Things to note when issuing letters of credit electronically and collection strategies in cross-border e-commerce B2B business

When using the electronic method to open a letter of credit, you need to pay attention to the validity of telecommunications documents, pre-notification and certificate set-up issues. In addition, in cross-border e-commerce B2B business, after signing the contract, the customer should pay the money on time or open a letter of credit. However, in reality, we may also encounter situations where customers do not pay or issue certificates on time, in which case certain urging measures need to be taken.

Validity of telecommunications documents and necessity of mailing confirmation

According to “UCP600”, if the telecommunications document does not contain “details to be announced later” or other similar expressions, and does not state that the mailing confirmation shall prevail, the telecommunications document shall be a valid letter of credit. This means that in most cases, the issuing bank does not need to mail a separate confirmation; even if it is mailed, other banks and beneficiaries may choose to ignore it. However, if the document clearly states that further details are pending or a confirmation by mail is required, a formal letter of credit or confirmation by mail must be issued promptly. This rule also applies to letter of credit modification notices.

Pre-notification

In order to ensure that the beneficiary can understand the issuance status of the letter of credit as early as possible, sometimes the applicant will ask the bank to send a pre-notification via telecommunications. This kind of pre-notice usually only contains basic information such as beneficiary name, letter of credit number, contract number, amount, product name, etc. Nevertheless, the issuing bank still needs to ensure that the complete letter of credit issued later is consistent with the content of the pre-notification.

Certification issues

In order to avoid additional costs when issuing a repeated letter of credit, some applicants may request to apply some of the terms of the previous letter of credit. However, this approach may lead to omissions or misunderstandings of terms, especially if the previous letter of credit has been amended. Therefore, UCP600 recommends that banks discourage such behavior.

Dunning strategies in cross-border e-commerce B2B business

In cross-border e-commerce B2B business, once a contract is signed, the seller should promptly remind the buyer to fulfill its payment obligations. You can gently remind customers to pay according to the contract, such as through email, and emphasize the importance of timely payment to ensure that orders are completed on time. At the same time, when urging the issuance of a letter of credit, the relevant payment terms in the contract should be quoted, and the possible adverse effects of delayed issuance of the letter of credit, such as production delays, should be explained.

The above is an introduction to the issues that need to be paid attention to when issuing a letter of credit electronically and how to effectively collect payment in cross-border e-commerce B2B business. I hope this information will help you better understand and respond to various practical situations.