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Change the letter of credit from BL to FCR
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Customer requests puttingThe client wants to change the bill of lading (BL) in the contract to FCR, saying it's faster and cheaper. But I've heard that FCR carries significant risks and banks might refuse payment. What should we do in this situation?
Michael ZhangYears of service：6Customer Rating：5.0
Customs Declaration & Compliance ExpertStart a Chat
The issue you encountered indeed touches upon the core risk points of letter of credit transactions. There are fundamental differences in legal nature between the Forwarder’s Cargo Receipt (FCR) and the Bill of Lading (BL): BL is a document of title，while FCR is not. According to UCP 600，if the letter of credit requires a bill of lading，banks will strictly review its ownership attributes when auditing documents. If you submit an FCR，the issuing bank has the right to refuse payment on the grounds of "document discrepancy," even if the client has already picked up the goods. From a compliance perspective，such modifications pose three risks。
1. Bank refusal risk: FCR does not meet the letter of credit’s implied requirements for transport documents。
2. Loss of cargo control: Consignees can pick up goods without the original FCR。
3. Foreign exchange settlement risk: In some regions，foreign exchange control authorities conduct stricter reviews of outbound payments under FCR。
My advice is。
- If the letter of credit has already been issued，you must require the client to issue an official amendment letter through the issuing bank，explicitly replacing "BL" with "FCR" and confirming the bank’s acceptance. Never change the document type based solely on client emails or verbal commitments。
- If the letter of credit has not yet been issued，clarify document requirements during contract negotiations and explicitly specify "FCR acceptable" in the letter of credit terms. Ideally，also include a clause requiring the "forwarder to be designated by the beneficiary" to retain some control rights.
Daniel XuYears of service：10Customer Rating：5.0
Director of Import & Export OperationsStart a Chat
From a logistics practical perspective, the switch from FCR to BL does indeed affect operational procedures. FCRs typically appear in scenarios involving LCL (Less-than-Container Load) or buyer-designated freight forwarders (FOB terms), where forwarders issue FCRs instead of bills of lading to control the goods. Compared to BLs, FCRs offer faster issuance, lower costs (often no telegraphic release fees), and no need to mail original copies. However, there are several key operational considerations:
First, verify the forwarder’s credibility. Under FCRs, the forwarder is liable to the consignee, and if the forwarder has a close relationship with the buyer, you may completely lose control over the goods.
Second, pay attention to the cargo handover process. FCRs are merely receipt documents and cannot control ownership rights like BLs through controlling the original copy.
Third, consider transportation mode compatibility. FCRs are common in air freight and express shipping, but using BLs for FCL (Full Container Load) shipments is safer.
If you must accept FCRs, we recommend the following measures:
- Select a trusted forwarder.
- Clearly mark "To Order" in the shipper’s field (though FCRs have limited legal effect).
- Require the forwarder to annotate the FCR with "Delivery must be based on the original FCR" (though enforcement may be limited).
A more secure approach is to change the trade term from FOB to CIF or CFR, allowing you to control the forwarder’s selection. Even if FCRs are issued, the forwarder will follow your instructions.
Linda GaoYears of service：7Customer Rating：5.0
Documentation SupervisorStart a Chat
Facing such a request from the client, your concerns are completely reasonable. This is not just a document issue, but also a game of negotiating leverage. When the client proposes to amend the FCR, it's usually to speed up the delivery process and save costs, but essentially, they want to weaken your control over the cargo rights. Directly saying "no" might harm the relationship, while blindly agreeing could put you at risk. Here's how you can communicate with the client:
"We understand your desire to expedite the process, but under the L/C terms, the bank has very strict requirements for documents. Making rash changes might lead to bank refusal of payment, delaying settlement time. To protect both parties' interests, we propose two solutions:
1. Maintain the BL, but arrange Telex Release. This preserves bank-approved documents while allowing you to pick up goods quickly. We'll cover the Telex Release fee.
2. If you insist on FCR, we need you to coordinate with the issuing bank to issue an official L/C amendment, explicitly accepting FCR, and changing the payment term from 'Documents Against Payment' to 'XX days after shipment'. In this case, we'll assume cargo rights risk but gain payment term compensation."
This approach demonstrates cooperation sincerity while skillfully shifting risk responsibility. Typically, clients will back down when hearing about L/C amendments and accept Telex Release. If the client is a powerful buyer, you could negotiate a higher prepayment ratio (e.g., 30% deposit) or require them to issue back-to-back L/Cs to isolate sub-document risks. Remember: all document amendments must be supported by written documents - verbal commitments hold no value in trade disputes.