🔴 Ensuring Secure Logistics and Payments

Challenges and Solutions

Today I’d like to talk to you about some of the challenges that anyone involved in international trade is bound to encounter, especially when it comes to shipping and payment – the two essential operations for the successful completion of any overseas sale.

For those working in import-export, managing logistics and payments is a crucial point. And, as we know, when it comes to international shipments, distance, procedures, and bureaucracy tend to complicate matters.

Let’s start with the first common issue:
delays in delivering the Bill of Lading to our client, the recipient of the goods.
A classic scenario. It happens when the importer does not receive the Bill of Lading in time – the document that allows them to collect the goods at the destination port. And what happens? The goods are held in storage and warehousing charges begin to accrue. And who pays? The importer, of course, who ends up having to shell out extra money when collecting the goods.

In short, a setback that can create tension and put our buyer in a difficult position. On top of that,

if the issue keeps recurring, our client will inevitably end up blaming us, the exporters, for the delays. A problem like this could compromise our business relationship with the customer, causing considerable damage in terms of turnover and profit.

But let’s move on to the second issue:
the complexity of international payments.
Here there are two typical scenarios: one is payment upon delivery, either CAD (Cash Against Documents via a bank) or COD (Cash On Delivery via our freight forwarder), and the other is payment via Letter of Credit. Both payment options can be used and offer a good level of security, but, as we know, they also involve their own challenges.

With CAD and COD, the importer pays only when they receive the documents or the goods, but this system requires the involvement of intermediaries – a bank or a freight forwarder – and therefore introduces unavoidable delays and additional procedures.
With the Letter of Credit, on the other hand, we have what is considered the most secure and advanced payment method. The exporter has the guarantee of an irrevocable payment, but beware: the bank to which the exporter presents the documents may raise discrepancies, even for minor and insignificant non-conformities in the paperwork. As a result, the payment is subject to verification, and the exporter risks delays and, in some cases, even suspension of payment.

So... what can be done to avoid all these problems?
This is where a financial instrument comes into play: the Stand-By Letter of Credit, which we’ll simply refer to as the "Stand-By".
This type of Letter of Credit has a major advantage, as it simplifies shipping procedures and offers a secure payment guarantee.

Let’s take a closer look. In short, the Stand-By is a smart solution that can save both time and money. It’s particularly suitable for those who want to avoid the complications of a traditional Letter of Credit, without giving up the security.

The steps involved are simple:
Step 1: the exporter, as beneficiary of a Stand-By, ships the goods and sends the documents directly to the recipient, without involving intermediaries.

Step 2: the importer – our client – receives the documents without delays and can therefore collect the goods at the destination port without incurring storage costs.

Optional Step 3: if the foreign client fails to make the payment, the exporter activates the Stand-By and requests payment from the bank upon presentation of the documentation specified in the Stand-By itself.

The conclusion is that if everything goes smoothly – that is, if the foreign client pays the exporter’s invoice – the Stand-By reaches its natural expiry without being used, allowing both exporter and importer to operate smoothly and with full security, as if it were a simple deferred payment sale.

If, however, the importer fails to make payment within the agreed timeframe, the exporter, by activating the Stand-By, will receive payment from the Italian bank to which the required documents are submitted.

That’s all. The Stand-By is therefore a financial instrument that can effectively resolve the potential issues we often face with other shipping and payment procedures.