Export Letters of Credit




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A method of payment commonly used in international trade transactions, whereby the advising bank (TD Bank) facilitates payment to the exporter - provided the exporter complies with the terms and conditions of the letter of credit. Export letters of credit carry the credit risk of the issuing bank and the political risk of the issuing bank's country. A letter of credit may also be referred to as a documentary credit.

Features

  • Irrevocable letters of credit cannot be cancelled or changed without the consent of all parties involved (importer, exporter and the issuing bank)
  • Foreign issuing bank and country risk can be mitigated via confirmation of the letter of credit
  • May be payable upon presentation of certain documents (sight) or at a future date after documents have been accepted under the letter of credit (term or usance)
  • May be transferred to a third party if stipulated in the letter of credit
  • The letter of credit should be consistent with the terms and conditions stipulated in the commercial contract
  • Letters of credit can be advised electronically via TD Bank Trade

Benefits

  • Exporter is assured of receiving payment if it complies with all terms and conditions of the letter of credit
  • Under a letter of credit, the exporter relies upon the creditworthiness of the issuing bank and not that of the importer
  • Term/usance letters of credit can be discounted upon acceptance of drafts, thereby expediting cash flow
  • Exporters may offer extended payment terms if payment is through a letter of credit
  • Electronic notification of letters of credit through TD Bank Trade eliminates illegible copies of letters of credit and provides a central database

Requirements

  • Electronic advice of export letters of credit via TD Bank Trade is available at no additional cost above advising fees and requires initial setup by TD Bank Global Trade Finance

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