Preparing documents for submission under a Letter of Credit (LC) (2024)

Preparing documents for submission under a Letter of Credit (LC) to ensure they are considered "clean" is crucial for smooth financial transactions in international trade. A "clean" document under LC terms means that it complies with all the terms and conditions of the LC without any discrepancies. Here are general steps and tips to ensure your documents meet these criteria:

1. Understand the LC Terms: Carefully review all conditions and requirements specified in the Letter of Credit. Pay special attention to the description of goods, quantities, prices, shipping deadlines, and document requirements.
2. Prepare Accurate Documents: Ensure all documents are accurately prepared and reflect the exact terms stated in the LC. This includes commercial invoices, packing lists, bills of lading (or airway bills), insurance documents, and any other required certificates (like inspection or origin certificates).
3. Consistency Across Documents: All details must match across documents. For instance, the beneficiary's name, address, description of goods, quantities, and prices should be consistent in the invoice, packing list, and bill of lading.
4. Follow Shipping Deadlines: Ship goods within the time frame specified in the LC to ensure documents like the bill of lading indicate shipment dates within the credit validity.
5. Adhere to Document Specifications: If the LC specifies particular forms, formats, or stipulations for documents (e.g., a specific Incoterm, a requirement for documents to be signed in a particular manner, or a need for documents to be presented in multiple copies), comply with these requirements meticulously.
6. Get Documents Right the First Time: Amendments can be time-consuming and costly. Ensure that all documents are correct before presenting them to the bank. Even minor discrepancies can cause documents to be deemed discrepant, leading to delays and additional costs.
7. Insurance Documents: If insurance documents are required, ensure they cover at least 110% of the CIF (Cost, Insurance, and Freight) value of the goods in the currency of the LC and that they comply with any specific coverage requirements stated in the LC.
8. Presentation within Validity Period: Present documents to the nominated bank within the LC's validity period, ensuring you adhere to any presentation period after the date of shipment as specified in the LC.
9. Review by a Professional: Before presentation, have all documents reviewed by a professional experienced in LC transactions, such as a freight forwarder, a bank officer, or a legal advisor specializing in international trade.
10. Use of a Checklist: Create a checklist based on the LC's terms and conditions and tick off each requirement as you prepare your documents. This will help ensure no detail is overlooked.

Remember, the goal is to present documents that the issuing bank can process without raising discrepancies, ensuring timely payment for your goods. Discrepancies not only delay payment but can also lead to additional costs and negotiations with buyers and banks to rectify issues.