L/C types — pick by payment terms
UCP 600 (effective July 1, 2007) is the universal framework for documentary credits. Almost every L/C cites "Applicable Rules: UCP LATEST VERSION" in field 40E. Once that line is in, every interpretation defaults to the ICC text — country law steps aside on document examination.
Banks examine documents, not goods (UCP 600 Article 14). A perfect document set is the only path to payment — even a typo on the beneficiary name or a one-day-late on-board date can hold the payment for weeks while parties negotiate a waiver. Minor errors are not minor in this regime.
For sellers, time-to-payment under a compliant L/C is typically 5–10 business days after presentation. Discrepancies push it out by weeks. For buyers, opening an L/C is a payment-undertaking obligation that survives the underlying sales contract — once the credit is issued, the funds are committed even if you later regret the trade.
| Type | Payment timing | Use case | Common in |
|---|---|---|---|
| Sight L/C | At presentation of compliant docs | First-time trade, low trust | Most apparel and consumer goods |
| Usance / Deferred Payment L/C | 30 / 60 / 90 / 180 days after sight or shipment | Trusted buyer who needs financing | Capital goods, machinery |
| Confirmed L/C | At presentation — second bank adds its own undertaking | Country risk on the issuing bank | Emerging-market buyer |
| Standby L/C (SBLC) | On default only — rarely drawn | Performance or payment guarantee | Construction, services, large supply |
| Revolving L/C | Replenishes after each draw | Ongoing supply contract | Bulk commodities |
| Transferable L/C | At presentation; rights transferable to a second beneficiary | Middleman / trader without own line | Brokered transactions |
SWIFT MT700 fields
| Field | Required | Guidance |
|---|---|---|
| 40A — Form of Documentary Credit | Yes | Irrevocable is the default under UCP 600 — revocable credits are no longer recognised by the rules. |
| 20 — Documentary Credit Number | Yes | Issuing bank's unique reference. Quote it on every document the beneficiary presents. |
| 31C — Date of Issue | Yes | UCP 600 timing starts from here. Older issue dates may mean a stale credit — check 31D expiry. |
| 40E — Applicable Rules | Yes | Almost always "UCP LATEST VERSION" — anchors the credit to UCP 600. Any other value should be questioned. |
| 31D — Date and Place of Expiry | Yes | Beyond this date, the beneficiary cannot claim. Place of expiry decides where documents must be presented by the cut-off. |
| 50 — Applicant | Yes | The buyer. Address and name must match the underlying sales contract. |
| 59 — Beneficiary | Yes | The seller. Exact name match against the invoice and other documents — banks treat any spelling difference as a discrepancy. |
| 32B — Currency Code, Amount | Yes | ISO 4217 currency + amount. Cross-check against the sales contract; mismatch is a structural defect. |
| 39A — Percentage Credit Amount Tolerance | Optional | Typically +/- 5% or +/- 10%. Without 39A, UCP 600 Article 30 default tolerances apply only in narrow conditions. |
| 41A — Available With/By | Yes | Which bank the credit is available with, and by what method: payment, acceptance, negotiation, or deferred payment. Determines where the beneficiary presents. |
| 42C — Drafts at | Optional | Used when drafts are required — the usance period (e.g., "60 days after sight"). Omit for pure payment credits. |
| 42A — Drawee | Optional | On whom the drafts are drawn. Usually the issuing bank or a nominated bank. |
| 43P — Partial Shipments | Yes | ALLOWED or NOT ALLOWED. Silence defaults to ALLOWED under UCP 600 Article 31, but credits almost always state it explicitly. |
| 43T — Transhipment | Yes | ALLOWED or NOT ALLOWED. UCP 600 Article 20 lets transhipment occur even when prohibited, if the entire carriage is covered by one B/L — common surprise to first-time sellers. |
| 44A — Place of Taking in Charge / Dispatch / Receipt | Optional | For multimodal transport. Often an inland point (ICD, factory). Distinct from 44E port of loading. |
| 44E — Port of Loading / Airport of Departure | Yes | Required for sea or air shipments. Must be a real sea port or airport — not an ICD. |
| 44F — Port of Discharge / Airport of Destination | Yes | Required for sea or air shipments. Must match the destination on the B/L or AWB. |
| 44B — Place of Final Destination / For Transportation to | Optional | For multimodal. The final inland delivery point if different from the port of discharge. |
| 44C — Latest Date of Shipment | Yes | The single most-watched field. On-board date on the B/L (or AWB date for air) cannot be later than this. |
| 45A — Description of Goods/Services | Yes | Generic description is fine and safer. Over-specifying (model numbers, HS codes, certifications) multiplies discrepancy risk on the invoice. |
| 46A — Documents Required | Yes | Invoice, transport document, packing list, insurance certificate, certificate of origin, inspection certificate. Each line is a separate trap — read carefully. |
| 47A — Additional Conditions | Optional | Special terms outside the standard document set. Common source of discrepancies — non-documentary conditions are disregarded under Article 14(h) but document-linked ones are enforced. |
| 71B / 71D — Charges | Optional | Who pays L/C fees: OUR (applicant pays all), BEN (beneficiary pays all outside issuing bank), SHA (each side pays its own bank). Watch confirming bank fees. |
| 48 — Period for Presentation | Yes | Days after shipment within which documents must be presented. UCP 600 default is 21 days; check the credit and the 31D expiry — whichever is earlier wins. |
| 49 — Confirmation Instructions | Yes | CONFIRM (advising bank must confirm), MAY ADD (advising bank may confirm at beneficiary's request), or WITHOUT (no confirmation). |
| 78 — Instructions to the Paying/Accepting/Negotiating Bank | Optional | Reimbursement and document-handling instructions. Usually bank-to-bank language the beneficiary doesn't act on directly. |
Common discrepancies
Reasons banks refuse the document set
- Late presentation — documents arrive after the 21-day period (or whatever 48 specifies) or after 31D expiry.
- Late shipment — B/L on-board date is later than 44C latest shipment date.
- Description mismatch — invoice goods description differs from 45A wording.
- Insufficient insurance coverage — less than 110% of CIF or whatever the credit demands; wrong currency; wrong risks covered.
- Wrong number of B/L originals — "full set" not presented, or stated count diverges from the B/L itself.
- Missing endorsement on order B/L — the endorsement chain to the issuing bank or to order is incomplete.
- Partial shipment when 43P prohibits — even a split between two B/Ls on different vessels triggers it.
- Mathematical error in invoice — line subtotals don't equal the total, or unit price × quantity doesn't reconcile.
- Wrong notify party — notify field on B/L doesn't match the credit's instruction.
- Insurance dated after B/L on-board date — UCP 600 Article 28 requires cover to be effective no later than the date of shipment.
Best practices
Amend before shipment, not after
If the original L/C terms can't be met — wrong port, wrong description, latest shipment date too tight — apply for an amendment BEFORE shipping. Post-shipment amendments are slower, more expensive, and sometimes refused outright by the applicant if leverage has shifted.
Use a second pair of eyes on the document set
Freight forwarder checks the transport document, bank's trade finance desk checks the credit-linked documents, your own export clerk checks the invoice math. Three independent reads before presentation catch what one reader misses every time.
Build a credit-specific checklist, not a generic template
Every L/C has its own 47A additional conditions and 46A document list. A generic "export checklist" misses the special clauses. Print the credit, highlight each requirement, tick off against the actual documents — one credit, one checklist.
Negotiate MAY ADD instead of CONFIRM when possible
If the seller wants confirmation flexibility without forcing the buyer to pay confirmation charges, ask for field 49 to read "MAY ADD". The beneficiary can then request confirmation if conditions deteriorate, without locking in the cost upfront.