Bank Guarantee...

[Secg]

Currently I'm exporting scallops from Peru to France... the french buyer want´s much more of my product but my credit line is not as big and banks in Peru say LC's are only payment instruments so I can't get more money advanced from them... I talked to somebody who is willing to give a MT 779, for 1 million US., the interest is 12% upfront for the 1st year provided I have clearance from my local bank...(I only need 500K).. I red an article from you to beware this kind of BG's... how can somebody get scammed if both banks agree the procedure, plus and the issuing Bank is Top 5??

I undestand your advise is only educational but will appreciate your prompt answer.

Best Regards: frc

[Arndell]

Dear Fed So you are the Supplier of the scallops- You are not an intermediary correct?

This is a very difficult question- so i will try to give you some insight to guide your thinking-  

I AM ASSUMING YOU HAVE SCOPE AS AN EXPORTER TOP DO THE ORDER- YOU ARE A REGISTERED SCALLOP PRODUCER.Nobody is going to advance you money otherwise.

I assume you are revolving the shipments ?

I assume Perhaps 1 or a few Full container load every few months  CIP France.

BANK GUARANTEE-

A bank guarantee is useless- and forget about MT  Payment over a SWIFT protocol..NEVER.  A bank guarantee is given as a Performance Guarantee , if you do not perform , the buyer collects on the PG BG so first rule - NEVER GIVE A GUARANTEE FIRST - THE BUYER MUST AT ALL TIMES MAKE PAYMENT FIRST TO YOU -  A DLC IS NOT MONEY AND IS ONLY OFFERS A SEMI SECURITY INSTRUMENT when use as collateral. The strongest of such DLC's is a Confirmed DLC A Band Guarantee used to BUY goods is no good either as "payment" for goods - because  if you have problems it cost big money and many years to settle the matter in a court.

DLC for documents that's how the deal works -Finance is about lending on security  or collateral nothing to do with the deal. if you borrow , and cannot pay , and the deal fails ,  you will still need to repay money borrowed.

SO TRY SOME OF THE FOLLOWING.

You need to finance your  operation to sell more Scallops  the you ask for a:(Every work here is important.)

ASK FOR FROM BUYER(1) NON REVOLVING EXAMPLE  FOR ONE SHIPMENT

Bank issued Confirmed Irrevocable UCP 600 ruling Documentary Letter of Credit  as issued from the Bank of the End buyer to the Sellers bank  and confirmed by the seller bank at buyers expense, directly  or via a corresponding bank.  Collection applied 100% at sight clean on board delivery ASK FOR(2) REVOLVING; EXAMPLE FOR 3 SHIPMENTS  

Bank issued Confirmed Irrevocable UCP 600 ruling Documentary Letter of Credit  as issued from the Bank of the End buyer to the Sellers bank  and confirmed by the seller bank at buyers expense, directly  or via a corresponding bank. Credit is to be advised as a non cumulative revolving credit  opened to support the value of 3 payments. 3 Shipment value is the opening value of the credit .Drawn at 1 credit per shipment as each delivery is made. Collection applied 100% at sight clean on board delivery

You get the scallops  to the port at Peru - and collect on the credit immediately by producing the required DELIVERY documents as defined on the credit.

But lets say you need some of the the money  in advance to export goods, pay contractors, workers..etc..  - Then ask  the buyer to issue his credit  with(even without confirmation) a " Red clause " inserted - This will allow  you to produced a NON transport document  such a 'Warehouse receipt." You go you to bank with sight draft and some simple to "evidence" of  goods like a 'Warehouse receipt" and present the a  draft  to collect on some of the funds earlier - before transport documents are produced . Your bank then makes arrangement to get money for your operation  from the buyers bank-so long as the credit was issued with said 'Red clause"

If you have a confirmed credit  your own  bank might advance you money by discounting  the draft to you and collecting the full amount for the imports bank. Sight drafts are not covered by UCP600 bank  rules- So this matter is for your bank to consider.  Talk to them see what they say if "red clause credit " is advised to you.

Sight drafts such as a "Bill of Exchange." -

Also note; If you have a small bank , getting the DLC at a bigger bank in Peru "over the counter " might be a better option to consider as well.

(3) Try? -Nothing to do with the export deals - Peru laws applies on matters of "factoring" the DLC  defined below . If you need money to run the factory - Ask the bank or finance company to "factor" the deal for you - to do this the confirmed credit is assigned to the factor who gets all the money on the DLC- and  give you a lower amount- It must be a confirmed credit .Seek local advice about  factoring as it too complicated to defined here.

Above applies to  a fully operational factory  which is verifiable usually via the commercial department of the  local Chamber of Commerce- You must have Scope to be able to perform.

Now Fed please take note:

I cannot wake up in the morning as and say "Tomorrow  I will get money to sell Lithium form Peru" all because you know where some Lithium can be mined. A Miner and lithium mine owner  can do this - Not you.

If you are not the supplier you can't do anything above, as no matter whats defines evidence of product must be provided to borrow or to get money in advance.

An intermediary acting as buyer/seller applies a different method and cannot do any of the above.

I hope above is of help - Your position is a very difficult one. Genuine exporters in some countries have governments who help them with finance , when they employ many people .

At the end of the s day you are the exporter - You control the situation- You make the demands of the user - hence only accept OR  decline your offer to sell onY OUR conditions and terms .

He want more Scallops? - You need money in advance...or NO deal.

Don't borrow from expensive private lender because if you cannot perform you will be in trouble .Borrow only form safe legitimate entities and only after you ave in your hand a very strong DLC  FIRST IN your Hand as ACCEPTED- as semi security  against the  method you are going to sue to get money in advance.

The delivery rules is CIP(not CIF) as per incoterms or FCA if you only bringing Scallops to Container freight station to Peru port and the buyer books ship himself(Proper terms  is FCA not FOB)

UCP 600 are the International bank rules YOUR bank must follow .

Incoterms 2010 are the new delivery rules as from 1st of jan 2011

Hope it give you some guidance-

regards

Davide Giovanni Papa

www.smice.net

www.ftnexporting.com  

[Eilig]

Currently I'm exporting scallops from Peru to France... the french buyer want´s much more of my product but my credit line is not as big and banks in Peru say LC's are only payment instruments so I can't get more money advanced from them... I talked to somebody who is willing to give a MT 779, for 1 million US., the interest is 12% upfront for the 1st year provided I have clearance from my local bank...(I only need 500K).. I red an article from you to beware this kind of BG's... how can somebody get scammed if both banks agree the procedure, plus and the issuing Bank is Top 5??

I undestand your advise is only educational but will appreciate your prompt answer.

Best Regards: frc