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In Shanghai, which countries require that imports be paid via letter of credit only?
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We are a company based in Shanghai.Recently, our company has secured several new clients from Bangladesh, Nigeria, and Argentina. I've heard that in some countries, importing goods is only allowed under certain conditions.We can't do it through TT. I want to ask which countries have such mandatory requirements? We are doing thisandWhat risks should we pay attention to when purchasing insurance online?
Evelyn LiYears of service：3Customer Rating：5.0
Cross-border Compliance SupervisorStart a Chat
From the perspective of compliance and foreign exchange regulation，you need to pay particular attention to developing countries with strict foreign exchange controls. Currently，the main countries that enforce or covertly require letter of credit payments include: Bangladesh (all imports must be paid via letter of credit)，Nigeria (foreign exchange controls，TT payments are generally not approved)，Pakistan，Egypt，Argentina，Venezuela，Iran，etc. These countries' foreign exchange management authorities typically stipulate that all import payments must be made through bank letters of credit channels to ensure controlled outflow of foreign exchange. In practice，the greatest risk is that even if the client agrees to TT payments，the funds may still not be remitted，resulting in you having shipped the goods but not receiving payment. During the customs declaration process，it is essential to ensure that the declaration form，bill of lading，and invoice amounts are strictly consistent with the letter of credit，otherwise it will be impossible to clear the payment. Recommendations。
1) Clearly stipulate the letter of credit issuance period in the contract。
2) Check the country-specific risk rating through China Export & Credit Insurance Corporation (Sinosure)。
3) Require clients to open immediate，irrevocable letters of credit to avoid the risk of future acceptance。
4) Pre-review all documents before submitting them to the bank to avoid rejection due to non-conformities.
Cindy ChenYears of service：3Customer Rating：5.0
Key Account ManagerStart a Chat
From the logistics operational perspective, transportation arrangements for countries with letters of credit must be planned in advance. For such orders, it is strongly recommended to use CIF or CFR terms, allowing you to control the freight forwarder and shipping schedule to avoid the risks caused by clients designating their own freight forwarders under FOB terms. Key points: Letters of credit typically require the provision of a Master Bill of Lading, while Air Waybills (AWBs) are considered non-property rights documents by many banks, which may lead to payment refusal. If the client insists on air freight, it is necessary to explicitly accept AWBs in the letter of credit terms. Regarding documents, the Consignee on the bill of lading must be listed as "To Order of Issuing Bank" according to the letter of credit requirements, rather than directly recording the client's name. The insured amount on the insurance policy must be increased according to the letter of credit requirements (usually 110%). Practical suggestions:
1. Provide a copy of the letter of credit to the freight forwarder before booking the order to ensure all transportation terms are enforceable;
2. Reserve at least 5-7 working days for document submission and review;
3. Avoid partial shipments and transshipments unless explicitly permitted by the letter of credit;
4. All document dates must be logically reasonable to avoid the risk of "backdated signatures".
Grace WangYears of service：10Customer Rating：5.0
Senior Foreign Trade ConsultantStart a Chat
From the perspective of business negotiations, when dealing with countries with mandatory letters of credit, negotiation strategies and tactics are crucial. Clients don’t distrust you—it’s simply due to their country’s foreign exchange control regulations. You can frame this as a professional image of "jointly complying with local regulations." During negotiations, suggest the following: "We understand your country’s foreign exchange management regulations, and letters of credit are the best way to protect both parties’ rights. To ensure a smooth transaction, we recommend using an immediate, irrevocable letter of credit issued by a reputable bank in your country. This not only meets regulatory requirements but also safeguards your goods."
At the same time, strive for more favorable terms:
1) Require a 10-30% prepayment (TT) with the balance paid via letter of credit to reduce risks.
2) Clarify the deadline for issuing the letter of credit and reserve the right to cancel the contract and confiscate the prepayment if it’s overdue.
3) Require the letter of credit to be confirmed (Confirmed L/C), especially those issued by banks in less developed countries.
4) Purchase export credit insurance to transfer the risk of bank non-payment.
A high-EQ approach is to explain the letter of credit process clearly and provide document templates, making clients feel that you’re experienced and attentive to their needs, rather than creating unnecessary difficulties for them.