Solutions Overview
Knowledge About L/C In The Process Of Foreign Trade
In foreign trade, L/C has been increasingly used in the export trade. However, the high cost and high risk make many companies discouraged. And these costs and risks happen due to a word--discrepancy. Today, I would like to introduce the risk caused by discrepancy under L/C and some discrepancies to be a reminder for you. 

"Discrepancies" refers that after the buyers issue a L/C but sellers do not present document in accordance with the requirements. Once there is discrepancy between document and L/C, such as a word or punctuation, it still is regarded as discrepancy. Generally speaking, the discrepancy deducts $50 to $100 depending on the bank regulations. Regardless of the amount of discrepancy, each document shall be deducted only once paid by seller. This commonly reflects the high fees of L/C. 

Once there is a discrepancy, the bank’ credit of the L/C is no longer in existence but transfers to customer's business creditbecause the bank needn’t to bear the responsibility due to discrepancy. Whether you can get the payment only depends on customer's credit. If customers refuse to pay, sellers will be caught in a dilemma. So this is the risk of L/C. 

The existence of discrepancies is the key to affect risk and deduction of L/C. Some discrepancies cannot be avoided, but some can. If you are experienced, you must know clearly about discrepancies in one L/C.

Discrepancies about time:
1. The L/C expired; 
2. L / C date of shipment expires; 
3. Presentation document by beneficiary expires

Discrepancies about content 
1. Lack of documents (lack of advice of shipment or delivery documents, certificate etc. ) 
2. B/L is not marked “Freight Prepaid” (generally speaking, under FOB and master B/L, “FREIGHT PREPAID” cannot be marked on B/L); 
3. Vessel certificate is not issued by the requirement of L/C(the vessel certificate is generally issued by shipping company, but most of the shipping companies have their own fixed format and it cannot be fully shown in accordance with L/C requirements. Therefore, a discrepancy occurs); 
4. Discrepancies between each document category and L/C; 
5. Discrepancies between types of insurance and L/C; 
6. The endorsement error of transport document and insurance document or not according to the requirements of endorsement; 
7. Cargo short or over loaded (generally, L/C allows a ±5-10% drop, so you can remind your customers before issuing L/C); 
8.Documents do not be signed and sealed as required; 
9.Documents copies are not in agreement with L/C (including B/L, which can be confirmed in advance with freight forwarding)
Among the problems caused by discrepancies, in addition to the documents issued by the beneficiary (bill of lading, vessel certificate, certificate of origin, inspection certificate, etc.), certificates and documents issued by the beneficiary are controlled. As long as we are careful enough, many discrepancies are avoidable. 

When received the L/C draft, we ought to concern whether the validity, shipment date is in range that we can arrange and whether L/C requires some certificates or documents issued by customers or the third parties. Please remember: only documents and files that are made by beneficiary are controllable. In order to better control discrepancies, the key is to prepare well in advance. 

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