Common Export Documents for Letters of Credit

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Are you confused about all of the documents required for exporting goods under a letter of credit? While letters of credit are the backbone of international trade finance, many importers and exporters don’t fully understand the plethora of documentation involved in these important transactions. This article will give an outline of the various presentation documents that can be required under a letter of credit, and provide tips about how to best implement them for effectiveness and cost efficiency.


Basic Export Documents & Principles

The number one rule to keep in mind is that all required documents and certificates should be prepared before shipping. It would be a big mistake, for example, to ship your goods to another country and attempt to get an inspection certificate after it arrives. If you can’t get the proper certificate, the buyer isn’t obligated to accept the goods and you’ll have three options: 1) find a new buyer, 2) reship the goods back to your country, or 3) abandon the goods. None of these are ideal options. Thus, be sure to get your documents in order before you ship.

Every letter of credit export arrangement will have at least two documents that must be provided. The first is the invoice, which is called the ‘bill of exchange.’ The language used in the invoice must exactly match the requirements in the letter of credit, otherwise, the buyer will have no obligation to accept and pay for the goods. Even tiny differences, such as the use of the trade name or industry jargon for the goods instead of the official name can be a valid basis to reject otherwise conforming goods. The second document required in every letter of credit for exported goods is the transport document, which may be a bill of lading or other certificate providing the relevant carrier information.

Export Certificates

Letters of credit may also require certificates, which are documents that must be signed. Generally, certificates come from independent third parties, such as government agencies or commercial goods inspectors. Certificates from third parties aren’t free, and thus, you should carefully consider how the multiplication of certificates may affect the cost of the transaction. Some common certificates include:

Inspection Certificate: A letter of credit should specify quantifiable inspection criteria to be used by an independent inspector. It should also state whether a specific company or class of companies must be used. It’s generally best to avoid requirements for multiple inspectors’ signatures. Likewise, it is best to have flexibility in the inspectors or inspection companies that may issue the certificate.

Consular or Visaed Invoice: Some countries require these certificates to be issued by an official from the exporter’s country. The essential purpose for such a certificate is to ensure compliance with the importer country’s exchange controls, balance of payments, laws and regulations.

Certificate of Origin: Some countries require this document in order to disclose the country of origin of the exported goods. In some cases, the seller may sign the document, however, some countries require specific agencies to sign the document and may further require the certificate to be notorized or visaed.

USDA Inspection Certificate: This document provides evidence as to the quality and condition of agricultural products. It certifies that the products you shipped were in good condition prior to shipping, which can provide supportive evidence in case your transaction results in a claim or lawsuit.

Phytosanitary Certificate: This document is also issued by the USDA, but relates primarily to plants and plant products. This certificate generally states that the goods have been inspected to be free of harmful pests and diseases.

Other Pre-Shipping Documents

Insurance Documents: For obvious reasons, all exports should be insured. However, the provider of insurance will vary depending on the transaction and the agreed on international commercial terms.

Packing List: This document is different from the invoice. It does not list prices, but instead lists all of the merchandise with specific details regarding the number of cartons, boxes, and other packaging, and the items contained inside them.

Other Documents: If other documents are required, it is very important for the letter of credit to stipulate the content and wording of the document, in addition to whom must issue the document.

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