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Basic Mistakes Of Letter Of Credit

Basic Mistakes Of Letter Of Credit

For international sales, there are many payment options such as open account, advance payment, letter of credit and many more. Importers and exporters use the payment option named as the letter of credit. It is more expensive than other options and requires advanced operational skills. Traders use this option very rarely when others do not work. Mistakes in the letter of credit payment are due to many reasons.

 

Due to a lack of knowledge and experience, exporters usually make these mistakes. In this post, we would like to explain the most common mistakes of letters of credit that exporters make repeatedly. Make sure to prevent yourself from making these mistakes.

 

5 Biggest Mistakes of Letter of Credit

 

1. Don’t Understand The Real Purpose of a Letter of Credit

One of the most common mistakes is that you don’t understand the primary purpose. Due to your rush routine, sometimes you ignore the working procedure of the letter of credit. You can avoid these letters of credit mistakes by understanding what a letter of credit is and how it works. Join us to get detailed knowledge about a letter of credit.

 

2. Lack of Knowledge

If you want to complete the procedure of a letter of credit without any negative results, then you must understand the following point.

  • How do the letter of credit rules apply to the document
  • How to read the letter of credit
  • You should understand all terms and conditions regarding the procedure

Insufficient knowledge increases the chances of many unexpected results.

 

3. Lack of Review of Letter of Credit When it is Received

It is essential for exporters to approve all matches discussed in the agreement. Review it properly to save yourself any future trouble. Improper review causes them not to get paid to exporters or lose the sale. Make sure about the following points.

  • Not getting completed bills of lading
  • Any spelling and mathematical mistakes
  • After the specified date, shipping the goods

 

4. Don’t Have Enough Knowledge About The Mechanism

Letter of credit is not only an expensive method of payment but also requires extra expertise. All banks are restricted to the rules of the letter of credit created by the ICC Banking Commission. So, according to the terms of the letter of credit, you prepared all the required documents and are up to date about the latest rules. Lack of information about mechanisms is also the cause of many significant mistakes.

 

5. Doing Business With An Improper to Whom You have No Real Information

Before initializing any transaction, you should have fundamental knowledge about your counterpart. An exporter finishes a transaction without having enough knowledge about his buyer, making a great mistake in the letter of credit.

 

If you desire to understand more about the mistakes of the letter of credit to prevent yourself from any future trouble, then connect with us! We are always here for your help and guidance.

 

Wrap Up

Read the letter of credit as well and learn all rules and regulations. Practice and expertise is mainly the solution to every obstacle. Get enough knowledge about all terms and conditions and save yourself from problems!

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