4. LC is received by Advising Bank, which checks the LC, then passes it on to the Seller

The Letter of Credit will be received by a bank in the Seller’s country, which will authenticate it and check that its terms and conditions are workable. They then pass the Letter of Credit on to the Seller. Please note that if the bank is merely passing the Letter of Credit on to the Seller, they are known as the Advising Bank. However, if the bank is adding their undertaking to pay, they become the Accepting Bank Checking the LC The Seller, or Beneficiary (of LC), should make the following checks when the LC arrives to ensure that the terms match those originally agreed with the Buyer. 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 LC If LC’s are received that depart from the routine of being sent to the Seller from an Advising/Confirming Bank. The bank should be authenticated. 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. Also establish whether it is revocable or irrevocable. Remember revocable LCs can be cancelled without the Seller’s prior knowledge. LCs issued under UCP600 are assumed to be irrevocable. 4. Is the LC payable when and where requested? 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. With payment abroad please note that the Seller is responsible for postal delays in presenting documents overseas within the time limits set by the expiry date. 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 Buyer and Seller’s details correct? Ensure the Seller’s name and address are spelt correctly and that they are shown exactly as they are on the invoice heading. Similarly, ensure the Buyers’s name and details are copied from the invoice. 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 Seller can present the documents within the terms of the LC. 10. Make sure that time is allowed for the following: • production and packaging • inspection • shipment • chamber of commerce and consular work • obtaining the inspection certificate • assembling and checking documents • presenting documents to the bank. 11. Can you provide the transport documents called for? Ensure that you are able to provide any transport documents required. Amendments If the Letter of Credit is wrong or ambiguous in any way, or the Seller cannot comply with any of the terms, the Seller should contact the Buyer to request that the LC is amended. If this is agreed, the Buyer would then ask their bank to issue an amendment. If no amendment is made, there is a risk of non-payment. If you are in doubt about any of the terms of the LC, always consult the Advising Bank for advice. Also remember that only the Buyer can authorize amendments or extensions through their bank. It is advisable for an individual within the Seller’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.

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