Ok, so buyers have become very smart. 

Yes. The fact is that they chinese manufacturers or staff don’t know how to present documents correctly to the banks for collecting the funds once the shipment is done. 

Suppliers know this, hence the reason for them not to prefer this way of payment. See you got to realise that there are a lot of unprofessional buyers out there. The bank when the documents are presented to them, is trained to look for discrepancies. A discrepancy can be a stupid thing like you misspelling a name, for example instead of spelling “manoj”, u spell it as “manog”.  

Now a stupid spelling mistake can be the reason for the buyers bank saying “hang on a minute, there is a problem here, the seller has not done everything as per directed so I retaing my right to pay”. At this point you got to remember that the goods are already on the way to the buyers destination, hence the seller is in effect at the buyers mercy. 

If they buyer is understanding he will tell the bank to accept the discrepancies, if he is not then the seller will most probably end up having to give a discount for the buyer to tell his bank to pay. 

I know many of you might think that the above is not true, the fact that for a spelling mistake things can go so wrong.  

But this is technically true. Another thing is whether your bank agrees to see this as a discrepancy or not, where the issue comes of how much power you have with your bank. 

When I was living in Hong kong, I would hear many stories from other exporters and suppliers as to the way in which buyers from Dubai ( a major reexport market) would tell their banks to look for discrepancies in the documents so as to get a discount. 

As a matter of fact I would say that in the past 10 yrs of me dealing with lcs, in 95% of them I have encountered discrepancies.  

Just think the power I have had in may hands to decide to pay or not the supplier. And just think why banks always encourage you to pay by lc. If each discrepancy costs you about usd 100 (that’s free money that is going in the banks pocket). 

I hope you understand now the reason why sellers are less and less using this form of payment. 

And don’t worry if you are forced to use lcs. 

Ill show you in the next chapter a technique used by me to have the upper hand in the payment terms, always. 

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