LETTER OF CREDİT

How it works

A business called the InCosmetika from time to time imports goods from a business called BLISS, which banks with the ABC Bank. InCosmetika holds an account at the Commonwealth Bank. InCosmetika wants to buy $500,000 worth of merchandise from BLISS, who agrees to sell the goods and give InCosmetika 60 days to pay for them, on the condition that they are provided with a 90-day LC for the full amount. The steps to get the letter of credit would be as follows:

InCosmetika goes to The Commonwealth Bank and requests a $500,000 letter of credit, with BLISS as the beneficiary.

The Commonwealth Bank can issue an LC either on approval of a standard loan underwriting process or by InCosmetika funding it directly with a deposit of $500,000 plus fees which are typically between 1% and 8% of the face value of the LC.

The Commonwealth Bank sends a copy of the LC to the ABC Bank, which notifies BLISS that payment is available and they can ship the merchandise InCosmetika has ordered with the full assurance of payment to them.

On presentation of the stipulated documents in the letter of credit and compliance with the terms and conditions of the letter of credit, the Commonwealth Bank transfers the $500,000 to the ABC Bank, which then credits the account of BLISS for that amount.

Note that banks deal only with documents required in the letter of credit and not the underlying transaction.

Many exporters have mistakenly assumed that the payment is guaranteed after receiving the LC. The issuing bank is obligated to pay under the letter of credit only when the stipulated documents are presented and the terms and conditions of the letter of credit have been met.

Availability

DC being an irrevocable undertaking of the issuing bank makes available the Proceeds, to the Beneficiary of the Credit provided, stipulated documents strictly complying with the provisions of the DC, UCP 600 and other international standard banking practices, are presented to the issuing bank , then :

i.if the Credit provides for sight payment – by payment at sight against compliant presentation

ii.if the Credit provides for deferred payment – by payment on the maturity date(s) determinable in accordance with the stipulations of the Credit; and of course undertaking to pay on due date and confirming maturity date at the time of compliant presentation

iii.a.if the Credit provides for acceptance by the Issuing Bank – by acceptance of Draft(s) drawn by the Beneficiary on the Issuing Bank and payment at maturity of such tenor draft, or

iii.b. if the Credit provides for acceptance by another drawee bank – by acceptance and payment at maturity Draft(s)drawn by the Beneficiary on the Issuing Bank in the event the drawee bank stipulated in the Credit does not accept Draft(s) drawn on it,
or by payment of Draft(s) accepted but not paid by such drawee bank at maturity;

iv. if the Credit provides for negotiation by another bank – by payment without recourse to drawers and/or bona fide holders, Draft(s) drawn by the Beneficiary and/or document(s) presented under the Credit, (and so negotiated by the nominated bank )

Negotiation means the giving of value for Draft(s) and/or document(s) by the bank authorized to negotiate, viz the nominated bank. Mere examination of the documents and forwarding the same to DC issuing bank for reimbursement, without giving of value / agreed to give, does not constitute a negotiation.

MNIDA

LETTER OF CREDİT

A letter of credit is a document issued mostly by a financial institution, used primarily in trade finance, which usually provides an irrevocable payment undertaking (it can also be revocable, confirmed, unconfirmed, transferable or others e.g. back to back: revolving but is most commonly irrevocable/confirmed) to a beneficiary against complying documents as stated in the Letter of Credit. Letter of Credit is abbreviated as an LC or L/C, and often is referred to as a documentary credit, abbreviated as DC or D/C, documentary letter of credit, or simply as credit (as in the UCP 500 and UCP 600).

A Standby Letter of Credit, SBLC, is a credit enhancement device which helps secure a primary loan. Banks, after the current financial collapse, require standby letters of credit for most real estate development loans.

The LC can also be the source of payment for a transaction, meaning that redeeming the letter of credit will pay an exporter. Letters of credit are used primarily in international trade transactions of significant value, for deals between a supplier in one country and a customer in another. They are also used in the land development process to ensure that approved public facilities (streets, sidewalks, stormwater ponds, etc.) will be built. The parties to a letter of credit are usually a beneficiary who is to receive the money, the issuing bank of whom the applicant is a client, and the advising bank of whom the beneficiary is a client. Almost all letters of credit are irrevocable, i.e., cannot be amended or canceled without prior agreement of the beneficiary, the issuing bank and the confirming bank, if any. In executing a transaction, letters of credit incorporate functions common to giros and Traveler's cheques. Typically, the documents a beneficiary has to present in order to receive payment include a commercial invoice, bill of lading, and documents proving the shipment was insured against loss or damage in transit. However, the list and form of documents is open to imagination and negotiation and might contain requirements to present documents issued by a neutral third party evidencing the quality of the goods shipped, or their place of origin.

MNİDA

INCOTERMS

Incoterms or international commercial terms are a series of international sales terms widely used throughout the world. They are used to divide transaction costs and responsibilities between buyer and seller and reflect state-of-the-art transportation practices.

Group E – Departure

EXW – Ex Works (named place)
the seller makes the goods available at his premises

Group F – Main carriage unpaid

FCA – Free Carrier (named place)
the seller hands over the goods, cleared for export, into the custody of the first carrier (named by the buyer) at the named place. This term is suitable for all modes of transport, including carriage by air, rail, road, and containerised / multi-modal transport.

FAS – Free Alongside Ship (named loading port)
the seller must place the goods alongside the ship at the named port. The seller must clear the goods for export; this changed in the 2000 version of the Incoterms. Suitable for maritime transport only.

FOB – Free On Board (named loading port)
the classic maritime trade term, Free On Board: seller must load the goods on board the ship nominated by the buyer, cost and risk being divided at ship's rail. The seller must clear the goods for export. Maritime transport only.

Group C – Main carriage paid

CFR – Cost and Freight (named destination port)
seller must pay the costs and freight to bring the goods to the port of destination. However, risk is transferred to the buyer once the goods have crossed the ship's rail. Maritime transport only.

CIF – Cost, Insurance and Freight (named destination port)
exactly the same as CFR except that the seller must in addition procure and pay for insurance for the buyer. Maritime transport only.

CPT – Carriage Paid To (named place of destination)
the general/containerised/multimodal equivalent of CFR. The seller pays for carriage to the named point of destination, but risk passes when the goods are handed over to the first carrier.

CIP – Carriage and Insurance Paid to (named place of destination)
the containerised transport/multimodal equivalent of CIF. Seller pays for carriage and insurance to the named destination point, but risk passes when the goods are handed over to the first carrier.

Group D – Arrival

DAF – Delivered At Frontier (named place)
It can be used when the goods are transported by rail and road. The seller pays for transportation to the named place of delivery at the frontier. The buyer arranges for customs clearance and pays for transportation from the frontier to his factory. The passing of risk occurs at the frontier.

DES – Delivered Ex Ship (named port)
Where goods are delivered ex ship, the passing of risk does not occur until the ship has arrived at the named port of destination and the goods made available for unloading to the buyer. The seller pays the same freight and insurance costs as he would under a CIF arrangement. Unlike CFR and CIF terms, the seller has agreed to bear not just cost, but also Risk and Title up to the arrival of the vessel at the named port. Costs for unloading the goods and any duties, taxes, etc… are for the Buyer. A commonly used term in shipping bulk commodities, such as coal, grain, dry chemicals - - - and where the seller either owns or has chartered, their own vessel.

DEQ – Delivered Ex Quay (named port)
It means the same as DES, but the passing of risk does not occur until the goods have been unloaded at the port of destination.

DDU – Delivered Duty Unpaid (named destination place)
It means that the seller delivers the goods to the buyer to the named place of destination in the contract of sale. The goods are not cleared for import or unloaded from any form of transport at the place of destination. The buyer is responsible for the costs and risks for the unloading, duty and any subsequent delivery beyond the place of destination. However, if the buyer wishes the seller to bear cost and risks associated with the import clearance, duty, unloading and subsequent delivery beyond the place of destination, then this all needs to be explicitly agreed upon in the contract of sale.

DDP – Delivered Duty Paid (named destination place)
It means that the seller pays for all transportation costs and bears all risk until the goods have been delivered and pays the duty. Also used interchangeably with the term "Free Domicile"

MNİDA

Sell More Over the Phone

Q: Customers don't return my calls, so should I continue to leave messages?

A: Try leaving the customer different types of messages. Vary your tone, your content, and use what we at SalesPEAK call, "strong words" to get a call back.

Slow down when you leave your phone number. Many people are checking messages from their cell phones on cars and while traveling; connections might be poor and your phone number was heard at break-neck speed. Make it easy for the customer to call you back.

Also, some people won't return a salesperson's call unless they've heard several messages. Some in senior management say that they have to hear the salesperson's name up to 14 times before they'll call back! (Just don't make all of those calls in one day!) Which brings me to the next question, heard weekly…

Q: If I continue to call without a response, where do I draw the line from "persistence" to "pest"?

A: Sometimes there is a fine line between these two descriptions. Research shows that the salespeople who contact customers 12 times are in the top 10% of the selling profession.

So, consider your relationship with the customer. If this is someone you are on good terms with, you are not a priority on their "response list". If you continue to be creative, use the phone, email and other contact tools at your disposal, the likelihood of getting a call back increases exponentially in your favor.

On the other hand, if this is a cold call, discover the personality type of the customer; either by listening closely to their voice mail, asking one of their colleagues, or through research, and match the customer's personality style to get a call back.

Q: What are the most effective methods of getting past gatekeepers?

A: First, be glad there's a gatekeeper! With increasing technology, talking with a human creates an opportunity of building a relationship with this person.

In your friendliest, yet most confident and commanding voice, state your name and then say, "I need to speak with Mary Edwards". You are creating a sense of urgency and in addition, you have already told the gatekeeper who you are, so she/he doesn't have to ask. Remember, whomever is asking the questions on the phone, is in command of the call. Make sure you're proactive and you'll get through more often.

Also, use the gatekeeper's name and often. Use a warm inflection in your voice and put an exclamation point into your tone when you say her/his name.

MNİDA

The Best Techniques to Use When Selling Over the Phone - 2

3: Use Scripts

A script is a group of words, in order, that generate predictably profitable results. A script is effective because your listener will know when it is their turn to talk, and they'll know what you want them to say. When a prospect asks you how much your product costs and you use the script "Well, that depends on how much money you have in the bank!" you will receive a predictably different result than when you use the script "Forty-five dollars a month. Less than most people spend on coffee and cokes."

Listen carefully to these two scripts: "That depends on how much money you have" tells your prospect to respond just as glibly with "Oh, about 25 cents." While a specific amount, followed by an example gives your listener the opportunity to say "Great, that works for me."

Prepare scripts for the nine questions you are asked most frequently. They are probably about product cost, delivery time, references, options and guarantee.

4: Keep your best result in mind

When Grandma Lillian was making prospecting calls, her favorite result was to get an appointment. "You can't get a haircut over the phone," she told me, "what I want is an appointment in their home."

She had a second acceptable outcome - the prospect's permission to call again. "Shall I call you in about a month?" I heard her say sweetly, several times each hour. And then she put their name and phone number into her calendar for the agreed upon date.

Either way, Grandma Lillian felt good about herself and had customers and distributors who loved her, too.

MNIDA

The Best Techniques to Use When Selling Over the Phone

1: Work with a clean desk

Even if this means sweeping the current piles into a shopping bag until your telephone time is finished, don't have anything on your desk except your calendar and your favorite pen.

You get two benefits: distractions are limited, and, perhaps more importantly, the person you are speaking with senses that they have your full attention.

If your prospect doesn't feel that they are getting your full attention, why should you have theirs?

2: Have a mirror on the wall in front of you

If you doubt that the smile on your face carries through your voice try this exercise. Record your side of a prospecting telephone conversation. Play it back while you watch your face in the mirror. Surprise! Your face will match the feelings you had while you were on the phone. You will actually see the fear or anxiety or need that you felt.

Your tones affect your listener that way, too. A mirror on the wall in front of you increases your telephone prospecting profitability in these specific ways:

First, you can see what your listener is hearing. The added awareness of your own body language makes your verbal language more effective.

Second, because you keep your chin up to look at the mirror on the wall, your voice will automatically have more enthusiasm and energy.

Try this experiment with your tape recorder. Role play a prospecting telephone call with your head down, chin to chest, doodling on an order form. Now raise your chin, look in the mirror, and repeat the same sentences. Because you sound more successful you will be more successful - people like to do business with a winner.

MNIDA

Some Do's And Don'ts On The Phone

Have a pleasant and sincere, positive voice.

Have a smile on your face as you talk on the phone.

Work on your vocabulary. Remember, you're on the phone, you have to create a positive "mental picture" in the customers mind of your product or service.

Synchronize your rate of speech with the rate of speech of the person to whom you are speaking. Don't talk too fast or too slowly.

If you are calling them, ask if it is a convenient time to talk.

Make your conversation brief, easy to understand, and to the point.

Make sure you have all the information in front of you to handle your customers questions. If you have to put them on hold, you may lose them.

Don't ask anyone to place a call for you unless you are ready to talk. The person on the other end of the line is busy too.

Don't do all the talking. Give the person on the other end of the line an opportunity to answer you, to ask questions, or to make comments. Never interrupt your customer.

Be as courteous voice-to voice as you would be face-to-face.

The Last Word About Selling On The Phone

The phone is instant communication. No waiting for it to boot up. Many customers are calling on an impulse. They have developed a sudden need and want that need filled. You have a great opportunity to bring additional revenue to your business. People buy where they feel comfortable and appreciated. Give them that feeling when they call. It's just common courtesy.

MNIDA

You Can't Give Information If You Don't Have Information

The sales person should be responsible for a variety of information. Customer service, product sales, product promotions, accuracy of order or customer information along with courtesy and diplomacy.

Here are some areas your phone people need to be trained to do:

Sales orders
Inquiries of merchandise or services
Dates of delivery or service scheduling
Follow-up or service calls
Policies re: returns or exchanges of goods or services
Complaints
Customer Services - price adjustments, follow-up calls, replacement merchandise.

In order to be effective, phone salespersons must be familiar with all departments and products the company offers. Some things the sales person might need:

Copies of all current marketing and adverting promotions and ads.
Copies of competitors ads (to match offers)
Order/Shipping/Credit Card Forms
Calculator/Scratch Pads
Pricing Guides
Product or service availability and schedules.
Company policies and legal disclaimers

MNIDA

Discovering Your Customers Needs

If you were going to purchase a car would you just pick a dealer, call them up, and ask, "Hey, how much are cars today?"

Probably not. Why? Because there is a lot of information you don't know. Here are some questions the car dealer might need to know the answers to:

1. Mid-Size, Compact , Luxury?
2. Color?
3. Brand Name?
4. Car,
4-Wheeler, Mini-Van?
5. Two-Door/4 Door?
6. Accessories?
7. In Stock/Special Order?
8. New or Used?
9. Available Financing?
10. And yes, you might even want to know the price.

Notice that Price is not the number one question on the list. Why? Because price is a perception of value. If I were to simply ask you, "How much is a car?" , you would have a hard time coming up with a price until you had more information.

MNIDA

The Phone Is Conversation And Communication

The First Rule Of Using The Phone is to realize that you are having a conversation with someone. When you meet a friend on the street, do you talk to them in the same way you do on the phone? Most people would say no. You are having a face-to-face conversation with someone. You are smiling as you are talking. Smile when you talk on the phone. Pretend they are right there in the room with you.

The Second Rule Of Using The Phone is that the person asking the questions in any conversation is always in control of the conversation. If the customer is asking the questions, they are in control. They have you on the defensive. You can't sell effectively until you regain control.

The Third Rule Of Using The Phone is to understand that it is physically and emotionally impossible to be polite and courteous and aggressive and pushy at the same time. You are either one or the other. You can't be polite and courteous at work if you are naturally aggressive and pushy at home.

MNİDA

STEPS TO THE SALE

1. Introduction:

When answering the phone give:Company NameYour name."Good morning; Smith Realty; Mrs. Anderson speaking"
Remember, this is your "first impression" with the customer. This one area is very important. The customer may decide whether or not to do business based on how they are treated when they call your company.

2. Finding A Need:

Ask "open-ended" questions. Questions that can't be answered by a yes or a no. Let the customer talk as much as they want without interruption. Remember, the person asking the questions is in control of the conversation.

What are they asking for? Have they done this before? What did they like about their last experience? What didn't they like? What was the level of service? Each product or service should have a group of questions that are commonly asked. Brainstorm with each other for answers to these questions without losing control of the conversation.

3. Recommendations And/Or Up-Selling:

As with our car analogy above, you can't recommend a car without asking a few questions. To present the product , you might say something like, "Based on what you told me, here is what I recommend...."As an up-sell, "I have had several people add.......to this package."

4. Overcoming Objections:

An objection is not really an objection. It is a request for more information. The point to keep in mind is that there are only two kinds of objections:

Valid Objections - I'm a size 18 this is a size 6, is a valid objection.

Invalid Objections: - Most common is "It costs too much." Or, "Well, it sounds good but I need to think about it before I spend that much." In most cases this is not a valid objection. If they couldn't afford it why bother looking?

What they are really saying is, "You haven't shown me enough benefits to justify the price." If they really and truly can't afford it, they are not a valid customer. You haven't lost anything. If they can't buy from you they can't buy from the competition either.

5. Closing The Sale:

The First Rule Of Selling Anything: "When logic and emotion come into conflict, emotion always wins." If you think customers are going to sit down and make logical comparisons of the merits of your product or service against your competitor...you are mistaken. They will purchase on emotion and create a logical argument to justify their decision. Remember the "fact-finding" section? This is where you show the benefits of the items they said they wanted.

No one wants a one-inch drill bit, they want the benefit that the one-inch drill bit will give them. They want the one-inch hole. As a result price is seldom an issue. It is usually a defensive excuse or an invalid objection. People buy benefits and benefits are almost always emotional. Benefits give a feeling of "well-being" and "well-being" is an emotional "feeling."

The Second Rule Of Selling Anything: Ask for the order. The reason most often given by people for not buying is, "No one asked me to."

An easy way to ask is, "If you have your credit card handy I can start processing your request."

MNIDA