Letter of Credit Forum

Hi,

I sometimes see L/Cs with no Incoterm mentioned. As the L/C is a separate payment arrangement to, but based on, the contract of sale between seller and buyer, all that is necessary for the operation of the L/C is to state whether the transport document is to show that freight is prepaid or collect. However it would be a wise and intelligent thing to include the Incoterm in the description of goods to accurately reflect the contract of sale.

Bob

Short answers would be : No and Yes, in that order.

But, onthe basis that a trade term or "incoterm" has been stated in the underlying contract, the natural question from this would be why the applicant and the beneficiary would not want the protection of the certainty regarding the division of responsibilities and respective risks to be reflected in the LC?

The absence of a defined incoterm in the LC, although not mandatory, would naturally lead the bank(s) to question its absence, and might give rise to suspicion as to the underlying trade.