Where payment against a letter of credit is
stipulated then the seller should obtain full details of the buyers letter of
credit as soon as possible. This is to ensure that the required documentation is
in fact obtainable, that there will be sufficient time to obtain such
documentation, and that there are suitable shipping opportunities to the named
port of destination within the stipulated period of shipment. The European
Contracts for Coffee only require a full and complete letter of credit to be
available for use from the first day of the contractual period for shipment,
even though the letter of credit may well contain stipulations on what must be
done before loading. Therefore it may be wise to provide specifically in the
contract for earlier receipt of the full and complete letter of credit. Sellers
should also ensure that the letter of credit remains valid for the negotiation
of documents for at least 21 days after the date of shipment. (See also 10.09.00
Risk and the Relation to Trade Credit).
Both ECF and GCA stipulate this. If the length of
validity is not carefully checked one could fulfill all the L/C conditions only
to find it has lapsed.
Buyers calculate all costs (from FOB through to
delivery at final destination) to arrive at the final cost pricelanded roasting
plant, taking into account any extra costs. For example, an origin that
habitually delivers documents late (i.e. after the vessel has arrived) is
penalized as the buyer will provide for this eventuality in the calculation to
landed plant. In fact the importer actually saves money by not having to finance
the goods for the expected period of time, but should the goods arrive before
the documents then serious trouble will arise. If a letter of credit is
demanded, the bid price will be lowered correspondingly to cover the costs. Such
a bid would also be lower than that for similar coffees from other origins that
do not require a letter of credit.