Pay attention to the issuing bank. Especially those small banks in Africa and South America that are unknown and unheard of. Because the letter of credit relies on the bank’s credit, if the bank is unreliable, the exporter will face the danger of losing both money and goods. Therefore, generally before opening the letter of credit, confirm with the customer, or directly ask for “opening the letter of credit through a well-known European/American bank”. If the customer refuses because of the inconvenience of operation, you can accept the letter of credit from a small bank, but ask for “confirmation” from a well-known European/American bank. Confirmation means asking another reliable bank to be the guarantor of this letter of credit. If the issuing bank refuses to pay unreasonably, the bank that confirms the payment shall bear the payment responsibility. Because the judicial system and bank supervision system in Europe and the United States are relatively complete and developed, the reputation of commercial banks is generally high. Confirmation requires paying a confirmation fee to the bank, but this will give the letter of credit a “double insurance”.
If the letter of credit is reviewed and found to be correct, it can be accepted and operated accordingly. Remember, letters of credit are based on documents, not goods. Even if there is a problem with the goods, you can still get the money if the documents are “beautiful”. On the contrary, if there is a problem with the documents, even if the goods are good and the service is dedicated, you will still suffer losses. The so-called “beautiful” documents are based on the standard of “consistency between documents and documents”, that is, the documents and the requirements of the letter of credit are consistent, and the same content columns between documents are consistent.