23. I抳e recently started a website, the information you offer on this website has helped me tremendously. Thank you for all of your time & work.

  24. I know this if off topic but I’m looking into starting my own blog and was curious what all is required to get setup? I’m assuming having a blog like yours would cost a pretty penny? I’m not very web smart so I’m not 100 sure. Any suggestions or advice would be greatly appreciated. Thanks

  25. Pretty section of content. I just stumbled upon your site and in accession capital to assert that I get in fact enjoyed account your blog posts. Anyway I抣l be subscribing to your augment and even I achievement you access consistently rapidly.

  26. I have learned several important things via your post. I would also like to convey that there will be a situation where you will make application for a loan and never need a co-signer such as a National Student Aid Loan. But if you are getting financing through a common loan service then you need to be prepared to have a cosigner ready to make it easier for you. The lenders will probably base their own decision over a few variables but the greatest will be your credit history. There are some creditors that will also look at your work history and make a decision based on that but in many instances it will depend on your credit score.

  27. Thanks for your publication. One other thing is the fact that individual states in the United states of america have their own personal laws that affect people, which makes it extremely tough for the our elected representatives to come up with a different set of guidelines concerning home foreclosure on property owners. The problem is that each state possesses own regulations which may work in a damaging manner when it comes to foreclosure procedures.

  28. When I originally commented I clicked the “Notify me when new comments are added” checkbox and now each time a comment is added I get several e-mails with the same comment. Is there any way you can remove people from that service? Thanks!

  29. Wow! This could be one particular of the most useful blogs We have ever arrive across on this subject. Basically Great. I am also an expert in this topic so I can understand your hard work.

  30. When I initially commented I clicked the -Notify me when new feedback are added- checkbox and now each time a comment is added I get 4 emails with the same comment. Is there any way you’ll be able to remove me from that service? Thanks!

  31. I liked up to you’ll receive performed right here. The comic strip is attractive, your authored subject matter stylish. nevertheless, you command get got an shakiness over that you want be delivering the following. in poor health without a doubt come further previously once more as exactly the similar nearly a lot regularly within case you protect this increase.

  32. Thanks for your suggestions. One thing we’ve noticed is always that banks in addition to financial institutions are aware of the spending habits of consumers while also understand that the majority of people max outside their cards around the breaks. They smartly take advantage of this fact and commence flooding ones inbox along with snail-mail box with hundreds of Zero APR credit cards offers shortly when the holiday season ends. Knowing that if you are like 98 of the American public, you’ll get at the chance to consolidate financial debt and transfer balances for 0 rate credit cards.

Leave a Reply

Your email address will not be published. Required fields are marked *