Quick answer
To open a letter of credit (LC) without expensive rework, you need to:
- Lock the commercial terms (amount, Incoterms + named place, latest shipment date, payment terms).
- Ask for an LC draft and make it match your real document set.
- Apply through the issuing bank with the right applicant details and limits.
- Track expiry + presentation deadlines from day one.
If you skip step 2, the LC will “work on paper” but fail at presentation.
Step 1: Decide whether an LC is the right tool
Use an LC when you need payment assurance (new counterparty, high ticket size, higher country/bank risk). If the relationship is stable and margins are thin, open-account terms may be operationally cheaper.
Start with the definition: /resources/what-is-letter-of-credit
Step 2: Collect the inputs you need before the bank application
At minimum, have these ready:
- Applicant (buyer) legal name + address exactly as registered with the bank
- Beneficiary (seller) legal name + address (exact spelling matters)
- Amount + currency + tolerance (if any)
- Incoterm + named place (e.g., “CIF Jebel Ali” is usable; “CIF” alone is not)
- Latest shipment date, expiry date, and where the LC expires
- Shipment terms: partial shipments allowed? transshipment allowed?
- Required documents list (invoice, packing list, BL/AWB, COO, insurance, inspection, etc.)
Step 3: Create an LC draft that matches reality
Your goal is to avoid “unpresentable” requirements. Practical controls:
- Use your real invoice template wording (don’t invent descriptions for the LC)
- Keep document counts and originals/copies realistic
- Make the BL/AWB clause match how your forwarder issues documents
If your bank or counterparty proposes strict wording, test it by asking:
“Can we generate this exact document set today with our current supplier/forwarder/broker setup?”
Step 4: Choose the LC type that matches the risk
Common choices you must be explicit about:
- Sight vs usance (payment timing): /resources/sight-lc-vs-usance-lc
- Confirmed vs unconfirmed (bank/country risk): confirmation adds cost but reduces payment-risk exposure
Step 5: Submit the application and confirm issuance details
Once the issuing bank issues the LC text:
- Confirm the advising bank and LC advice method.
- Store the final LC text as the source of truth (not screenshots or WhatsApp forwards).
- Log every amendment as a new version (with dates).
Step 6: Set up your deadline tracker immediately
Track these dates as structured fields:
- latest shipment date
- expiry date (and place of expiry)
- presentation period / deadline
Related: /resources/track-letter-of-credit-expiry
Step 7: Run a pre-check before presentation
Do a pre-check against the LC text (not memory). This is how you avoid discrepancy fees and avoidable delays:
- party names match exactly
- description and quantities match across invoice / packing list / transport doc
- dates and on-board notations comply
Common mistakes that create rework
- Opening an LC before product descriptions and document templates are finalized
- Accepting impossible clauses (document counts, unrealistic timelines, strict wording you can’t produce)
- Not controlling versions (multiple LC texts and multiple invoices in circulation)
- Tracking only the expiry date and missing presentation deadlines
How Tijara helps
Tijara helps LC-driven teams keep one operating system for the LC, documents, and deadlines—so you catch issues before banks do.