Frequently Asked Questions

A letter of credit is considered the most reliable type of transaction because payment to the exporter is guaranteed by a bank.

In the case of a letter of credit, the bank provides a payment guarantee if the terms are met.

• Applicant, Orderer, Principal: The party requesting the opening of the letter of credit. In practice, this party is also referred to as the buyer or importer.
• Beneficiary: The party in whose favor the letter of credit is opened. In practice, this party is also referred to as the seller or exporter.
• Issuing Bank: The bank that prepares the text of the letter of credit upon the applicant’s instruction, forwards it to the exporter’s bank, and undertakes to make payment to the exporter.
• Advising Bank: The bank that notifies the beneficiary of the letter of credit in accordance with the issuing bank’s request.
• Confirming Bank: The bank that adds its confirmation to the letter of credit at the request of or under the authority granted by the issuing bank.
• Reimbursing Bank: The bank where the issuing bank maintains its account.

A letter of credit is considered the most reliable type of transaction because payment to the exporter is guaranteed by a bank.

Bank guarantees are provided in the form of a letter of credit.

• Applicant/Orderer/Principal: The party requesting the opening of the letter of credit. In practice, this party is also referred to as the buyer or importer.
• Beneficiary: The party in whose favor the letter of credit is opened. In practice, this party is also referred to as the seller or exporter.
• Issuing Bank: The bank that prepares the text of the letter of credit upon the applicant’s instruction, forwards it to the exporter’s bank, and undertakes to make payment to the exporter.
• Advising Bank: The bank that notifies the beneficiary of the letter of credit in accordance with the issuing bank’s request.
• Confirming Bank: The bank that adds its confirmation to the letter of credit at the request of or under the authority granted by the issuing bank.
• Reimbursing Bank: The bank where the issuing bank maintains its account.

A power of attorney must be granted to our customers prior to import financing.

Except for the Cash Against Goods method, financing must be arranged before the goods are cleared through customs. For Cash Against Goods transactions, the same rule applies regarding the power of attorney and price agreement.

L/C (Letter of Credit) refers to payment by letter of credit. It is a method used in international trade that ensures payment security between the buyer and seller through a bank guarantee. Under this system, the buyer’s bank commits to paying the seller provided that the required documents are submitted in full and in accordance with the terms specified in the letter of credit. This ensures a secure and controlled payment process between the parties.

CIF is an Incoterms (international trade term) delivery term formed from the initial letters of the English phrase “Cost, Insurance, and Freight.” Under this delivery term, the seller is obligated to pay the cost of the goods, the freight charges to the port of destination, and the transportation insurance premium. However, the seller acknowledges and undertakes that all risks arising after the goods are loaded onto the vessel will pass to the buyer.

The commitment must be closed within 2 years from the financing date.

The exempted Banking and Insurance Transactions Tax (BITT) amount will be collected together with the applicable penalty.

• Eximbank Short-Term Export Credit Insurance General Policy
• Buyer Limit Approval Form

• Guarantor Bank: The bank that issues the guarantee and bears the obligation and liability toward the beneficiary.
• Counter-Guarantor Bank: The bank that issues a counter-guarantee in favor of the guarantor or another counter-guarantor bank.
• Applicant: The party that assumes an obligation in the business relationship covered by the guarantee and whose obligation is backed by the guarantee.
• Beneficiary: The party in whose favor the guarantee is issued.

The rights and obligations of the parties are governed by the URDG 758 rules published by the International Chamber of Commerce.

In External Guarantees, the applicant can specify the relevant terms to help prevent unjustified claims. Banks may also refuse payment against claims that do not comply with the terms of the applicant.
The beneficiary, on the other hand, has the benefit of a bank guarantee assuring payment of the amount due under the transaction covered by the guarantee.