Frequently Asked Questions

First, you will need to obtain a CIBC line of credit for the amount involved or arrange to make the funds available for the ultimate payment through your Account Manager.

Then, you complete CIBC's Documentary Letter of Credit Application form. If you require assistance in completing this form, please contact our Client Support at 1-877-905-0365 or call us at your nearest Trade Finance Centre.

Once the application is completed, you may send the application to the branch for authorisation. The branch will then forward it to Trade Finance for issuance.

You may also choose to submit your Letter of Credit applications directly to Trade Finance. To do this, you will need to arrange with your Account Manager to provide Trade Finance with a credit line dedicated to cover the issuance of your Letters of Credit.

Once your credit line is in place with Trade Finance, you can choose to submit your Letter of Credit applications via CommLinc LCTM (CIBC's secure Internet access system for Letters of Credit) or by fax. All you need to do is review and sign CIBC's Electronic Communications Agreement for Import Trade Finance Services.

For more information about CommLinc LC™ and Global Trade Information™, please contact our Client Support at 1-877-905-0365 or contact your nearest Trade Finance Centre.

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The "Uniform Customs and Practice for Documentary Credits" ("UCP") is a set of guidelines published by the International Chamber of Commerce ("ICC") in Paris, France. These guidelines are widely accepted and used in the international trade community for determining the roles and responsibilities of all parties involved in Letters of Credit, including Standby Letters of Credit.

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Under an Import Letter of Credit, the bank promises to make payment to the seller against the seller's presentation of pre-specified documents.

As detailed as such documentation may get, it will not, in practice, provide the buyer with protection if the seller presents documents that comply with the Credit but later prove to be fraudulent. Assuming all appropriate documents are presented, the bank, in the absence of knowledge of fraud, will not be able to refuse payment should a dispute arise between the buyer and seller.

To reduce the likelihood of problems, a buyer should thoroughly investigate prospective sellers. Your CIBC branch, Corporate Banking Centre or Trade Finance Centre may be able to assist you in compiling this information using their global contacts.

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A Standby Letter of Credit provides security to a beneficiary in that CIBC promises to pay the beneficiary upon presentation of pre-specified documents. The following are some instances where Standby Letters of Credit are used: To enable the buyer to purchase goods without having to make a cash deposit; to enable a builder to bid on projects; to provide security for work being done by a builder.

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Yes. A Standby Letter of Credit can be cancelled prior to expiry by having the beneficiary return the original Standby Letter of Credit to the Trade Finance Centre along with an advice that it is no longer needed. Unless the Standby Letter of Credit is revocable, the applicant or the issuing bank cannot cancel or alter the Standby Letter of Credit without the express written approval of the beneficiary.

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Well before the expiry date, you should make a note to advise your Trade Finance Centre whether or not you want the Standby Letter of Credit renewed.

Usually, the Standby Letter of Credit will specify that the bank must advise the beneficiary 30 or 60 days prior to expiry, if it will not be renewed. Otherwise it will be automatically extended.

If the Trade Finance Centre does not receive your instructions, or if the instructions are received but do not provide Trade Finance with sufficient time to effect notice of non-renewal to the beneficiary to meet the 30 or 60 day notification requirement, the Standby Letter of Credit will automatically be renewed for a further period (usually one year), whether or not this was your intention.

If it was your intention not to have the Standby Letter of Credit renewed, you must ask the beneficiary to return the original Standby Letter of Credit to the Trade Finance Centre for cancellation.

It is important to note that even if the advice of non-renewal is received in time by the beneficiary, the beneficiary still has the right to draw on the Standby Letter of Credit anytime up to the expiry date.

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The commission rate is based upon the risk assumed by CIBC and influenced by the security provided and the financial strength of the client.

In the case of a Standby Letter of Credit, the commission rate also depends on whether the instrument is classified as:

• "Financial" (i.e. where a client's underlying obligations can only be settled by a cash payment, or where the Standby Letter of credit supports balance sheet liabilities such as accounts payable), or

• "Non-financial" (i.e. where a client normally settles the underlying obligation by performance of some act other than paying cash, such as constructing a building, or completing a project).

Financial Letters of Credit are priced higher than Non-Financial Letters of Credit.

Please check with your Account Manager to find out the rate applicable for your company or transaction.

Commission is collected at the time of issuance (and on the yearly anniversary date, if applicable).

Additional charges could also be incurred if the Letter of Credit is amended or transmitted by telecommunication. Other charges may include correspondent bank charges, consultation fees (if such service is requested), and any out-of-pocket expenses such as courier, telephone/fax charges, etc.

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