For our overseas customers, a Letter of Credit (LC), also known as a Documentary Letter of Credit (DLC), has become an important method to pay for vehicles and other goods – in fact, many of our clients prefer this method of payment when exporting cars to China. Each LC requires the submission of a number of documents, including the Bill of Lading for proof of export.
A Bill of Lading (BL) is the controlling document for vehicles which are shipped and can often be seen in two varieties. The first is the Master Bill of Lading (MBL) / Ocean Bill of Lading (OBL) which is issued by the carrier, and the second is the House Bill of Lading (HBL) which is issued by an NVOCC or freight forwarder.
There is minimal difference between MBL’s and HBL’s other than their issuer, but some LCs require a Master Bill of Lading to be submitted and do not allow use of a House Bill of Lading. Generally, we highly recommend our clients change this requirement to their LCs before submission as the use of an MBL can cause a variety of delays and difficulties when exporting cars.
- MBL’s delay payments as it takes longer to get the originals from the shipping line.
- This can result in increased costs for the shipper and may delay delivery of cars upon arrival.
- MBL’s rarely match the LC requirements exactly as shipping lines never make them conform to the Letter of Credit causing inevitable LC discrepancies.
- These LC discrepancies can result in increased costs for the shipper and may delay delivery of cars upon arrival.
- Payments will be delayed until the LC discrepancies can be resolved.
- MBL’s are extremely hard to replace when they get lost (when shipped by courier for instance).
- This delay will once again increase costs for the shipper and may delay delivery of cars upon arrival.
- MBL’s enable the customer to take delivery upon arrival without paying for other charges agreed upon.
- Unless the payment of other charges is made before the documents are submitted, the customer may never pay these fees.
In contrast to these difficulties a House Bill of Lading is faster to get, easier to match all LC requirements, and can be more easily replaced if misplaced or lost.
If you are interested in the export of cars from Canada, our team at Techlantic are experts at navigating LC documentation requirements and procedures. We rarely experience Bill of Lading LC discrepancies with the HBL’s from our preferred freight forwarders.
For additional insight into Letter of Credit discrepancies, visit our earlier blog on the Top 5 Most Common Letter of Credit Errors (include link) or contact us directly for a complete set of Letter of Credit requirements to avoid all common Letter of Credit mistakes.