Organic Processing Vo1.5 #5

Letters of Credit

While there is no space here to deal with financing, a few words with regard to LCs are in order. LCs create more trouble than one may think, and some sources peg the failure rate as high as 50 percent. Why is that? The biggest reason is that the underwriting bank does not accept the paperwork. This can create major headaches for both the exporter/seller and the im-porter/buyer.

Also keep in mind that most banks will count the LC against your credit line, reducing your available credit. Before entering

into an LC agreement, review the specific requirements for the requested papers carefully, if possible by comparing them with papers of shipments you already received. An introduction to LCs can be found at: www.tradecorp.com/letter_of_credit/.

In Conclusion: Communicate,
Communicate, Communicate

There is no simple recipe for successfully importing organic ingredients, but here are the most important steps: • Talk to colleagues; visit trade shows.

If you need professional help, contact a few consultants and check their product and supplier knowledge.

• Discuss financial terms including LCs early in the game and be painstakingly scrupulous in their preparation.

• Communicate clearly about all types of certification, request product certificates before you go ahead, and transaction certificates with the shipment, if at all possible.

• Make sure that everybody is on the
same page regarding quality re-
quirements and products specs.

• Stay on top of every single shipment, in terms of preparation and follow-through.

• Communicate often and don’t take anything for granted.

Dr. Winfried Fuchshofen specializes in agricultural and trade issues as well as certification, processing and sourcing. He is a speaker and writer for constituencies both domestic and international. He is also the president of Organic Insights, an organic consulting company.