Safe L/C opening process for large orders

1. Common Types of L/C and Level of Safety for Sellers

Before asking customers to open L/C at their bank, businesses need to clarify the type of letter of credit that will be applied in foreign trade contracts:

• Irrevocable L/C (Irrevocable L/C):The safest and most popular type of L/C today. The L/C opening bank may not modify or cancel payment commitments without the seller's written consent.

• Confirmed Irrevocable L/C:The pinnacle of safety for export factories. In addition to the buyer's L/C opening bank, there will be a third reputable international bank to guarantee payment. Usually applicable when buyers are in countries with political risks or weak domestic banking systems.

• L/C at sight (L/C at Sight):The seller will receive the money as soon as the bank notices receipt of clean and valid documents within a few working days.

• Deferred L/C (Usance L/C):The seller accepts the buyer's deferred payment after 30, 60, 90 or 180 days from the date of signing the bill of lading, the bank will make payment based on the accepted bill of exchange.

2. 7 Step Process of Operating Large Orders via L/C From A to Z

A closed, safe L/C opening and enforcement process needs to be strictly implemented according to the linear steps below:

• Signing a foreign trade contract (Sales Contract):Legal stepping stone.The two sides finalize the product terms, Incoterms conditions, total value and clearly state the payment method as Irrevocable L/C at Sight.

• The buyer opens a L/C at the issuing bank (Issuing Bank):Request from the passenger terminal.Foreign customers pay a deposit and request their bank to issue a letter of credit based on the content of the signed contract.

• Advising Bank sends draft L/C:Cross-check documents.The seller's bank in Vietnam receives the L/C and sends a draft to the export factory to review technical errors.

• Producing goods and preparing logistics:Execute orders at the factory.The factory conducts mass production, packs according to specifications and carries out customs clearance procedures, delivers goods to the ship to get a Bill of Lading (B/L).

• Gather and check export documents:Core stage.Personnel carefully check all documents (Invoice, Packing List, B/L, C/O, Insurance Certificate) to ensure there are no discrepancies compared to L/C requirements.

• Present the documents to the Notifying Bank:Transfer of documents.The seller submits the original set of documents to the bank in Vietnam so that they can send international express delivery to the buyer's issuing bank.

• Issuing bank checks and disburses:Cash flow recovery.Within 5 working days according to international law, if the documents are perfect, the issuing bank is required to transfer payment to the seller's account.

3. Check-list of 6 Points to Review Carefully on the Draft L/C (Draft L/C)

When receiving the draft L/C from the notifying bank, the factory's accounting and sales department must carefully "scrutinize" the following 6 sensitive points before agreeing to the customer's official release:

• Legal information of the parties (Field 50 and 59):The company name, address, and phone numbers of both the buyer and the seller must match every character and comma with the original contract and business license.

• Product description (Field 45A):Write briefly and generally, avoid including too deep descriptive details or too complicated technical specifications in the L/C. The more details recorded, the higher the document error rate.

• Latest Date of Shipment - Field 44C:Must ensure that the factory has enough time to reserve for the risk of material delays or ship delays to avoid missing this deadline.

• Period for presentation of documents (Period for Presentation - Field 48):Usually within 21 days from the date of signing the bill of lading (but must be within the validity period of the L/C). Avoid leaving this time limit too short (for example, 7 days) because you will not have time to complete the procedures for C/O issuance or quality testing.

• Terms allowing Partial Shipment and Transshipment:Priority should be given to selecting "Allowed" so that the factory can flexibly handle the flow of goods, in case there is a shortage of empty containers or the ship must call at a transshipment port.

• Bank Charges - Field 71B:Clearly agree that costs incurred at any country's bank will be borne by that country (All bank charges outside Vietnam are for Buyer's account) to optimize operating costs for the Vietnamese factory.

4. Common Mistakes That Cause Sellers to Deny Payment

If the set of documents contains an inconsistent error, the right to proactively make payment will immediately fall back to the buyer (the buyer has the right to agree or refuse to pay for that error). Below are classic mistakes that should be absolutely avoided:

Document verification matrix

5. B2B Tool Combination Strategy to Find and Appraise Large Buyers

For high-value orders using L/C, determining the reputation of the partner from the beginning is a vital factor for businesses to confidently allocate production budget.

• Use the Verified Buyer and Buyer Profile filters:When businessesopen stallOn the B2B platform, proactively check the partner's transaction history, wholesale purchase frequency and company size through the platform's big data management portal to eliminate fake accounts.

• Require customers to use banks that are among the world's top prestigious banks:Sales should negotiate for customers to open L/C at international standard banks (such as HSBC, Citibank, Standard Chartered, JPMorgan Chase...) to ensure the ability to pay cash flow when goods arrive at the destination port.

• Accompany a team of experts to optimize the process:Operating large orders via L/C requires in-depth knowledge of foreign trade operations. Therefore, small and medium-sized businesses should proactively connect with Alibaba Vietnam's representative network to receive advice on opening standard booths. Experts will provide trend reports, assess risks and introduce solution packages, support the development of a systematic consulting roadmap for opening booths for SMEs, helping Vietnamese factories confidently negotiate with large purchasing corporations globally.

Contact us for advice on opening a booth - Don't wait another day!

Are you in Dong Nai, Binh Duong or Ho Chi Minh City? COMPANY LIMITEDALIBABA.COMVIETNAM - ALIBABA VIETNAM is ready to support:

• Head office: 19th Floor, Saigon Center Building, No. 67 Le Loi Street, Ben Nghe Ward, District 1

• E-mail:[email protected]

• Phone: +84 0987258510 (Mr. Dan - main consultant)

• Branch 1: 10th Floor, Becamex Tower, 230 Binh Duong Avenue, Thu Dau Mot, Binh Duong

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• Branch 3:123 Cong Hoa, Ward 12, Tan Binh, Ho Chi Minh City 700000, Vietnam

Call now 0987258510 – Mr. Dan for free consultation, support in opening a booth, optimizing products and exporting plans to the West in 2026. No consultation fee, no commitment, just need you to be ready to act!
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