Preparing documentation for letters of credit (L/Cs) can be a headache. This is especially so when documents have to be prepared exactly according to the numerous conditions and requirements in the letter of credit. However, relief is available. Outsourcing can be an effective and low cost solution to solve this problem, avoiding documentation mistakes.

It may come as a shock to many exporters to learn that over 60 percent of documentary presentations contain discrepancies - shocking, but understandable. The letter of credit is a complicated payment mechanism. It takes a high level of expertise to deal with all the players in a letter of credit scenario - buyers, banks and freight forwarders - who may have differing priorities, requirements and stipulations. Furthermore, the buyer or the overseas bank usually has particular requirements on how the letter of credit documents should be presented for payment. These documents cannot normally be produced by financial systems, which leave the exporter even more confused than before.

New rules for Letters of Credit (UCP 600 effective July 2007) have facilitated a mini technology break through, which is finally happening to the L/C process. Online access to banking data now allows for the proper capture of L/C advice data, which can then be easily validated and converted into conforming documents. This critical path can now be tightly controlled on an outsource basis, to ensure proper management of the Letter of Credit process, including third party responsibilities, while providing for full client monitoring of these critical tasks.

Some exporters refuse business on a “Letter of Credit” basis - because they do not have the know-how, the time or necessary expertise to deal with the process. This translates into lost business opportunities, which most firms can no longer ignore in this economic climate. Other exporters may rush in “where angels fear to tread” and suffer complications and potentially disastrous consequences as part of the deal.

An example of a company who provides outsourcing is Export Edge, who over the last 12 years have negotiated over $200,000,000 L/C contracts and prepared compliant documents to satisfy Letter of Credit contracts within the rules of the International Chamber of Commerce (ICC). By helping companies avoid the hassle and anguish of this technical breach of contract, Export Edge’s expertise have proved the immediate benefits that can come from such a Managed Service.

Further information can be obtained from Austin Rutledge on Export Edge