Documentary Letter Of Credit

Documentary Letter of Credit (L/C) is mainly a guarantee for the seller to get paid, once the cargo is shipped on board, while the buyer remains unprotected, if the cargo dispatched does not correspond to the quality ordered.

Banks do not guarantee that what is described in the documents corresponds to the packed commodity. Carriers and forwarders do not examine the contents of packages or containers but trust that what is declared by the shipper corresponds to the truth.

It this therefore very important  to choose reliable business partners, who will not disappear or runaway from their responsibilities when the cargo arrives to the buyer and the quality does not corresponds to his expectations

Beyond definition of terms and schedule of payment of the cargo,  buyer must use the L/C to force the seller to the accomplishment of a number of obligations, including the Incoterm agreed in the order confirmation and the issue at the country of origin of all documents required to the customs clearance at the country of destination. We recommend you to have a previous conversation with your customs broker to check eventual benefits and/or restrictions enjoyed by the product and the documents required for that purpose. Please contact our Customs Services department for any assistance.

L/C serves also to force the seller to ship the cargo within the agreed time frame and mode of transportation and, depending on the agreed Incoterm (ex: EX-WORKS, FCA, FOB), the carrier or forwarder to be used.

Seller has the right and the obligation to analyze carefully the L/C, to check if it is according to the order confirmation, the agreed time frames and all requirements that may have been imposed by the buyer, asking him the alteration of the  items eventually incorrect or even impossible to accomplish.  Example of impossibility is the non-permission of transshipment when there are not direct transport services operating between origin and destination. Another is the obligation to present a transport document (ex: Bill of Lading) of a type impossible to adequate to the mode of transportation to be used (ex: demand an “Ocean” or a “Marine” Bill of Lading when the transport will be Multimodal)

Transcinco will be very glad to assist you (buyer and/or seller) to clarify any doubts when opening a L/C (client buyer) or when it arrives to your hands (client seller).