A letter of credit is not a payment against a working device. It is a payment against a complying document set. The bank does not inspect the equipment, test the software or visit the clinic. It reads the papers, compares them with the credit, and pays or refuses. That is why the documents are the transaction.

An LC Pays Against Documents, Not Against Goods

An LC pays when the documents presented comply with the credit\’s terms. The bank is not responsible for the condition, performance or delivery of the equipment; it is responsible for checking the documents against the credit.

That principle is the source of both the LC\’s strength and its risk. The seller is protected from the buyer\’s credit risk, but it is exposed to documentary risk. A missing certificate, a spelling difference or a late presentation can stop payment even when the unit is exactly as agreed.

The buyer also carries risk: it may pay against documents that comply while the unit is delayed, damaged or not as described. The LC does not replace inspection or a contract with clear remedies; it sits alongside them. The regulatory context varies by market, from FDA rules and the EU Medical Device Regulation 2017/745 to MHRA, TGA and PMDA requirements, while WHO guidance frames the shared principles; a complying document set does not establish regulatory compliance.

The Core Document Set

The core set usually includes a commercial invoice, packing list, transport document, certificate of origin, insurance certificate and any inspection or beneficiary certificate the credit requires. The exact list is set by the LC, not by habit.

The commercial invoice should describe the goods as the credit does, show the quantity and unit price, and identify the buyer and seller. The packing list should reconcile with the invoice. The transport document should show the port of loading, port of discharge, consignee and the shipment date the credit requires.

Descriptions That Must Match Exactly

The goods description in the invoice must correspond with the description in the credit. The bank is not required to reconcile commercial synonyms, model abbreviations or translations; it compares the documents with the credit.

The seller should use the credit\’s wording for the goods, the model, the quantity and the unit. If the credit says \”one electrosurgical generator, model X\”, the invoice should not say \”surgical energy platform\” or omit the model. A description that is more detailed is not automatically safer; it can create a mismatch.

The same discipline applies to names and addresses. A misspelled beneficiary, a different consignee or a port name that does not match the credit can be a discrepancy. The documents should be checked against the credit line by line before presentation, not after the bank raises an issue. The seller should also compare the credit\’s goods description with the commercial invoice before the invoice is issued. Correcting the invoice after it has been presented is harder than aligning it at the start. If the credit is ambiguous, ask the issuing bank for clarification through the advising bank rather than guessing.

Inspection Certificates Inside an LC

An inspection certificate can be a powerful condition, but it must be issued by the party and in the form the credit specifies. If the LC requires a certificate from a named inspection body, a seller\’s own certificate will not satisfy it.

The certificate should state what was inspected, against which standard, on what date and with what result. It should use the wording the credit requires, including any statement about compliance or acceptance. A certificate that describes a different unit or a different test is a discrepancy, even if the underlying inspection was sound.

The timing matters too. The certificate must be dated within the period the credit allows and must be presented with the other documents. An inspection performed before shipment but certified after the presentation period may not be usable.

Shipping Dates and Presentation Periods

The LC sets a latest shipment date and a presentation period, and both are conditions of payment. A shipment after the latest date, or a presentation after the period or the credit expiry, can be refused even if the goods are correct.

The seller should build the shipment schedule backwards from the latest shipment date, allowing for booking, loading, document issuance and presentation. The transport document\’s on-board date is usually the shipment date, so a delay in obtaining the bill of lading can push the shipment outside the credit.

The buyer should make sure the dates are realistic for the unit and the route. A latest shipment date that assumes an impossible production or inspection timeline creates a discrepancy before the seller starts. It is better to amend the credit than to plan a waiver. The seller should also confirm that the bill of lading is issued in the form the credit requires: on-board, to order, or consigned to a named party. A transport document that is acceptable commercially but not in the required form is still a discrepancy.

Common Discrepancies

Common discrepancies include a goods description that differs from the credit, a late shipment, a missing document, an inconsistent quantity, an insurance certificate with insufficient coverage, a wrong port or consignee, and a presentation after the allowed period.

Spelling and formatting matter more than sellers expect. A beneficiary name with an extra word, a model number with a different suffix or a date format that does not match can be treated as a discrepancy. Banks examine documents on their face, not by commercial intent.

The seller should run a pre-presentation check against the LC\’s document list and wording. A second reviewer is useful, because the person who prepared the documents tends to read what they intended rather than what is written.

Amendments and Their Cost

An amendment changes the credit and requires the agreement of the parties and the banks. It takes time, costs money and can delay shipment, so the credit should be checked before the seller commits to a production or shipment date.

The buyer may need an amendment to extend the shipment date, change a document requirement or correct a description. The seller may need one to remove a document it cannot obtain. Each amendment should be confirmed in writing and reflected in the documents before presentation.

An amendment is not a substitute for a clear original credit. A credit that requires repeated amendments is a sign that the underlying commercial terms and the document set were not aligned at the start. The seller should also confirm who pays the amendment fee and whether the amendment extends the presentation period as well as the shipment date. An amendment that changes one date without the other can leave the presentation outside the credit.

When an LC Is the Wrong Instrument

An LC is the wrong instrument when the value is small relative to the bank charges, when the documents cannot be controlled, or when the parties have a stable open-account relationship. It is also awkward when the unit\’s condition is variable and the payment depends on acceptance rather than shipment.

For used equipment, an LC can work if the document set is predictable and the inspection certificate is available. It is less suitable when the buyer wants to pay against installation or performance, because those events are harder to express as a clean document presentation.

The alternative is a milestone structure with escrow or a retention, which can tie payment to acceptance without requiring the bank to read a technical report. The right choice depends on what the parties can document, not on which instrument sounds more secure.

The exporting guide covers the logistics sequence, and the Knowledge section has related payment and contract guides.

If you are preparing an LC and want the document set checked before presentation, send the draft credit to the HHG team.