Letters of credit and the F rules – workarounds

Where there are compelling reasons for using a rule such as FCA or FOB, here is one way in which the letter of credit can be adapted to provide protection for the seller.

The general principle is that the letter of credit calls for three further documents, which the beneficiary may present as substitutes for the bill of lading:

• A certificate of readiness or similar – the beneficiary attests that the goods have been made available for taking in charge at the agreed place
• A certificate issued by the beneficiary, attesting that the applicant has failed to make transport available for the goods as per the agreement
• A document that will substitute for the bill of lading – could be a forwarder’s certificate of receipt, or possibly a warehouse warrant, that can serve as a document of control over the goods

(The exact form of these documents will depend on the transaction and transport arrangements, and will need to be discussed with the applicant and the issuing bank.)