Maintaining a template for your letters of credit

Here's another highly practical export tip from BGI international trade manager Colin Crabbe...

"Considering their critical importance in the export chain, it's amazing how often letters of credit cause problems. 'They're always wrong' is a comment I've heard from many despairing export managers in my time.

But there is a way to minimise the problems, and it's a lot simpler than you might think.

The root of the problem is that, when you receive an export order, it is probable that your customer's overseas bank will have a reciprocal arrangement with your own UK bank, who issued the original letter of credit ... and, in my experience, that's where a lot of mistakes are made.

The overseas bank probably deals with many different styles of letters of credit, and may insert important information in the wrong place, or precis some of the data, or make a mistake on payment terms.

The result is often bank rejection, an irate finance director and all the costs of repeating the exercise by couriering out fresh letters of credit - let alone any delay in order fulfilment and negative cash flow.

The do-it-yourself approach

To get round this problem, I got our own bank to supply me with a blank template letter of credit along with precise, detailed instructions on how to complete it.

I carried this template with me, and when I received an order from a new customer, I always took the time to go through the document in depth with him so the letter of credit went through first-time.

Not exactly rocket science, but I know many exporters who have valued and applied this practical tip."