Let us consider yourself as an exporter and assume that you have just shipped your order.
What you have to do in order to prove that this shipment has been made. Of course, you must supply a relevant transport document. Let us consider also that the shipment term was CIF incoterms 2000, which obligates you to arrange the insurance for the shipment. Again, you must supply an insurance document, as it is demanded in the L/C in order to fulfill your responsibility.
The importance of the documentation is stated in UCP 600 article 5 as follows:
Banks deal with documents and not with goods, services or performance to which the documents may relate.
In addition, every condition stated on the letter of credit form must be connected to a document. This point is also clearly indicated in UCP 600 article 14.
If a credit contains a condition without stipulating the document to indicate compliance with the condition, banks will deem such condition as not stated and will disregard it.
Documents most frequently used in letters of credit transactions
Why documentation is so important in letters of credit?
There are many important points in a letter of credit transaction that need to be taken care of professionally. However, documentation is much more important than any other part of the letter of credit transactions. This importance stems its power from the letter of credit structure. Letters of credit transactions are related to the documents only.