Letter of Credit Questionnaire

The Blades International Letter of Credit Brokerage Team can advise you on all types of pricing and structure issues. The following is a set of questions that covers part of the initial process we go through in helping our clients:

  1. Do you compare confirmation fee quotes when you have an L/C directed to one of your banks?
  2. Do you negotiate the confirmation price?
  3. Have you ever directed an L/C to another bank for a lower cost confirmation once the first bank has advised it?
  4. How price sensitive are you to export L/C fees? Do you look at the overall good service of a bank and simply pay whatever is quoted?
  5. What kind of return on the bank’s capital do you think they earn on your export L/C confirmations—25%, 40% or 80%? What should they earn off of your L/C if a target is 18% for a bank?
  6. Did you know that bank capital requirements on a trade standby L/C are about half of what they would be for issuing your financial standby L/Cs? The risk is historically lower on a trade L/C and, therefore, some in the industry say the capital required should be even lower. Do you agree?
  7. Even when there are challenges and discrepancies, most commercial or export L/Cs seem to work out. Has this been your experience?
  8. In the case of a large L/C, have you ever negotiated to pay your confirmation fee quarterly in arrears?
  9. Have you ever negotiated the ability to prorate a confirmation fee if you ship early or don’t need the L/C?
  10. If you pay a confirmation fee, does your bank help make sure you will not have discrepancies? Are you aware that a discrepancy can cancel out your confirmation?
  11. Have you ever compared the cost of Ex-Im Bank Insurance on a foreign A/R versus a confirmation?
  12. Have you ever agreed to work with your bank on an export confirmation to provide a supplier certificate so that they could use an Ex-Im Bank policy to insure 95% of the confirmation risk?
  13. Would you be interested in a website from an L/C broker that shows you Ex-Im Bank insurance charges on L/Cs in the countries they cover?
  14. Would you confirm more export L/Cs if the prices for confirmations were significantly lower?
  15. Have you ever negotiated to have a confirmation done only a couple of weeks before shipment to save costs?
  16. Have you ever negotiated to pay only for the days you need versus paying for “90 days or part thereof”?
  17. Have you ever paid for 180 days of confirmation coverage when the risk was only outstanding for 120 days?
  18. Would it appeal to you to know what fees other exporters have paid to banks for similar confirmations?
  19. If you pay $50,000 a year in export L/C fees, is it worthwhile to lower down to $30,000 with better information and negotiating?
  20. Does your export L/C pricing reflect the economies of scale deserved for combining all your banking activity?
  21. Do you ever pay 12bps or .12% for a negotiation, as it is standard?
  22. Do you ever do assignments of proceeds? And pay significant fees?

If these questions, and your answers, make you wonder if you’ve been paying too much for letters of credit transactions, we should talk.

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