Letters of Credit – Checklist and Guide for Exporters

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SITPRO has produced a set of three Letters of Credit Checklist and Guides for ImportersExporters and Export Sales Representatives. The checklist designed for importers is to be used by purchasing staff when applying to local banks for letters of credit. The export sales representative’s guide advises on credits and some of the other responsibilities assumed on overseas visits. We strongly recommend you provide your customers with copies of these guides to back-up your own discussions with them.

This checklist is intended primarily for use in export sales and shipping departments. It will also be of assistance to those involved in financial and credit management and in production and supply. To ensure a letter of credit is workable, trouble-free and provides security of payment, it is essential to take simple yet effective precautions at the start. Working through the checkpoints set out in the various sections of the guide will help reduce discrepancies and associated unplanned costs.

Successive surveys by SITPRO and others have shown that well in excess of fifty percent of documents presented by exporters to banks for payment under letters of credit are rejected on first presentation. This can cause expensive delays for both the exporter and the importer and may even result in a lesser payment or no payment at all. A great many of those rejections could be avoided if more care was taken to ensure that the documents called for in the credit are properly completed.

The SITPRO Letters of Credit Checklists and Guides are designed to minimise unnecessary costs and risk when trading on the basis of letters of credit. They are aligned with and based on interpretation of Uniform Customs & Practice for Documentary Credits (UCP), produced by the International Chamber of Commerce (ICC). The current revision, UCP 600, is available from ICC UK (www.iccuk.net).

Any letter of credit requirements which are still not clear should be referred to your bank for clarification without delay.

Key Checks When the Letter of Credit is Received

Before going any further:

Having assured yourself on these points, proceed with the key checks. Bear in mind, as mentioned, that over half of credit documents are rejected on first presentation to the banks. The main reason for this is matters that could have been put right, had the credit been checked early enough, were not put right. Making these key checks on the day the credit arrives, consulting other departments accordingly and carrying out the more detailed checks immediately afterwards, will enable difficulties to be spotted in better time to take action.

Check that the type of credit gives you the level of payment security you sought

Check that you will be paid at the time you planned

Check that both your company name, address and full title and those of the buyer are correct and consistent with all other documents

Check that you can produce the goods, ship them, assemble the documents required and deliver them to the bank, all by the expiry date and within the time limit for presentation of transport documents

If the credit has been sent electronically to a UK bank (“teletransmitted”) check that it provides details of the credit that you can act upon and that is not just a pre-advice

Check that only those bank charges you agreed to pay are stated to be for your account

If an alteration or extension is required, complete the detailed checks below to see if there are any other errors, and:

At an early stage, it will be in your best interests to send a copy of the credit to your forwarder or whoever will obtain the transport documents. Similarly with your insurers if insurance is to be covered by you. Telephone instructions alone may easily result in misspellings or other errors and consequent rejection by the bank, or even a wrong type of transport or insurance document may be provided.

Detailed Checks Immediately on Receipt of the Credit

When checking your credit under the headings below, remember that UCP 600 will apply fully unless you have agreed different terms, which are reflected in the credit. One or more of the following checkpoints may thus be overridden by conditions stipulated in your particular credit. If you are still unclear as to what the wording of the credit implies check what UCP 600 has to say on the point and with the UK bank.

Note: It is recommended that the details of the credit be recorded at this point so that a progress check can be updated right through to presentation of the final documents to the bank for payment. The Documentary Letter of Credit Exporters Validation Form available from Chancellor Formecon Ltd provides a convenient way for doing this.

Does the type of credit give you the security of payment you want?

Is it payable when you want it?

Is it payable where you want it?

Note: Under UCP 600, whether a credit is available by sight payment, deferred payment, acceptance or negotiation, a credit can be available with any bank.

Is the value of the credit correct?

Are the terms of delivery the same as you quoted (e.g. FOB, CIF, CIP) and do they match the price properly?

  • You will need to specify if you want the delivery terms to form part of the credit terms
    • For example, if you quoted “£10,000 FOB Southampton –Incoterms 2000” and the credit states “£10,000 CIF Hong Kong –Incoterms 2000” you will naturally not be able to recover the freight and insurance
  • The paying bank will refuse your documents if you exceed the credit amount or alter any unit price quoted in the credit
  • Inconsistent delivery terms are discrepancies and the L/C will be rejected

Company names, addresses and other details

Are partial shipments expressly prohibited?

Can you meet the expiry date and also present documents within the transport document time limit?

Has the export or import licence been obtained with adequate validity?

Are the goods described consistently?

Does the credit restrict the way in which documents are prepared?

Can you provide the transport document called for?


Can you supply all other documents in the way called for?

Interpretation of common business language

What if the credit is wrong or ambiguous on any of the above points?

When Compiling Documents for Presentation to the Bank

Ensure that:

Check each document to ensure that it is in order

Transport Document

Insurance Document


Other Documents

Bills of Exchange, if any

Covering note/letter to Nominated bank

Present documents to the bank without delay and within the expiry date and transport document time limit

If There Are Discrepancies

Unless you can correct discrepancies in time you will lose your right to payment under the credit and all the cost and effort to obtain security will have been wasted.

What are the options?

If the transport document involved is a full set of negotiable bills of lading, these measures normally retain your control over the goods as the buyer cannot take delivery without the documents, which are still in your control. However, in other circumstances, the buyer can obtain the goods without the presentation of documents. Nevertheless, the buyer is in effect being asked whether, after all, they still want the goods and is prepared to accept the discrepancies in the documents. They are quite free to refuse.


Whilst every effort is made to ensure that the information given herein is accurate, SITPRO Ltd. accepts no legal responsibility for any views expressed or implied or for any errors, omissions or misleading statements in that information caused by negligence or otherwise.

UCP600 contains the rules for the use of letters of credit. Where there are any inconsistencies with this guide, UCP600 will prevail.