Guide to Letters of Credit
For people new to the export market, the most daunting document they will see is a Letter of Credit, or LC. With over 20 years of handling LCs I have found that the following tips should make the whole LC process less daunting and time consuming;
- Always insist on the LC being irrevocable and confirmed. This will allow you to present your documents for payment to a bank in the UK and not in the country it was opened in.
- Always ask for the validity of the LC to be 21 days from the last shipping date. This will allow you plenty of time to prepare the documents and clear up any discrepancies, should they occur.
- Where possible, arrange to see a draft of the LC before it is opened. This will allow you make any changes to the LC before it becomes live.
- Once you receive the LC, read through the document with colleagues to see what the main terms are, what issues there may be and if any special documents are required.
- Ask for any amendments to the LC in writing, as soon as possible. Refer to the LC clause number/numbers in your letter.
- Draw up drafts of all the documents required. Check that all the important details, such as LC number and beneficiary details are correct.
- Send a copy of your LC to your freight forwarder. This will help them in getting the shipping documents correct at the draft stage and save on getting any changes done in a rush.
- Before presenting the documents or before sending them off to be certified, have one last read through with your colleagues. One final check may spot any discrepancies.