In international trade, letters of credit (LCs) are the backbone of secure transactions—especially when dealing with new or unfamiliar buyers. According to a 2023 ICC report, over 40% of LC disputes arise from mismatched documents and contract terms. That’s why thorough clause review isn’t just best practice—it’s essential for avoiding costly delays, rejected payments, and even lost shipments.
Think of your contract as the blueprint and the LC as the construction permit. If they don’t match, the bank won’t pay—even if you’ve shipped everything perfectly. In fact, banks follow UCP600 rules strictly: any discrepancy, no matter how small, can trigger rejection. A study by HSBC found that nearly 67% of LC rejections in 2022 were due to minor but critical mismatches, such as inconsistent descriptions or missing dates.
Clause | What to Check | Real-World Risk |
---|---|---|
Goods Description | Compare product name, specs, quantity, packaging, Incoterms, and唛头 (marking) | Mismatched unit (kg vs lbs) or wrong Incoterm like FOB instead of CIF led to $87K loss for a German exporter in 2021. |
Shipping Terms | Confirm port names, transit time, and whether partial shipments or transshipment is allowed | Same port name in two countries (e.g., "Port of Shanghai") caused confusion in a Chinese textile deal—delayed shipment by 14 days. |
Documents Required | Check type, number, issuer, and content consistency across all docs | A single typo in the invoice number once triggered a full LC rejection—costing a US supplier $32K in penalties. |
If you find a mismatch:
Remember: The goal isn’t perfection—it’s predictability. By aligning your contract, LC, and documentation early, you reduce uncertainty and increase trust with your buyer and bank alike.
Don’t wait for a dispute to learn this lesson. Download our free LC Clause Review Checklist PDF—used by top 50 global exporters—to ensure your next transaction sails smoothly.
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