Swift is a provider of secure message platform for financial institutions mainly for banks.
Swift messages are being sent and received by banks in encrypted forms. As a result swift messages are accepted as a valid and reliable way of communication between banks.
For example, an issuing bank sends a swift message to an advising bank in order to inform issuance of a documentary credit. Similarly the advising bank sends its acknowledgement via a swift message.
Swift messages play a key role not only in letters of credit but also other payment methods in international trade such as cash in advance payment, documentary collections, open accounts and bank payment obligations.
When an irrevocable letter of credit is issued, the risk of payment rests with the issuing bank. This type of letter of credit is defined as an unconfirmed letter of credit.
However, in certain circumstances, the exporter may find the issuing bank not fully trustworthy and/or the country where it is located has high political or economic uncertainty.
In this situation, the exporter should consider requesting a confirmed letter of credit.
Confirmation is a security tool for the exporters. Confirmation eliminates country risks and insolvency risks of the issuing bank.
With a confirmed letter of credit, another bank, the confirming bank, usually located in the same country that the exporter is located, will add its confirmation to the letter of credit.
By adding its confirmation, the confirming bank undertakes to honour the exporter’s claim under the letter of credit, provided all terms and conditions of the letter of credit are met. (1)
Letters of Credit are flexible instruments because they incorporate various payment options.
According to letter of credit rules, a credit must state whether it is available by sight payment, deferred payment, acceptance or negotiation. (UCP 600 – Article 6- b)
The credit must explicitly indicate its availability as: (i) immediate payment (sight), (ii) payment at a future determinable date (deferred), (iii) acceptance of a time draft drawn on the issuing, nominated bank, or confirming bank, or (iv) negotiation with or without recourse to the beneficiary.
Sight payment ensuring prompt payment upon document compliance. Deferred payment, allowing for payment at a future date. Acceptance LCs involve the bank’s commitment to pay at a later date via draft acceptance. Negotiation LCs offer the possibility of receiving early payment by discounting drafts.
A Letter of Credit (L/C) is a payment method in international trade that ensures secure payment and delivery of goods between exporters and importers.
It relies on collaboration between banks, logistics providers, the exporter, and the importer to reduce risks and enable smooth cross-border transactions.
Although letter of credit is a balanced payment method in terms of risk issues for both exporters and importers, each letter of credit party bears some amount of risk; higher or lower.
For the seller, the primary concern lies in the financial stability and trustworthiness of the issuing bank, often located in a distant country and potentially unfamiliar to them.
Conversely, the buyer faces the risk of paying for goods that may be unsatisfactory, substandard, or even non-existent, as well as uncertainties surrounding the documents presented.
As I have explained on my previous post, letters of credit transactions are handled by banks, which make banks one of the parties that bears risks in l/c transactions in addition to exporters and importers.
Risks in letters of credit can be discussed under four groups: general risks, risks to the applicant, risks to the beneficiary and risks to the banks.
On this post each risk group will be examined in detail with real life examples.
This page discusses the parties involved in a letter of credit. Each L/C party will be presented briefly, and its roles and responsibilities will be explained with the help of the graphic illustrations. A video on this topic is also available.
A Letter of Credit (LC) is a financial instrument in international trade that guarantees payment to the seller (beneficiary) as long as the agreed-upon terms and conditions are met.
It involves multiple parties, each playing a distinct role.
The key parties in an LC transaction include the beneficiary (seller), applicant (buyer), issuing bank, advising bank, confirming bank, nominated bank, and reimbursing bank. Understanding the roles and responsibilities of these entities ensures smooth and hassle-free letter of credit operations for businesses.
From their origins in 18th-century traveler’s credit systems to today’s cornerstone role in international commerce, letters of credit (LCs) have transformed into all-round, secure financial instruments critical for mitigating risk in cross-border transactions.
These tools are broadly categorized into commercial letters of credit—the go-to payment method for facilitating trade deals—and standby letters of credit, which act as safety nets for contractual obligations.
Beyond these core types, specialized variations like red clause, confirmed, transferable, and back-to-back letters of credit offer tailored solutions to meet the unique demands of buyers and sellers.
In this post, we break down the different types of letters of credit and how they secure global transactions.
Letter of credit, in a broad perspective, is one of the payment methods in international trade.
The letter of credit is distinguished itself from other payment methods in international trade by its complex structure and detailed rules.
A documentary credit, also known as a letter of credit, is a written guarantee issued by a bank (issuing bank) on behalf of a buyer (applicant) to pay the seller (beneficiary) a specified amount, either at sight or on a future date.
This payment commitment is subject to the beneficiary’s compliance with the terms and conditions outlined in the credit and is fulfilled through a ‘complying presentation’.
According to the Uniform Customs and Practice for Documentary Credits (UCP 600), a complying presentation must meet three key requirements:
Documents must strictly adhere to the terms and conditions of the documentary credit.
If the credit is governed by UCP 600, documents must align with its applicable articles and sub-articles.
Documents are reviewed based on latest version of international standard banking practices, ISBP 821 (International Standard Banking Practice for the Examination of Documents under UCP 600).
Understanding these principles ensures smooth international trade transactions and minimizes payment risks.
Confirmationmeans a definite undertaking of the confirming bank, in addition to that of the issuing bank, to honour or negotiate a complying presentation.
Confirming bank means the bank that adds its confirmation to a credit upon the issuing bank’s authorization or request.
If a confirming bank adds its confirmation to a letter of credit, the credit becomes a confirmed l/c.
On today’s post, I am going to share a confirmed letter of credit sample, which is issued in a swift format.
Recently I have explained the reasons why I have started to put sample letters of credit on my website.
A standby letter of credit is a financial instrument issued by a bank guaranteeing payment to a beneficiary if the applicant (the bank’s client) fails to fulfill the terms of an agreement.
A standby letter of credit is issued as a financial guarantee and is not intended to serve as the primary payment method, unlike a commercial letter of credit. It is only utilized if the applicant fails to fulfill their obligations under the underlying contract, making it a secondary payment option.
On today’s post, I would like to share a standby letter of credit sample in swift format.
Recently I have explained the reason why I have started to put sample letters of credit on my website.
Deferred payment is one of the payment options available under letters of credit, along with sight payment, acceptance and negotiation.
Under deferred payment terms, exporters receive letter of credit amount not at sight but after a certain period of specific date, such as 30 days after shipment, 60 days after commercial invoice date etc.
Today, I would like to share an irrevocable deferred payment letter of credit sample in swift format.
Recently, I explained why I began sharing sample letters of credit on my website.
Each letter of credit is unique, varying by industry, document requirements, and even modified UCP 600 terms.
While our samples don’t provide a one-size-fits-all solution, they offer a broad understanding of how letters of credit function in real-world scenarios.
Drawn from over 16 years of consultancy experience, these examples have been modified for privacy.
By studying them, you can learn how to read letter of credit texts in SWIFT format, identify key transaction elements, and understand common document requirements and bank expectations, helping you navigate real-life letter of credit scenarios with greater confidence.
Bangladesh, situated in the northeastern corner of the Indian subcontinent, shares its borders with India and Burma.
With an estimated population of 165 million in 2021, as reported by the World Bank, Bangladesh stands as the eighth most populous nation globally.
In terms of population density, it is the most densely populated country after city-states.
As of 2021, Bangladesh ranked as the 32nd largest economy in the world based on its GDP (current US$).
In regards to GDP per capita (current US$), Bangladesh was positioned as the 133rd economy globally.
Bangladesh’s Foreign Trade:
Exports:
In 2021, Bangladesh emerged as the 56th largest exporter in the world, with a total export value of $51.8 billion.
Over the course of the past five years, the country’s exports experienced a notable increase of $14 billion, rising from $37.8 billion in 2016 to $51.8 billion in 2021.
Bangladesh is one of the biggest textile exporters in the world.
The ready-made garment (RMG) industry remains a significant driving force behind Bangladesh’s economic growth, contributing substantially to its export sector.
The primary exports of Bangladesh are led by Knit T-shirts, accounting for $7.06 billion, followed by Non-Knit Men’s Suits ($6.68 billion), Knit Sweaters ($6.32 billion), Non-Knit Women’s Suits ($5.41 billion), and Knit Women’s Suits ($3.54 billion).
Among the various destinations for Bangladeshi exports, the United States holds the top position, importing goods worth $8.72 billion.
Germany follows closely behind at $8.36 billion, with Spain at $3.6 billion, the United Kingdom at $3.29 billion, and Poland at $2.94 billion being other significant export destinations for Bangladesh.
Imports:
In 2021, Bangladesh ranked as the 48th largest trade destination in the world, with a total import value of $76.6 billion.
Over the past five years, the country’s imports have undergone a significant change, increasing by $34.1 billion from $42.5 billion in 2016 to $76.6 billion in 2021.
The primary imports of Bangladesh are dominated by Refined Petroleum, amounting to $5.48 billion, followed by Raw Cotton ($2.8 billion), Non-Retail Pure Cotton Yarn ($2.26 billion), Wheat ($1.92 billion), and Light Rubberized Knitted Fabric ($1.83 billion).
China stands out as the largest import partner for Bangladesh, with imports valued at $24.1 billion.
India follows closely behind at $14.1 billion, with Singapore at $3.53 billion, Indonesia at $2.92 billion, and the United States at $2.3 billion being other significant import partners for Bangladesh.
Letter of Credit Usage in Bangladesh:
Bangladesh import letters of credit have certain characteristics:
Bangladesh banks open letters of credit with excessive detail. A typical Bangladesh import L/C consists of 5-6 pages, requesting presentation of at least 8 different documents.
Due to country risks most of the banks do not confirm Bangladesh L/Cs.
CFR is the dominant Incoterms used in Bangladesh shipments. Chattogram Port is the main container port of the country. CFR Chattogram Port (Incoterms 2020) is the default Incoterms.
Insurance covered locally in Bangladesh by importers. Shipment advice a document that is generally requested by Bangladesh banks.
Bangladesh banks demand Beneficiary Certificates with different content under each letter of credit.
Despite being members of the World Trade Organization, Bangladesh continues to enforce a trade ban with Israel. It is not possible to make shipments with an Israel flag vessel to Bangladesh. Some L/Cs demand vessel certificate to confirm that carrying vessel is not Israel flag.
Understanding the Importance of a Draft Letter of Credit
A letter of credit is a conditional payment method.
An exporter is required to submit documents, which comply with the letter of credit terms and conditions, to the issuing or confirming bank within the specified period allowed in order to receive payment under the letter of credit.
In case of discrepant documents, banks’ payment obligations will be diminished, and exporters can only receive payment if the discrepancies are accepted and cleared by the importers.
To avoid presenting discrepant documents, exporters usually check the letter of credit terms before starting production and request amendments to the letter of credit terms to correct potential issues that may arise.
According to the above example, one amendment cost USD 469,23 to the exporter. Multiple amendments mean higher costs.
Almost all LCs include an amendment fee. This amendment fee is a cost that the issuing bank will collect.
In addition to the issuing bank, the advising bank also incurs a fee because it has transmitted the amendment message through the Swift system.
If the LC is confirmed and the confirming bank is different than the advising bank, then the confirming bank will also request a separate Swift message transmission fee for the amendment.
All these costs that may be requested by the issuing bank, advising bank, and confirming bank, if applicable, increase the operational cost of the LC.
The easiest way to avoid all these expenses is to request a draft letter of credit in swift format from the importer before opening the letter of credit.
What are the Differences Between a Draft Letter of Credit and a Letter of Credit?
The draft letter of credit, which is transmitted by the importer to the exporter in Swift format, should cover all details of the actual letter of credit to be opened.
As the letter of credit has not yet been opened, the letter of credit number should not be included in the draft.
In addition, the opening date of the letter of credit should not be mentioned in the draft letter of credit.
Except for these two points, all other information must be included in the draft letter of credit.
What is the Importance of a Draft Letter of Credit
The exporting company should review the draft letter of credit and communicate any necessary corrections to the importer.
The importer should then consult to the issuing bank and inform the exporter whether the requested corrections can be made.
The letter of credit should only be opened after both parties have agreed.
Opening letters of credit directly, without working on a draft letter of credit, can increase costs for the exporter and the operational difficulty level, resulting in additional discrepancy risks.
Summary:
A letter of credit is a conditional payment method that requires exporters to submit compliant documents to receive payment.
Discrepant documents can result in diminished payment obligations by the banks.
To avoid discrepancies, exporters usually check the letter of credit terms and request amendments if needed.
However, amendments made after the issuance of letter of credit come with additional fees, which can be costly for exporters.
To avoid these expenses, importers can provide a draft letter of credit in Swift format before opening the actual letter of credit.
The draft L/C should cover all details except for the letter of credit number and opening date.
Reviewing and correcting the draft letter of credit can help avoid discrepancies and increase operational efficiency.
Draft Letter of Credit Example:
MESSAGE TYPE 700 ISSUE OF A DOCUMENTARY CREDIT ————————————————————————— FLD. TEXT CONTENTS —————————————————————————
27: SEQUENCE OF TOTAL:
1/1
40A: FORM OF DC:
IRREVOCABLE
20: DC NO:
DC ONYX0103207-DRAFT
31C: DATE OF ISSUE:
170215
40E: APPLICABLE RULES:
UCP LATEST VERSION
31D: EXPIRY DATE AND PLACE:
180331HONG KONG
50: APPLICANT:
CAMERA IMPORTER SA 7, RUE BARON 75000 PARIS,
FRANCE
TEL: 01 40 40 90 60 59:
BENEFICIARY:
CAMERA TRADING LTD 5/F HENG SHAN CTR 140 QUEEN’S ROAD EAST WINCHAI HONG KONG CHINA
41D: AVAILABLE WITH/BY:
ANY BANK IN HONG KONG BY NEGOTIATION
42C: DRAFTS AT:
180 DAYS AFTER SIGHT
42D: DRAWEE:
ISSUING BANK
43P: PARTIAL SHIPMENTS: ALLOWED
45A: DESCRIPTION OF GOODS:
FCA (MANUFACTURER’S WAREHOUSE) CHINA, INCOTERMS 2010
+ SUPPLY OF
1. CAMERA WIFI 4K 10FPS PHOTO 16M LCD, QUANTITY: 3000PCS,
2. ACTION CAMS, QUANTITY: 1000PCS
AS PER APPLICANT’S PURCHASE ORDER NO. F1700016 DATED 23.02.2017.
46A: DOCUMENTS REQUIRED:
1. USD 300.000,00 PAYABLE AS ADVANCE PAYMENT AGAINST PRESENTATION OF THE FOLLOWING DOCUMENT:
1.1) BENEFICIARY’S SIMPLE RECEIPT FOR ADVANCE PAYMENT ISSUED ON BENEFICIARY’S LETTERHEAD AND DULY SIGNED AND STAMPED BY THE BENEFICIARY. 2. USD 700.000,00 PAYABLE AT 180 DAYS SIGHT AGAINST PRESENTATION OF THE FOLLOWING DOCUMENTS:
2.1) SIGNED COMMERCIAL INVOICES IN ONE ORIGINAL PLUS TWO COPIES STATING THAT GOODS ARE AS PER APPLICANT’S PURCHASE ORDER NO. F0000000 DATED 23.02.2017. THE COMMERCIAL INVOICE MUST SHOW 100 PCT. VALUE OF GOODS SHIPPED, LESS ADVANCE PAYMENT DEDUCTION AS PER CLAUSE NO. 3 OF FIELD 47A.
2.2) PACKING LIST IN TRIPLICATE.
2.3) CERTIFICATE OF ORIGIN ISSUED BY THE CHAMBER OF COMMERCE OR BENEFICIARY.
2.4) ONE ORIGINAL OF FIATA FCR (FORWARDERS CERTIFICATE OF RECEIPT) ISSUED BY (XYZ FREIGHT FORWARDER COMPANY) CONSIGNED TO APPLICANT CERTIFYING THAT HAVING ASSUMED CONTROL OF THE ABOVE-MENTIONED CONSIGNMENT IN EXTERNAL APPARENT GOOD ORDER AND CONDITION WITH IRREVOCABLE INSTRUCTIONS TO BE FORWARDED TO THE CONSIGNEE.
2.5) BENEFICIARY’S CERTIFICATE STATING THAT PRE-SHIPMENT INSPECTION HAS BEEN CARRIED OUT BY AN INDEPENDENT INTERNATIONAL INSPECTION COMPANY BEFORE SHIPMENT AND THE INSPECTION REPORT HAS BEEN EMAILED TO THE APPLICANT. THE INSPECTION REPORT HAS BEEN CHECKED, VERIFIED AND ACCEPTED BY THE APPLICANT.
47A: ADDITIONAL CONDITIONS:
1.TOLARANCE +/-5 IN QUANTITY AND TOTAL AMOUNT IS ACCEPTABLE PER EACH INSTALLMENT DRAWINGS AS EXPLAINED UNDER FIELD 47A-CLAUSE 3.
2.PARTIAL DRAWINGS ARE ACCEPTABLE
3.INSTALLMENT DRAWINGS 3.1) FIRST DRAWING MUST BE COMPLETED BETWEEN 01.MAY.2017 TO 30.JUNE.2017 WITH THE SHIPMENTS OF ARTICLE 1 3.2) SECOND DRAWING MUST BE COMPLETED BETWEEN 01.JANUARY.2018 TO 31.MARCH.2018 WITH THE SHIPMENTS OF ARTICLE 2.
71B: DETAILS OF CHARGES:
ALL CHGS OUTSIDE COUNTRY OF ISSUE FOR ACCOUNT OF BENEFICIARY/EXPORTER
48: PERIOD OF PRESENTATION:
EACH DRAWING MUST BE COMPLETED ACCORDING TO TIME FRAMES EXPLAINED UNDER FIELD 47A-CLAUSE 3.
As of 2020, the United States is a major player in the global export market, ranking as the second-largest exporter in the world with a total export value of USD 1.34 trillion.
US exports represents a decline of USD 49.7 billion from the USD 1.39 trillion in exports reported in 2015.
Refined petroleum is the leading export from the United States, with a value of USD 58.4 billion, followed by crude petroleum at USD 52.3 billion, cars at USD 47.6 billion, integrated circuits at USD 44.2 billion, and petroleum gas at USD34.7 billion.
The United States’ primary export partners are Canada, Mexico, China, Japan, and Germany.
Canada is the top destination for U.S. exports, with a value of USD 218 billion, followed closely by Mexico at USD 196 billion. China, Japan, and Germany round out the top five destinations for U.S. exports, with values of USD 122 billion, USD 63.1 billion, and USD 59.2 billion, respectively.
As of 2020, the United States ranked as the world’s top trade destination, with a total import value of USD 2.24 trillion.
Over the past five years, the country’s imports have increased by USD 127 billion, rising from USD 2.12 trillion in 2015 to USD 2.24 trillion in 2020.
The leading imports of the United States are Cars (USD 144 billion), Computers (USD 92.4 billion), Packaged Medicaments (USD 84.1 billion), Broadcasting Equipment (USD 82 billion), and Crude Petroleum (USD 75.1 billion).
China, Mexico, Canada, Germany, and Japan are the most common import partners for the United States, with import values of USD 438 billion, USD 326 billion, USD 264 billion, USD 116 billion, and USD 112 billion, respectively,
Letter of Credit Usage:
Letter of credit (LOC) is a payment method used in international trade.
Although some exporters view it as a complex, time-consuming, expensive, and stressful, it remains as an essential tool in certain situations.
In some countries such as Bangladesh, Algeria, Egypt, Nepal, Ethiopia, etc., the use of LOC is compulsory either in full or part of their imports.
Therefore, it is impossible to avoid LOC in these circumstances.
Additionally, commercial conditions may also dictate the use of LOC, despite its perceived disadvantages.
What We Offer:
What we offer to our customers is a top class, reliable and cost-effective letter of credit consultancy and document preparation services.
All technical details of the export letter of credit transaction are handled by us.
You will save time and money.
We Check the Letter of Credit:
Export letter of credit consultancy service starts with L/C check. Before shipment all potential troublesome points must be removed from the L/C.
Letter of credit documents change from one presentation to another, but you can find main document types from our related article above.
Final Control of Documents:
Our customers send us back scanned version of all documents signed and stamped for final check before presentation them to the nominated or confirming bank.
After we make sure that documents are complying the presentation process of documents is completed.
You can understand different payment availabilities under letter of credit transactions from our related article above.
References:
We have completed hundreds of presentations for the last 13 years and success rate is %100. All our customers received their payments under our services.
Here are some of our works. You can click heading parts for more details of each transaction.
Note: We do not share any details of our customers even their names. Only harmless data shared below.
Total letter of credit amount was USD 680.004,52. Letter of credit confirmed by JP Morgan Chase Bank, N. A., New York, USA. Beneficiary located in U.S.A. and applicant resident in India.
Total letter of credit amount was EUR 803.400,84. Letter of credit confirmed by Bred Banque Populaire Paris France. Beneficiary located in U.K, applicant in Senegal and manufacturer in Turkey.
Total letter of credit amount was USD 617.750,00. Although the exporter contacted us very late, we managed to put things in order and completed the transaction without any problem for each side.
In 2020, Spain exported a total of $298B of goods.
The top exports of Spain are motor cars and vehicles ($32B), medicaments ($11.6B), parts and accessories of motor cars and vehicles ($9.14B), processed petroleum oils ($7.77B) and meat of swine ($6.46B).
Spain’s main export partners are France, Germany, Portugal, Italy and United Kingdom.
In 2020, Spain imported a total of $315B of goods.
The top imports of Spain are crude petroleum oils ($15.8B), motor cars and vehicles ($13.9B), parts and accessories of motor cars and vehicles ($11B), medicaments ($10.7B), and petroleum gases and other gaseous hydrocarbons ($5.5B).
Spain’s main import partners are Germany, France, China, Italy and Netherlands.
Letter of Credit Usage:
Letter of credit is a payment method in international trade. Because it is regarded as complicated, time consuming, expensive and rather stressful among exporters; its usage rate has been diminishing for decades.
But it is not possible to avoid letters of credit in all circumstances.
It is simply because either some countries force letter of credit as a compulsory payment method in full or part of their imports such as Bangladesh, Algeria, Egypt, Nepal, Ethiopia etc.; or else commercial conditions dictates so.
What We Offer:
What we offer to our customers is a top class, reliable and cost effective letter of credit consultancy and document preparation services.
All technical details of the export letter of credit transaction is handled by us.
You will save time and money.
We Check the Letter of Credit:
Export letter of credit consultancy service starts with L/C check. Before shipment all potential troublesome points must be removed from the L/C.
Letter of credit documents change from one presentation to another, but you can find main document types from our related article above.
Final Control of Documents:
Our customers send us back scanned version of all documents signed and stamped for final check before presentation them to the nominated or confirming bank.
After we make sure that documents are complying the presentation process of documents is completed.
You can understand different payment availabilities under letter of credit transactions from our related article above.
References:
We have completed hundreds of presentation for the last 13 years and success rate is %100. All of our customers received their payments under our services.
Here are some of our works. You can click heading parts for more details of each transaction.
Note: We do not share any details of our customers even their names. Only harmless data shared below.
Total letter of credit amount was USD 680.004,52. Letter of credit confirmed by JP Morgan Chase Bank, N. A., New York, USA. Beneficiary located in U.S.A. and applicant resident in India.
Total letter of credit amount was EUR 803.400,84. Letter of credit confirmed by Bred Banque Populaire Paris France. Beneficiary located in U.K, applicant in Senegal and manufacturer in Turkey.
Total letter of credit amount was USD 617.750,00. Although the exporter contacted us very late, we managed to put things in order and completed the transaction without any problem for each side.
In 2020, Italy exported a total of $481B of goods.
The top exports of Italy are Medicaments ($26.7B), motor cars and other motor vehicles ($14.8B), motor vehicles; parts and accessories ($12.5B), petroleum oils and oils from bituminous minerals, not crude ($8.26B), and Human blood; animal blood for therapeutic, prophylactic or diagnostic uses; antisera, other… ($7.75B).
Italy’s main export partners are Germany, France, United States, Switzerland and United Kingdom.
In 2020, Italy imported a total of $429B of goods.
The top imports of Italy are crude petroleum oils ($25.5B), motor cars and other motor vehicles ($22.5B), medicaments ($18.7B), petroleum gases and other gaseous hydrocarbons ($10.6B) and gold ($9.17B),
Italy’s main import partners are Germany, France, China, Netherlands and Spain.
Letter of Credit Usage:
Letter of credit is a payment method in international trade. Because it is regarded as complicated, time consuming, expensive and rather stressful among exporters; its usage rate has been diminishing for decades.
But it is not possible to avoid letters of credit in all circumstances.
It is simply because either some countries force letter of credit as a compulsory payment method in full or part of their imports such as Bangladesh, Algeria, Egypt, Nepal, Ethiopia etc.; or else commercial conditions dictates so.
What We Offer:
What we offer to our customers is a top class, reliable and cost effective letter of credit consultancy and document preparation services.
All technical details of the export letter of credit transaction is handled by us.
You will save time and money.
We Check the Letter of Credit:
Export letter of credit consultancy service starts with L/C check. Before shipment all potential troublesome points must be removed from the L/C.
Letter of credit documents change from one presentation to another, but you can find main document types from our related article above.
Final Control of Documents:
Our customers send us back scanned version of all documents signed and stamped for final check before presentation them to the nominated or confirming bank.
After we make sure that documents are complying the presentation process of documents is completed.
You can understand different payment availabilities under letter of credit transactions from our related article above.
References:
We have completed hundreds of presentation for the last 13 years and success rate is %100. All of our customers received their payments under our services.
Here are some of our works. You can click heading parts for more details of each transaction.
Note: We do not share any details of our customers even their names. Only harmless data shared below.
Total letter of credit amount was USD 680.004,52. Letter of credit confirmed by JP Morgan Chase Bank, N. A., New York, USA. Beneficiary located in U.S.A. and applicant resident in India.
Total letter of credit amount was EUR 803.400,84. Letter of credit confirmed by Bred Banque Populaire Paris France. Beneficiary located in U.K, applicant in Senegal and manufacturer in Turkey.
Total letter of credit amount was USD 617.750,00. Although the exporter contacted us very late, we managed to put things in order and completed the transaction without any problem for each side.
The main German export product is motor vehicles accounting for %15,3 of Germany’s total exports. Machinery (%14,2) and chemical products (%10.0) ranked second and third, respectively, among the most important export items of Germany.
Letter of credit is a payment method in international trade. Because it is regarded as complicated, time consuming, expensive and rather stressful among exporters; its usage rate has been diminishing for decades.
But it is not possible to avoid letters of credit in all circumstances.
It is simply because either some countries force letter of credit as a compulsory payment method in full or part of their imports such as Bangladesh, Algeria, Egypt, Nepal, Ethiopia etc.; or else commercial conditions dictates so.
What We Offer:
What we offer to our customers is a top class, reliable and cost effective letter of credit consultancy and document preparation services.
All technical details of the export letter of credit transaction is handled by us.
You will save time and money.
We Check the Letter of Credit:
Export letter of credit consultancy service starts with L/C check. Before shipment all potential troublesome points must be removed from the L/C.
Letter of credit documents change from one presentation to another, but you can find main document types from our related article above.
Final Control of Documents:
Our customers send us back scanned version of all documents signed and stamped for final check before presentation them to the nominated or confirming bank.
After we make sure that documents are complying the presentation process of documents is completed.
You can understand different payment availabilities under letter of credit transactions from our related article above.
References:
We have completed hundreds of presentation for the last 13 years and success rate is %100. All of our customers received their payments under our services.
Here are some of our works. You can click heading parts for more details of each transaction.
Note: We do not share any details of our customers even their names. Only harmless data shared below.
Total letter of credit amount was USD 680.004,52. Letter of credit confirmed by JP Morgan Chase Bank, N. A., New York, USA. Beneficiary located in U.S.A. and applicant resident in India.
Total letter of credit amount was EUR 803.400,84. Letter of credit confirmed by Bred Banque Populaire Paris France. Beneficiary located in U.K, applicant in Senegal and manufacturer in Turkey.
Total letter of credit amount was USD 617.750,00. Although the exporter contacted us very late, we managed to put things in order and completed the transaction without any problem for each side.
Both importer and exporter are engaged in renewable energy sector.
The buyer is one of the biggest renewable energy company in India.
The seller is also a US based multinational company, supplying raw materials for the manufacture of wind operated electricity generators, wind turbines.
Letter of Credit References:
We have completed our export letter of credit consultancy services with success in regards to a letter of credit which is issued by Indusind Bank Limited on 04.February.2021.
The letter of credit number was OLC0009210039296. Letter of credit issued in English language.
Letter of credit confirmed by JP Morgan Chase Bank, N. A., New York, USA. Beneficiary located in U.S.A. and applicant resident in India. The goods had been shipped from beneficiary’s factory in Ecuador to India.
Port of loading was Guayaquil Port, Ecuador and port of discharge was Mundra Port, India.
The beneficiary had contacted us with a question regarding insurance documents under the letters of credit.
After replying the question, the beneficiary told us that they were about to sign a contract with an Indian buyer.
The buyer insisted on CIF delivery term, so we worked with the beneficiary to find a suitable insurance company that can supply us an insurance certificate that would be acceptable under the letter of credit.
After solving the insurance document problem, we started to work on the draft letter of credit.
We have checked the draft letter of credit and eliminated possible problem areas.
The letter of credit issued by Indusind Bank Limited and confirmed by JP Morgan Chase Bank, N. A., New York, USA.
The beneficiary completed despatch of goods in 5 partial shipments.
Shipping documents have been prepared and checked by us.
The documents have been presented to the confirming bank.
Conclusion:
All presentations have been accepted by the confirming bank on first presentation.
The purpose of taking out insurance is to receive compensation in case the goods do not arrive or are damaged.
Therefore, the policy holder must ensure that the sum insured is adequate to replace the goods.
The sum insured should include the price of the goods as well as the cost of transport and a new insurance. (1)
According to the letters of credit rules, UCP 600 and ISBP 745, the insurance document, insurance policy or certificate, must indicate the amount of insurance coverage and be in the same currency as the credit.
If there is no indication in the credit of the insurance coverage required, the amount of insurance coverage must be at least 110% of the CIF or CIP value of the goods.
Example 1: Marine Insurance Coverage Amount Calculation
Field 32B: Currency Code, Amount
120000USD
Field 46A: Documents Required
Insurance Policy / Certificate issued to the order of applicant in duplicate covering all risks for the CIF value of the goods plus 10 pct claims payable in Djibouti and must indicate the agent name and address in Djibouti.
According to our example, total CIF value of the goods is USD 120.000,00. The minimum insurance cover must be %10 higher than total CIF value, so that the minimum insurance coverage indicated in the insurance policy should be USD 132.000,00.
Insurance Coverage Amount
References:
Documentary credits in practice, Reinhard Längerich, Second edition – 2009, Published by: Nordea, Page:165
44E: Port of Loading/Airport of Departure
Any Port in Ecuador
44F: Port of Discharge/Airport of Destination
Mundra Port, India
46A: Documents Required
Full set of original on board ocean bill of lading, issued to order of issuing bank, marked freight prepaid and notify (1) issuing bank (2) applicant.
Insurance Policy / Certificate issued in favor of the beneficiary and blank endorsed for full CIF value of the goods plus 10 percent covering Institute Cargo Clauses (A), Institute War Clauses (Cargo) and Institute Strike Clauses (Cargo) covering risks warehouse to warehouse with claims payable in India and showing the name and address of the settling agent in India.
But in some letters of credit, especially the old fashioned ones, carry an insurance document clause not covering above points but simply demanding an All Risks Insurance Policy or Certificate.
Some examples are:
Insurance certificate or policy in negotiable form dated not later than the bill of lading date covering all risks for 110 PCT of CIF value and indicating premium paid.
Negotiable insurance policy or certificate in duplicate for full invoice value plus ten percent irrespective of percentage covering the Institute Cargo Clauses (All Risks).
The problem with the all risks insurance conditions is that when you contact with an insurance company, they most probably will inform you that they can supply you an insurance policy covering Institute Cargo Clauses (A) instead of All Risks clauses just like below image.
Insurance Policy Example: Institute Cargo Clauses (A) instead of All Risks Clause
The question comes to the mind of the exporter, is it safe to present such an insurance policy according to the letters of credit rules.
In order to answer this question we must look at the latest version of letters of credit rules: UCP 600 and ISBP 745.
UCP 600 : Article 28 – Insurance Document and Coverage
h.When a credit requires insurance against “all risks” and an insurance document is presented containing any “all risks” notation or clause, whether or not bearing the heading “all risks”, the insurance document will be accepted without regard to any risks stated to be excluded.
ISBP 745: Insurance Document And Coverage – Application of UCP 600 article 28
K18) When a credit requires “all risks” coverage, this is satisfied by the presentation of an insurance document evidencing any “all risks” clause or notation, whether or not it bears the heading “all risks”, even when it is indicated that certain risks are excluded. An insurance document indicating that it covers Institute Cargo Clauses (A) or Institute Cargo Clauses (Air), when dispatch is effected by air satisfies a condition in a credit calling for an “all risks” clause or notation.
Conclusion:
If letter of credit does not specify the risks to be covered under the insurance document, but only indicating an All Risks policy, this condition is to be satisfied by presentation of an insurance policy covering Institute Cargo Clauses (A) for sea shipments and Institute Cargo Clauses (Air) for air shipments.
We have completed our export letter of credit consultancy services with success in regards to a letter of credit which is issued by Coris Bank International Benin on 12.Nov.2019.
The letter of credit number was LC23/IMP/19. Letter of credit issued in English language.
The beneficiary has supplied us the letter of credit.
We have checked the letter of credit and following amendments have been made.
Because exporter and beneficiary located in different countries, bill of lading and certificate of origin must be presented to the confirming bank as received from the manufacturer.
Following phrase inserted to the letter of credit under field 47-A. “Third party documents are acceptable.”
According to the original letter of credit terms the shipment advice must be sent to the issuing bank 1 week before shipment. Because many information stated on the shipment advice may change on the actual documents, this condition can be a source of discrepancy.
Following phrase inserted to the letter of credit under field 47-A. “Name of Vessel, Expected Date of Shipment, Number of Packages, Net and Gross Weight indicated on the advice of shipment are all estimates and may subject to change on actual shipment documents. Differences between the advice of shipment and actual shipment documents do not constitute a basis for a discrepancy.”
Shipping documents have been prepared and checked by us.
The documents have been presented to the confirming bank.
Conclusion:
All presentations have been accepted by the confirming bank on first presentation.
