Three silent risks that stall payment under an LC

For exporters, bad news under a letter of credit rarely arrives loudly. The text looks standard, the bank processes the deal, the documents are prepared — and the problem only shows up at presentation, or when the payment doesn’t come. Yet most of the risks that stall collection can be seen before the credit is accepted.

Below are three “silent” risks drawn from two real transactions, and why all three are resolved in the same place — before issuance. The examples come from our Tunisia and Libya cases; both are fully anonymized.

1. Unconfirmed: a credit that looks confirmed but isn’t

The text may request confirmation, even name the confirming bank — and the transaction can still be advised unconfirmed. The difference is vital: unconfirmed, payment depends solely on the issuing bank; if it doesn’t pay, the risk stays with the exporter. In dollar-constrained, higher-risk markets that possibility is real. It happened in a Tunisia deal — see the Tunisia case. The fix is to run the transaction through a confirmation analysis and move the risk to a strong confirming bank.

2. Origin and document contradiction: the text fighting itself

Sometimes the problem isn’t in a single document but within the text itself. In the same Tunisia deal the text stated both Turkish-origin goods and “Türkiye – South Korea” origin, while requiring a mandatory EUR.MED certificate — yet Korean-origin goods don’t fall under EUR.MED. That is a certain discrepancy at presentation, visible only by reading the text line by line. Catching it is the job of an LC text review.

3. Amendment traffic: corrections that never end after issuance

Once the text is issued, every correction can only be made by amendment. In a Libya deal the text changed again and again after issuance — a free-format correction and three amendments within ~3 months, all around the certificate of origin and the payment tenor. Each amendment means time, bank charges and a new time risk. We walk through it in the Libya case. Most of that traffic would never have arisen had the text been fixed before issuance.

The common fix: before acceptance

All three risks look different but are resolved most cheaply in the same place: at the draft stage, before the credit is accepted. After acceptance, every change means an amendment, cost and renewed negotiation with the buyer; at presentation, it’s already too late.

• Read the text line by line; flag unworkable and contradictory clauses before you accept.
• Check whether confirmation is actually available; move the risk to the right confirming bank.
• Get the commercial terms (origin, legalization, tenor) written correctly once; cut the number of amendments up front.