| Key Stage 4. LC is received by Advising Bank, which checks the
LC, then passes it on to the Exporter
The Letter of Credit will be received by a bank in the Exporter's
country, which will authenticate it and check that its terms and
conditions are workable. They then pass the Letter of Credit on to
Please note that if the bank is merely passing the Letter of Credit
on to the Exporter, they are known as the Advising Bank.
However, if the bank is adding their undertaking to pay, they become
the Confirming Bank | Accepting Bank.
Checking the LC
The Exporter, or Beneficiary, should make the following checks
when the LC arrives to ensure that the terms match those originally
agreed with the Importer.
1. Is the Letter of Credit subject to
the latest version of the Uniform Customs and Practice for
Documentary Credits (UCP) of the International Chamber of Commerce?
2. Check the authenticity of the
If LCs are received that depart from the routine of being
sent to the Exporter from an Advising/Confirming Bank in the UK,
they should be handled with caution. Likewise, if the UK bank is not
recognised, check its authenticity with Barclays.
3. Does the type of LC give the required
level of security?
Is confirmation of the LC required? If so, establish whether the LC
is in fact confirmed, thus carrying the extra and separate
undertaking of a second bank, usually in the UK. Also establish
whether it is revocable or irrevocable. Remember revocable LCs can
be cancelled without the Exporter's prior knowledge. LCs issued
under UCP600 are assumed to be irrevocable.
4. Is the LC payable when and where
The LC may specify payment at sight, ie. when the correct documents
are presented to the Paying Bank, or at a later date, a set period
of time after the documents have been accepted. The LC can either be
made payable in the UK, with little or no delay after checking by
the Paying Bank, or abroad with possible delays. With payment abroad
please note that the Exporter is responsible for postal delays in
presenting documents overseas within the time limits set by the
5. Is the value of the LC correct?
Ensure the LC covers the full invoice value, incorporating any
additional costs such as freight and/or inspection fees.
6. Are the Importer and Exporter's
Ensure the Exporter's name and address are spelt correctly
and that they are shown exactly as they are on the invoice heading.
Similarly, ensure the Importer's name and details are copied from
7. Are the terms of shipment correct?
Ensure that the terms of shipment are the same as you quoted and
that they match the price properly.
8. Are all the charges correct?
Ensure that only the bank charges that have been agreed to
pay are stated. Pay particular attention to bank reimbursing charges
with an LC not expressed in sterling.
9. Can the expiry date be met?
Ensure that the Exporter can present the documents within the
terms of the LC.
10. Make sure that time is allowed for
- production and packaging
- chamber of commerce and consular work
- obtaining the inspection certificate
- assembling and checking documents
- presenting documents to the bank.
Note that the last four stages must be completed within the
number of days as stated with the LC, taken as 21 days if no
other time limit specified.
11. Can you provide the transport
documents called for?
Ensure that you are able to provide any transport
If the Letter of Credit is wrong or ambiguous in any way, or the
Exporter cannot comply with any of the terms, the Exporter
should contact the Importer to request that the LC is amended.
If this is agreed, the Importer would then ask their bank to
issue an amendment. If no amendment is made, there is a risk of
If you are in doubt about any of the terms of the LC, always
consult Barclays and/or the Advising Bank for advice. Also
remember that only the Importer can authorise amendments or
extensions through their bank.
It is advisable for an individual within the Exporter's company
to act as a co-ordinator of progress of the transaction for the
Letter of Credit between the insurance company, the freight
forwarder and all departments within the company.