Want a Letter of Credit? Read our Frequently Asked Questions First

What is a letter of credit?

A letter of credit triggers payment to the exporter only after the required pre-determined documents have been sent to a bank or financial institution.

If the quantity of products shipped out (as seen on the packing list and on the bill of lading) is outside the tolerance set in the letter of credit, it causes a discrepancy. In this case, the importer has the choice to accept it (in which case he can receive the shipment, and the supplier gets paid) or to refuse it.

Therefore, the buyer does not need to wire an advance payment that binds him to a potentially unethical foreign supplier. The importer keeps the freedom to refuse the products and cancel the payment if at least one document has a discrepancy, including if the products were of sub-standard quality.

Who can open a letter of credit with Trade Finance Services?

Anyone can open a letter of credit with us for a fee. Your credit rating or standing with the bank or lender has no effect.

What if its beneficiary rejects the Trade Finance Services letter of credit?

Before paying any upfront fees, Trade Finance Services will give you a L/C draft to send to your beneficiary. Once the beneficiary has accepted the verbiage, you can pay your fees and we will SWIFT out the documents within 1-2 business days.

What is the process of applying for a letter of credit with Trade Finance Services?

  1. Fill out our quote form.
  2. After some paperwork, we will be able to provide you with a quote for the fee and a letter of credit draft.
  3. Get our letter of credit draft accepted with your supplier/beneficiary.
  4. Pay our fees and get indemnity documents signed and notarized.
  5. One of our partner finance institutions will issue your letter of credit and SWIFT it to the beneficiary's bank.
  6. Beneficiary will send documents back to our finance institution and ship your goods to your port of destination.
  7. When the documents arrive, we will fax over the copies of all of the documents to you. At this time we will also check the documents as per the terms. Documents include bill of lading, invoice, insurance certificate, certificate of origin, and whichever documents you require.
  8. When the goods arrive, they go into a bonded warehouse. Here you may inspect the goods. If the goods are satisfactory, you can pay us the money for the supplier in exchange for all of the original documents.

Note: In a USANCE letter of credit, you can have up to 1 year to pay your supplier. However, the supplier must agree to the terms before the letter of credit is issued.

Why should you use our letter of credits?

A client buying regularly from his supplier is opening letters of credit or making deposits, etc. This means that he is using his own money even before the goods are received. The longer the manufacture and shipment period, the more advantageous it is for the client to use our letters of credit. Instead of locking his money up with his supplier, he can use his money to hold stock, finance credit terms to regular buyers, market, etc.

When the letter of credit is opened through us, he does not need to use his money until the goods arrive. This can be any amount of days after the letter of credit was opened.

What is the benefit for a middleman to use our letters of credit?

A middle man has a buyer and a seller. His buyer wants to pay cash against documents or when the goods arrive. The middleman needs to arrange for the goods to ship so that he can finish the deal.

The supplier wants a deposit or a letter of credit before he will ship the goods. The buyer opens the letter of credit through us. In this way he doesn't need to use his own capital to do the deal. He is not as limited in the number of deals that he can do as a middleman since he doesn't need to use his own capital to do the deal.

Can Trade Finance Services offer any other financial services?

YES. See our Financial Services page for other services. Alternatively, you can contact Trade Finance Services through our contact page for any further details. A member of our staff will be able to assist with any questions.

What type of proof of funds can be arranged?

We can arrange an online account or a Certificate of Deposit at a multi-billion dollar vencap firm. Written Verification of Deposit (VOD) is available, as are account statements and access to an online account summary. Confirmation letters, verbal and fax verification are also provided. SWIFT message to SWIFT SCORE member banks providing account status and transaction details are available at an additional cost. Terms and Conditions apply for POF.

Trade Finance Services

Things You Didn't Know About Offshore Banking

1

Offshore Banking is Legal in Most Countries

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While some countries with tightly regulated banking systems have strict controls on offshore banking, the idea of moving assets to a remote financial institution is legal in almost the entire world. What makes offshore banking popular in places like Switzerland, the Bahamas, the Cayman Islands, Jersey, and the like is a combination of extremely low taxes on interest and investment income, privacy, and access to financial instruments specifically designed to maximize wealth.

2

An Offshore Bank Is Any Bank Not in Your Home Country

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While the phrase "offshore banking" conjures up shadowy tax havens and tiny island kingdoms, technically, having investments in any country other than the one you live in is offshore banking. Some countries don't allow it, and others wouldn't be advisable places to park money. But there are dozens of nations recognized by at least one financial body as offshore financial centers.

3

Offshore Finance Began as a Way for a Tiny Island to Grow Its Economy

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It was in the Channel Islands - an archipelago of small protectorates in the English Channel - that the idea of using low taxes to attract foreign investment was born.

During World War II, the Channel Islands were the only part of the British Commonwealth occupied by Germany. After the war, they needed a way to attract both revenue and workers. Laws were passed ensuring easy access and low tax rates for investors from abroad, and modern offshore banking was born. The two largest islands are now offshore banking havens on the scale of countries like Bermuda and the Cayman Islands.

4

Swiss Banking Secrecy Was Started to Hide Money from the Nazis

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The famed Swiss banking industry is based on the small country's obsessive devotion to secrecy. This, in turn, began with the Federal Act on Banks and Savings Banks, passed in 1934 by the Swiss legislature. It was designed to shield money invested in the country by individuals and companies fleeing the Nazis - meaning it was legally impossible for the neutral country to answer questions about who had invested there.

Sadly, the Bank Secrecy Act didn't work as planned for Jews who hid money in Switzerland. Swiss accounts were still transferred to Germany under duress, and after the war, the country wasn't forthcoming about what happened to the money, destroying millions of bank records.

5

Tax Havens Hold a Huge Percentage of the World's Wealth

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Although the numbers are impossible to pin down, it's thought that as much as half of the entire world's wealth is held in offshore banking centers - potentially up to $32 trillion. Chief among these are the Cayman Islands, with between $1.5 to $2 trillion dollars, and Switzerland, which might hold as much as one third of all the investments on the planet.

6

The U.S. Has a Lot of Wealth in These Banks

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According to independent research and corporate filings, U.S. companies are deeply entrenched in offshore banking. A report by Citizens for Tax Justice showed that as of 2015, at least 358 large U.S. companies funnel money through over 7,600 different overseas subsidiaries - and that these offshore accounts old over $2.1 trillion in profits, very little of which is taxed.

7

Despite Its Reputation, Offshore Banking has Legitimate Advantages

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With the release of the Panama Papers, offshore banking has come under even more scrutiny from those who see it as a tax avoidance scheme for the ultra-rich. And it can be that. But it also has real advantages. It can allow people in unstable countries to place investments in stable and safe banks. It creates jobs in many small island economies that have little else to offer beyond tourism. It can also offer specific and legal tax advantages to small companies or individuals, including avoiding double-taxation, and ensuring easy access to money online.

8

It Also Carries Serious Risks

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Offshore banking has considerable risks. It doesn't have the guaranteed federal insurance that money invested in the U.S. does, so in a bad financial climate, cash can simply evaporate. In the financial crisis of 2008, a number of offshore banks collapsed, and virtually none of them were able to pay their investors back in full. Also, legitimate offshore money can easily get mixed up in money hidden by terrorists and rogue states. Accounts can be easily hacked in any country without a good cybersecurity apparatus.

Offshore banking can create undue tax burdens on developing nations. And at least in the US, offshore money is still subject to taxes - with the regulations being extremely complex and easy to run afoul of.

9

Offshore Banking is NOT Tax Free, Especially for Americans

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The biggest advantage of offshore banking is also what gives it such a stigma: the ability to reduce one's tax burden. While international companies have saved countless billions stashing money offshore as opposed to investing in their home countries, this type of banking is actually taxed by the nation of origin. Most offshore havens don't charge local taxes, with Switzerland being a notable exception.

Many high tax countries tax the worldwide income of their residents, no matter where the money is parked. The U.S. goes one step further, taxing the worldwide income of citizens even if they are not residents. That means if you're an American living in London, you have to pay taxes to both countries. Offshore investing can reduce these burdens.

10

Most Tax Havens Are Extremely Small Countries

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If you see a U.S. company that actually has its corporate headquarters somewhere like Bermuda, Curacao, or Hong Kong, you can tell they're hiding their wealth to a certain extent. These small, remote countries offer limited regulation, favorable tax climates, and a certain amount of secrecy and privacy. That doesn't mean they aren't free from criminal activity - just that it's harder to find criminality.

11

Many Offshore Havens Are Tightening Their Laws

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While the Panama Papers leak contains documents going all the way back to the '70s, most offshore banking havens have increased their regulation and oversight in the wake of the 9/11 attacks, as well as increased scrutiny from the Obama Administration. For example, Switzerland no longer guarantees the secrecy of its banks, and its institutions had to pay billions to the U.S. in a settlement. Tax havens like Lichtenstein and Singapore have made it a crime to launder profits from tax evasion. And the U.S. has introduced new regulations to ensure taxes are paid on American citizens' money held in offshore accounts, including the controversial law FATCA.

12

The US Has Its Own Tax Haven - Delaware

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Functioning as a miniature offshore tax shelter, the state of Delaware offers a number of corporate tax breaks that no other state does, making it a popular venue for incorporation. Delaware has no state taxes, no tax on goods and services provided by Delaware corporations operating outside the state, and no corporate tax on interest or income that a Delaware holding company earns. It has extremely low franchise and LLC taxes (often just a few hundred dollars). And it has privacy laws most other states don't, keeping the names of LLC members and corporate filers private.

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