International Payments

Should a U.S. exporter who is the beneficiary of a confirmed letter of credit attempt to retain control over the product that has been exported to a foreign buyer until such point that the U.S. exporter receives payment under the confirmed letter of credit?

While not necessarily essential or critical, it may prove to be in the exporter's best interest to do so. This is likely to be the case when a seller is unable to perform exactly as required under a confirmed letter of credit and is also unable to correct its performance deficiency. In such a circumstance the seller will have to ask the buyer to waive or accept the seller's performance deficiency. It is obviously much easier for a seller to obtain a buyer's agreement to waive a discrepancy under a confirmed letter of credit if the buyer does not yet have access to or possession of goods that have been shipped. Sellers must always keep in mind that letter of credit discrepancies they cannot correct, and that the buyer refuses to waive, will cause a seller to fail to meet the performance requirements under the letter of credit.  The seller will, therefore, have to forfeit the payment protection that would have been available to the seller under the confirmed letter of credit.

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