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Let's talk about how risky 100% LC is?
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TRACKING NO. 20260122 / GLOBAL Zhongshen Trade · 23+ Years of Expert Trade Agency
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Recently I negotiated with a new customer, the order amount is about $300,000, and the customer insists on paying by 100% sightL/C. I mainly did TT before and am not very familiar with LC operation. I heard that LC also has many pitfalls. I want to ask, how risky is 100% LC really? Will there be a situation where both money and goods are lost?
Victor SunYears of service：5Customer Rating：5.0
Trade Risk Control ManagerStart a Chat
The risks of 100% LC are concentrated in "document discrepancies" and "soft clauses". Banks review documents following the principle of "strict compliance"，and even spelling errors may lead to refusal of payment. The most dangerous are soft clauses，such as "goods samples need to be confirmed by the applicant" and "customer inspection certificate as negotiation document"，which give the buyer the initiative to refuse payment. Suggestions: Review clauses word by word before opening the credit，delete all soft clauses，produce documents according to LC requirements after shipment，be sure to insure export credit insurance. Remember，LC guarantees "compliant presentation"，not "goods quality".
Eric ZhouYears of service：6Customer Rating：5.0
Senior Manager of Foreign Exchange & Tax RebatesStart a Chat
The biggest risk on the logistics side is "document discrepancies" and "overdue time limit". LC requires all document information to be completely consistent and documents must be presented within 21 days after the bill of lading date. In practice, the goods description, amount, date, and header of the bill of lading, invoice, packing list, insurance policy, and certificate of origin must be checked word for word. Suggestions: Create a "document checklist" before shipment; confirm LC special requirements with freight forwarder and customs broker in advance; choose CIF terms to control insurance policy and bill of lading; reserve at least 5 days for document preparation and courier time. Once overdue or discrepancies appear, the bank has the right to refuse payment.
Kevin LinYears of service：4Customer Rating：5.0
Trade Solutions ManagerStart a Chat
The risk level of 100% LC depends on customer credit and clause design. It is recommended to conduct a customer background check first. Listed companies and industry leaders are relatively reliable, while new customers or small companies should be vigilant even with 100% LC. During negotiation, you can try to change to "30% TT advance + 70% LC", or require "third-party inspection report" instead of "customer inspection certificate" to avoid soft clauses. At the same time, be sure to insure with Sinosure, so you can be compensated even if payment is refused. Remember: LC is a settlement tool, not a trust guarantee. Don't relax the review of customer qualifications because of 100% LC.