The opportunity to participate in international trade is exciting, challenging, and at times daunting. With diligence and care, and by making sound use of the help and facilities available from your bank and other sources, your business can profit in the burgeoning market of world trade.

The Importer's Story:

Lucy Roberts, owner of Nouveau Fashions (fictional name & company) has three women’s clothing stores in a major metropolitan market. While “shopping” her competitors she has seen some promising merchandise bearing Chinese labels. She buys a dress to inspect it further. The dress is well made, of good material, the colors do not run, the design is original and she decides she would like to carry some of this line in her stores.

Through a phone call to the commercial attaché at the Chinese Embassy, Lucy is put in touch with the local trade commissioner, who supplies her with details about the Chinese manufacturer. On their next visit Lucy meets with the manufacturer to see their complete line. After she checked on the reputation of the company, through industry sources, she places a trial order worth USD 5,000 and she agrees to a prepayment of 20% on faxed receipt of the invoice, and upon receipt of evidence that the goods have been shipped she sends the balance via bank wire.

Lucy has some anxious moments because there were delays in shipping the goods. Once received the line sells well, and on the next visit from the manufacturer Lucy places an order for USD 30,000. This time Lucy decides payment by an irrevocable letter of credit would be safer, and she negotiates a sales contract with the manufacturer that includes the following terms and conditions:

• Payment in USD
• Good itemized (by batch) and priced 
• Spot checking of 1 in 10 items by a third party
inspection agent 
• Goods to be shipped CIF Toronto 
• Shipment by sea by an agreed latest shipping date 
• Payment by term draft "30 days sight"

The transaction proceeds as follows:

With the help of her domestic banker, who in turn deals with the bank’s International Trade Finance Group Lucy opens a USD 30,000 letter of credit, stipulating the terms and conditions agreed between Lucy and the manufacturer. (She has a line of credit with her bank for operating purposes, which allows the issuance of letters of credit.)

Lucy’s bank forwards the letter of credit to the manufacturer via the manufacturer’s local bank in the PRC.

In due course, Lucy’s bank receives the stipulated documents from the manufacturer’s bank, including commercial invoice, draft, ocean bill of lading, inspection certificate (which confirms that the goods were inspected on Lucy’s behalf by a pre-specified third party inspection agent), packing list, required customs invoice and any other required documents.

Lucy’s bank checks the documents to ensure they conform to the letter of credit.

Lucy is notified in due course that the goods have arrived. She presents the required documents at the port of delivery and obtains the goods.

On the due date Lucy’s bank debits her account and forwards payment to the paying bank in the PRC.

The relationship proves very satisfactory, and further shipments are made on the same basis.