Export Documentary Letter of Credit
An Irrevocable Export Documentary Letter of Credit (Export L/C) is the security of knowing that your payment can be guaranteed.
At your request, the overseas buyer establishes an Export L/C through their bank. The Export L/C can be established in most major currencies, however your choice of currency should be included in your original commercial contract with the supplier.
- The buyer’s bank has given an undertaking to pay you. This means that payment is guaranteed providing the credit has been established by a reputable bank and all conditions of the Export L/C has been fulfilled.
- The buyer cannot cancel or alter the terms and conditions without your agreement.
- Finance is available to approved customers to restore your working capital as soon as possible after shipment of the goods.
- Payment security makes it easier for you to develop new business opportunities.
What about the Exchange Risk?
If you are trading in a foreign currency, fluctuations in the exchange rate mean you can be exposed to exchange risk between the date of your contract and the date your payment is effected.
If you have overseas payables in the same currency, you may decide that these provide enough of a natural hedge. However, if you do wish to cover your risk, you may establish a Forward Exchange Contract (FEC) with Arab Bank Australia.
This is a way to reduce your risk and potentially reduce your overall costs.
For more information please contact: