Letters of credit in trade deals
opening and supporting import settlements
A letter of credit in a trade deal is for when neither side wants to risk an advance: the bank pays the supplier only against documents proving shipment. In practice payment is held up less by banks than by details — the B/L date, how a port is spelled, the goods description on the invoice. We help open import letters of credit and see the settlement through to payment.
The L/C is issued by the buyer's bank; we support the negotiation of terms, check documents under UCP 600 and watch the deadlines. Bank charges for issuance, advising and amendments depend on the banks — we calculate them per deal.
Specification
Specification · Import letter of credit. Standard terms · scheme and support cost are confirmed per deal
Service
- Instrument
- import documentary letter of credit
- ATF's role
- terms negotiation, document checks, deadline control
- Options
- combined with shipping and B/L issuance
Terms
- Timing
- bank examination — up to 5 banking days (UCP 600)
- Documents
- as per the L/C text
- Currency
- contract currency — as agreed with the bank
Process
- Before issuance
- contract terms, draft text
- Shipment
- date, transport documents
- After
- presentation, examination, payment
Price
- Base
- support — quoted per deal
- Extras
- bank charges — at the banks' tariffs
Service flow
- 01
Contract terms
We set out L/C settlement in the contract: amount, type (confirmed or not), latest shipment date, expiry, document list and Incoterms rule.
2–5 days - 02
Issuance
We help you fill in the application at your bank and agree the draft L/C text with the supplier before issuance, so you don't pay for amendments later.
depends on the bank - 03
Shipment
We make sure shipment happens by the latest date and that the transport documents — ports, consignee, freight notation — match the L/C.
per shipment schedule - 04
Document examination
Before presentation we check the set against the L/C text. The bank has up to five banking days after presentation to examine the documents (UCP 600 Art. 14).
up to 5 banking days - 05
Payment
The bank pays the supplier and releases the documents to the buyer to collect the cargo. If discrepancies are found, we prepare the way forward: correct the documents in time or agree to accept them as they are.
1–3 days
Problems
The L/C is issued but the supplier can't meet its terms: an unrealistic shipment date or a document nobody issues. Every amendment costs time and bank fees.
We agree the draft text with the supplier before issuance and check deadlines against the actual production and booking schedule.
Discrepancies: B/L dated after the latest shipment date, a port spelled differently, the invoice goods description not matching the L/C — the bank refuses to pay.
We check drafts before originals are issued and the full set before presentation, while errors can still be fixed.
The supplier's bank is not willing to advise an L/C from the chosen issuing bank, so the supplier does not receive it in time.
Before applying, we check with the supplier which bank they can receive the L/C through, and factor that into the scheme.
Documents
A typical document set for payment under an L/C. The exact list is set by the L/C text, while the Incoterms rule determines the freight notation on the B/L and whether an insurance document is needed.
Incoterms
- FOB
- B/L usually issued by the buyer's chosen line; "freight collect"
- CFR
- B/L marked "freight prepaid", freight included in the price
- CIF
- an insurance document is added to the set
Documents
- Commercial invoice
- goods description, amount and currency exactly as in the L/C
- Bill of lading
- clean on-board B/L: ports, consignee and shipment date within the deadline
- Packing List
- weights and package counts match the invoice and B/L
- Certificate of origin
- if required by the L/C terms
- Insurance policy
- under CIF/CIP — for the amount and risks stated in the L/C
FAQ
It is an undertaking by the buyer's bank to pay the supplier if the supplier presents documents that comply with the L/C terms. In international trade L/Cs are usually subject to UCP 600, under which a credit is irrevocable. The buyer pays against shipping documents; the supplier gets a bank's undertaking.
Submit an application to your bank with the contract terms: amount, currency, expiry, latest shipment date, document list and Incoterms rule. The bank checks cover or credit limit and issues the L/C via the supplier's bank. Agree the draft with the supplier beforehand to avoid paying for amendments.
With a new supplier, for a large amount, or when neither side accepts an advance. Payment happens only against properly prepared shipping documents, reducing risk for both buyer and seller. The price is bank charges and stricter document discipline.
Any mismatch between the documents and the L/C terms — from a wrong name to a missed deadline. With discrepancies the bank may refuse to pay; it can approach the buyer for a waiver to accept the documents as they are (UCP 600 Art. 16). That is why we check the set before presentation.
Under UCP 600, no more than five banking days following the day of presentation (Art. 14). Unless the L/C states otherwise, documents must be presented no later than 21 calendar days after the shipment date and within the L/C's expiry.
No, the L/C is issued by the buyer's bank. We support the process: helping agree the terms, document list and deadlines, checking the document set and following execution through to settlement.
It is made up of bank charges — for issuance, advising, confirmation if needed, amendments and payment — plus the cost of our support. Tariffs depend on the banks and the amount, so we calculate per deal.