Day: 22 June 2020

BCL – Bank Comfort Letter
The BCL, or Bank Comfort Letter, is a document usually issued by investment banks in which the bank says the client has a good credit history, sufficient to support large transactions, or the bank says it is willing to grant loans to the client, enough to cover the value of a particular transaction.

That is, it is a vote of confidence issued by the bank, with the purpose of helping to generate trust (comfort) between the parties.

BCL is especially useful when the parties have never seen each other and when the transaction needs speed.

For example: a medium-sized trading company, located in Pakistan, wants to buy chicken from a Brazilian slaughterhouse that is represented by a broker.

If the transaction is not in a hurry, the broker will be able to access the history of the likely buyer with international credit agencies (a type of Serasa). You can also calmly check all the company documentation, etc.

However, if the deal is urgent, the broker can request a BCL from a reputable bank. If the letter arrives, the probability that the buyer will be serious will be great. In this case, it will be justifiable to invest time in doing business.

If the buyer is unable to supply the BCL, this may indicate that it is not a final buyer, but an intermediary probing the market. Or it may indicate that the buyer is unable to provide credit quickly.
Although, in today’s market, BCL can sometimes be considered a refinement, an excess. It will depend on the market profile and the situation.

Note that the BCL is just a compliment from the bank and does NOT guarantee payment. Payment will only be guaranteed after a bank guarantee (BG) or letter of credit (L / C) has been issued.

However, the issuance of guarantees can only occur after the contract is signed, which logically only happens after the negotiation is concluded.

Thus, the BCL serves to encourage the engagement of the parties, while they still do not know each other well.

When the parties already know each other, the BCL becomes unnecessary and the focus becomes the reissue of guarantees.

Letter of Intention (L.O.I.) for irrevocable purchase order

Date:…………………………..

We the undersigned (NAME OF BUYER OR COMPANY)  hereby state and represent that it is our
corporate intention to purchase  the commodity / product ………………. in the quantity
and for the price as specified in the terms and conditions as stated below.  This  representation is made with full corporate
authority and also responsibility of the above stated buyer.

Commodity / Product:

Origin:

Specifications:

Quantity:

Packaging:

Delivery Size And Schedule:

Mode of payment:

FOB & C&F target price:

Destination Port Discharge Rate Per Day:

Inspection:

Guarantee:

Documents:

          Buyer’s Information
          Company Name
          Corporate Address:

City
Zip / Postal Code
Country:
Company phone
Company Fax:
E-Mail
Legal Representative:
Name / Title:

         Buyer’s Bank Information
         Bank Name
         Address:

City
Zip / Postal Code
Country:
Bank phone
Bank Fax:
E-Mail
Bank Telex
Swift Code:

Bank Officer’s Name/ Title/ Direct phone & Fax:

Account Name/Number:

Confirming bank coordinates (if any):
Banks name
address:
City
zip / postal code
country:
Int’l trade dept. Tel & Fax:

Bank officer’s name/ title/ direct phone & fax:

We understand that any and all offers and/or contracts are subject to successful seller verification of funds availability.  We hereby give our written permission for the seller to conduct a soft probe of our account.

Buyer’s full name & company seal ___________

Position:
___________________________________
Signature and typed full name.

Letter of Intent or Letter of Intent (LOI).
A very simple and quick definition of a Letter of Intent to Purchase is to describe in detail the “intention” of execution of one corporation over the other. Whether for the purchase negotiation or any other type of operational alliance between the parties.
In International Trade, many say that this is exactly how a pre-contract is made, that is, through a Letter of Intent (LOI); and that the parties negotiate their interests until they reach an agreement, until they reach consensus.
The question we ask you, reader, is as follows:
Will it give you time and condition to reach a consensus once the “intentions” have already been demonstrated?
For this reason, the interested Group or Person who presents the Letter of Intent (LOI) must not forget, as mentioned in the first paragraph, that this document reports the intention in detail.
It turns out that with our years of experience negotiating companies, we have seen that many interested parties who present a Letter of Intent to businesses, present a document punctuating all the interests to sign the purchase intention, and as a guarantee in order to honor the offer, they leave as check deposit 2% to 10% of the amount of interest in the purchase in order to initiate the Due Diligence or Audit process.
If the company is not the one presented in the reports submitted by the Seller or by the company responsible for the intermediation, the Buyer has the right to opt out of the purchase and receives the check left with the company responsible for the intermediation.
If the buyer is a curious or competitor and at some point, without just cause, give up the process, but already in possession of confidential documents, this amount is passed on to the Seller as a fine and the Letter of Intent loses its value for non-compliance with the buyer’s duties.
This letter has the main intention of ensuring both involved in the process, in addition to conducting in a safe and professional manner the entire process of a sale or merger of a company.

Prepayment
A commodity purchase and sale contract is based on the tripod: the commodity itself, the condition of delivery and payment terms. Payment terms are understood to mean currency, term and type.
While currency and term are negotiated conditions between buyer and seller, the payment method,as a rule, it is imposed by the seller.
This stems from the fact that the choice of the modality is almost always linked to the risks of non-payment, in particular, commercial and political risks.
Thus, the seller, after a careful cadastral evaluation made in relation to the buyer and his country, chooses the most appropriate form of payment, among others the remittance without withdrawal, the collection, a letter of credit (L / C) or an advance payment.
If the risk of non-payment has been the main reason for demanding early payment, modernly we observe that this modality has also been used in order to finance the production of the object goods of the sale. It is also justified in purchases made to order or, still, to obtain preference in the supply.
Prepayment is great for the supplier: it eliminates the risk of non-payment and still provides capital for production of the goods to be exported.
However, it imposes a financial cost on the importer / buyer. And more. The importer runs the risk of not receiving themerchandise and not even get your money back.
That said, in the case of an unknown supplier and the use of another modality not being possible, it is essential that guarantees are required from this supplier to ensure that the buyer returns any advance that may be made.
Such guarantees, therefore, must be provided prior to shipment to the exporter. The guarantee – Advance Payment Bond -, which can be constituted in the form of a Standby Letter of Credit (a Standby Advance), can ensure not only the return of the capital sent, but also the payment of a fine non-performance, as well as interest on capital use by the exporter.
The Export Insurance can be a good solution for the exporter, who for his guarantee can choose the Export Insurance, where Export Insurance companies guarantee payment to the Exporter in the case of non-payment or default by the Importer.
This type of insurance works worldwide and is a modality that greatly facilitates transactions Foreign Trade.