Khandakar
SITPRO
Simplifying International Trade
REPORT ON THE USE OF EXPORT LETTERS OF CREDIT 2001/2002
SITPRO’s Letter of Credit Report 11 April 2003
Executive Summary
Numerous surveys have been carried out in the UK (including by SITPRO) suggesting the rejection rate of first time presentations against letters of credit is between 50-60%. These findings have led to much publicity about the costs and dangers of failure to present compliant documents with work being carried out by SITPRO and other organisations to help exporters improve their performance in the use of letters of credit. Although much work has been carried out rejection rates seem to remain static. SITPRO felt that in order to move forward it would be ideal to examine why letter of credit presentations are rejected and what are the most common discrepant documents. This work commenced in 2001, with this report intended to consolidate the information gathered so far and look at ways in which further work can be carried out to help UK exporters in letter of credit operations. In order to ascertain the extent of the problem of rejection rates of letters of credit the review also estimates the cost to UK business of non-compliant presentations. A list of the top ten discrepancies can be found on page 13, with more detail given in Appendix 1. It is interesting to note that some of the most common discrepancies are those which are the simplest to correct and within the control of the exporter: inconsistent data; late presentation and shipment and, perhaps most disappointingly, absence of documents. From this information it appears that some exporters are not giving the time or resource necessary to dealing with letters of credit, which is essential from the beginning of the contract negotiations through until correct documents have been presented and payment has been received. The review estimates that in 2000 the UK lost £113 million through non-compliant documents being presented under letters of
Simplifying International Trade
REPORT ON THE USE OF EXPORT LETTERS OF CREDIT 2001/2002
SITPRO’s Letter of Credit Report 11 April 2003
Executive Summary
Numerous surveys have been carried out in the UK (including by SITPRO) suggesting the rejection rate of first time presentations against letters of credit is between 50-60%. These findings have led to much publicity about the costs and dangers of failure to present compliant documents with work being carried out by SITPRO and other organisations to help exporters improve their performance in the use of letters of credit. Although much work has been carried out rejection rates seem to remain static. SITPRO felt that in order to move forward it would be ideal to examine why letter of credit presentations are rejected and what are the most common discrepant documents. This work commenced in 2001, with this report intended to consolidate the information gathered so far and look at ways in which further work can be carried out to help UK exporters in letter of credit operations. In order to ascertain the extent of the problem of rejection rates of letters of credit the review also estimates the cost to UK business of non-compliant presentations. A list of the top ten discrepancies can be found on page 13, with more detail given in Appendix 1. It is interesting to note that some of the most common discrepancies are those which are the simplest to correct and within the control of the exporter: inconsistent data; late presentation and shipment and, perhaps most disappointingly, absence of documents. From this information it appears that some exporters are not giving the time or resource necessary to dealing with letters of credit, which is essential from the beginning of the contract negotiations through until correct documents have been presented and payment has been received. The review estimates that in 2000 the UK lost £113 million through non-compliant documents being presented under letters of