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Buying Product from Overseas Vendor

Sometimes it’s difficult to know what questions to ask.  That’s why we assembled a list of the most common goals and questions to help you identify what you hope to accomplish when buying product from an overseas vendor and how to move forward.

I want to understand the various payment options for this type of transaction:

The most common payment terms used for international purchases include variations ranging from open account terms as the most favorable to cash in advance as the most restrictive. In between these extremes would be a documentary collection and a letter of credit. The International Group can walk you through these alternatives to compare the different risks and costs involved with each option.

I need an import letter of credit:

An import letter of credit is an instrument whereby National Penn Bank substitutes its credit for that of the buyer, assuring your seller of payment upon presentation of required documents as prescribed within the terms of the letter of credit. This becomes a contingent liability for National Penn Bank upon issuance, so requires credit availability for the full amount of the letter of credit, which may need to be coordinated with your Relationship Manager. Our application for an import letter of credit (Microsoft Word template), along with instructions for completion, are included in the Resource Section of this website, and should be forwarded to the Relationship Manager for approval upon completion.

I need to initiate a wire transfer for payment:

Wire transfers can be initiated by going to one of our branches. If international wire activity is frequent, National Penn Bank offers the ability to initiate these on-line, whether denominated in USD or a foreign currency.

How can I be sure that product shipped will meet agreed quality standards?

Generally speaking, the surest way to manage product quality for imported products is to require a pre-shipment inspection. Sometimes examination and approval of a sample provided by the seller prior to production can be sufficient. If an inspection at the factory is preferred, the buyer will need to coordinate with an acceptable inspection service, which can be arranged for most situations, at a cost.

Can National Penn Bank help me obtain merchandise upon arrival at the port if the related documents are still en route?

Where goods arrive in port, while documents are still en route from the foreign seller, National Penn can arrange for issuance of an airway release or a steamship indemnity to facilitate release of documents without the original transport documents. This may entail incremental credit exposure for National Penn, and would need to be arranged directly with the International Group.

Are there any commonly utilized instruments that might help finance my imports?

Import financing alternatives generally fall into two categories; either seller driven or bank driven. Besides offering open account terms, sellers may also be agreeable to providing terms via time drafts under documentary collection or letter of credit terms. With the latter, National Penn actually provides the extended credit but the seller is not funded until the maturity of the related draft. The International Group can walk you through these alternatives to compare the different risks and costs involved with each option.

National Penn also offers various solutions to short-term financing needs, which may include bankers’ acceptance financing or other traditional working capital vehicles. Please contact your Relationship Manager to discuss these options.

Are there any advantages to agreeing to pay for my product in the vendor’s local currency?

There can be advantages to paying for imported product in the currency of the seller. When U.S. importers insist on paying in USD, the foreign seller incurs risk that the exchange rate to its local currency may fluctuate adversely between the time the sale is priced and the time payment in USD is received. This could translate to receipt of a lower amount than anticipated. In order to protect against this risk, foreign sellers will usually pad their USD quote. Importers can often achieve better all-in prices by agreeing to pay in the seller’s local currency, with that FX risk being managed by various FX hedging strategies that can be simple to execute.  

Contact our International Trade team at 888.461.1864 or international@nationalpenn.com.

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