There are many traders out there who don’t even read the issued LCs until they submit them to the bank. Usually, once they receive the LCs from the buyer or importer, they assume them to be a token of advance and immediately put them inside the filing cabinet for safekeeping and start shipping the goods. But it’s not an ideal way!
Yes, Letters of Credit can be a token of advance as they guarantee payment. But in order to receive the payment, your DLC should comply with certain Letter of Credit Terms and Conditions. Further, to ensure this, it’s a must to review the LCs once you receive them, i.e., before you ship your goods.
Here, we have come up with a checklist that will help you get a basic understanding of the document. So, read on this guide to review each and every detail in the issued DLC MT700.
Letter of Credit Checklist
Company Name & Address Spelled Correctly
Maybe your company has more than one physical location. But the address that appears on the issued Letters of Credit should be your corporate headquarters. Also, make sure to double-check whether the company name is spelled correctly everywhere. In case any error occurs, the bank will raise a discrepancy, so make sure to check it properly.
Mentioned Amount and Currency
Make sure to check whether the amount and currency are mentioned as per the agreed sales & purchase contract or the proforma invoice. Keep in mind that you may be unable to draw more than the value mentioned in MT700. On the other hand, if the words “approximately” or “about” are used, then there might be a chance to have a scope of plus or minus of the total value.
Tenure of the Draft
It’s based on when you are expecting payment. If it’s at the time of document presentation, then a DLC at Sight draft is required. In case you have agreed to a specified time period, then the tenure of the draft should accurately reflect the correct number of days.
List of Goods and Merchandise
The list of goods and descriptions on your proforma invoice should clearly match the description in the LC. In case anything is misspelled in the LC, either you’ll have to misspell the same on the invoice or need to have the DLC amended.
LC Fees and Charges
Usually, the buyer needs to pay all the charges to their bank. Outside the buyer’s bank country, the seller will be responsible for all the charges that occur in their bank or any intermediary bank. Also, this has to be clearly stated on the issued MT700.
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LC Under UCP 600
If the LC is issued in a SWIFT format, the issuing bank agrees to subject their LC to the latest version of UCP 600. Further, if it is issued in any other format and doesn’t mention anything about UCP 600, then you must have to amend the DLC.
These are the important checkpoints you need to look into once you receive the SWIFT MT700 in your hand. After reviewing it, if you determine that everything seems to be okay, you can proceed with the shipment.
How to Apply Letter of Credit?
Availing Letters of Credit from Bronze Wing Trading, the Letter of Credit Providers in Dubai, can save a lot of time, errors, and headaches, as our trade finance experts can take care of each and everything in detail on behalf of buyers before issuing the final Letters of Credit. We have 30-plus years of experience in facilitating Letters of Credit for importers. Also, we have supported more than 25,000 clients to conclude their trade deals by providing the required financial instruments.
To avail DLC MT700 from good-repute banks, contact us today! We are always available to assist you with all your trade finance needs!