Trade Channel is completely free of charge. It can be used anywhere in the world, as long as Internet access is available. The platform supports multi-user, multi-site environments, all managed by designated security administrators. Trade Channel is integrated under J.P. Morgan ACCESS, our single sign-on Treasury Services Portal Single Trade platform, with modules supporting: Import L/Cs, Collections and Open Account Transactions; Export L/Cs; Standby L/Cs and Guarantees; Transaction Initiation; Reporting and Inquiry.
Import LCs
An Import (commercial) Letter of Credit (ILC) facilitates payment for goods in international trade. It is a written undertaking by the issuing bank, given to the seller at the request and on the instructions of the buyer, to pay at sight or at a determinable future date:
- up to a stated sum of money
- within a prescribed time limit
- against stipulated documents
Letters of credit issued and amendments received in Banco J.P. Morgan S.A. before 10:30a.m. local time in Mexico are sent to confirming banks and/or released to beneficiaries the same day.
Export Letters of Credit
In any trade transaction, the issue of credit terms and method of payment must be considered. Typically, a buyer desires liberal payment terms, whereas the seller seeks to be paid promptly and assume as little risk as possible. A letter of credit (L/C) provides a compromise between the differing needs of buyer and seller.
When our client is the beneficiary of an L/C, Banco J.P. Morgan S.A. may play one or more of the following roles:
- Act as an advising bank. An L/C is usually transmitted from the issuing bank to a bank in the seller’s country (advising bank). The advising bank’s responsibility is to verify the authenticity of the L/C and deliver it to the beneficiary. The advising bank has no obligation to pay the beneficiary in the event that the issuing bank is unable or unwilling to pay.
- Act as a confirming bank. When a beneficiary is concerned with the creditworthiness of the issuing bank and/or certain political or economic risks of the importer’s country, the beneficiary may request that the L/C be confirmed. The L/C must specifically allow for a bank to "add its confirmation." A bank that confirms an L/C adds its commitment to pay in the event that the issuing bank is unable or unwilling to pay, provided that all terms and conditions of the L/C have been met. When J.P. Morgan acts as a confirming bank, we are willing to assume the credit and political/economic risks of the issuing bank and country.
Standby Letter of Credit
Banco J.P. Morgan S.A. offers Standby Letters of Credit to help clients reduce the risks of business transactions domestically and across borders. The basic function of a standby L/C is to protect a third party from loss resulting from the failure of a bank's client to perform or pay an obligation.
A standby L/C, or similar arrangement, which represents an obligation to the beneficiary on the part of the issuer:
- To repay money borrowed by, or advanced to, or for the account of, the account party, or
- To make payment on account of any indebtedness undertaken by the account party, or
- To make payment on account of any default by the account party in the performance of any obligation
A standby L/C is a contractual commitment that constitutes an extension of credit to an obligor that is subject to an applicant's lending limit and must be approved prior to issuance, like other extensions of credit.
A standby L/C is categorized as financial or performance. It is "performance" when the contractual obligation that triggers payment is performance related, such as failure to ship a product or provide a service. Where the event that triggers payment is related to a financial condition, such as failure to pay or repay money, the standby L/C should be classified as “financial.”
Banco J.P. Morgan S.A. is an entity authorized by our local regulator, Comision Nacional Bancaria y de Valores (CNBV) to issue standby L/Cs in favor of government entities, such as PEMEX, CFE, IMSS, TESOFE and ISSSTE, among others.
