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Sight Letter of Credit (LC), Complete Flow
(PRE-STRUCTURE → ISSUANCE → SHIPMENT → DOCUMENT → PAYMENT)
Many assume payment under an LC is made immediately after shipment… In reality, under a Sight LC, payment is made only after documents are verified
Key difference vs Usance LC:
Sight LC = Fast payment (no waiting period)
WHAT IS A SIGHT LC?
A Sight LC is a Letter of Credit where payment is made:
Immediately after compliant documents are presented and accepted
No deferred payment period (no tenor)
PHASE 1: PRE-STRUCTURING (BEFORE LC ISSUANCE)
STEP 1 – SELLER ↔ END SUPPLIER
- Identify documents the supplier can provide
- Ensure supplier can comply with LC terms
STEP 2 – SELLER ↔ SELLER’S BANK
- Review LC wording
- Avoid clauses that are difficult to comply
STEP 3 – SELLER ↔ BUYER (SPA)
- Agree on Sight LC as payment method
- Align on required documents and terms
PHASE 2: LC ISSUANCE
STEP 4 – DRAFT LC (MT710 / MT701)
For seller’s review
Not a real LC
STEP 5 – FINAL LC (MT700)
- Official LC issued via SWIFT
- Creates binding bank payment obligation
PHASE 3: SHIPMENT & DOCUMENT FLOW
STEP 6 – SHIPMENT
- Goods loaded onto vessel (on board)
- Shipment is considered completed
- No need to wait for arrival at buyer’s port
STEP 7 – DOCUMENT PREPARATION
- Bill of Lading
- Commercial Invoice
- Packing List
- Certificates (SGS / COO, etc.)
STEP 8 – DOCUMENT SUBMISSION
The seller submits all required documents to their bank
(Seller’s Bank / Advising / Negotiating Bank)
STEP 9 – BANK PROCESS
- Seller’s Bank performs pre-check
- Sends documents to Issuing Bank
STEP 10 – FINAL CHECK (ISSUING BANK)
If documents are compliant:
Payment Released (At Sight)
PHASE 4: PAYMENT
STEP 11 – PAYMENT (IMMEDIATE)
Issuing Bank pays:
- Immediately after document acceptance
- Through Seller’s Bank
KEY REALITY
“At Sight” does NOT mean payment right after shipment
Payment is only made after:
- Documents are complete
- Documents are compliant
CRITICAL WARNING
Incorrect documents → Payment delay or rejection
LC is a document-based system
WHO HOLDS THE RISK?
- Seller: Lower risk (faster payment)
- Buyer: Must pay quickly
- Bank: Pays if documents comply
SWIFT MESSAGES INVOLVED
- MT710 / MT701 → Draft
- MT700 → Actual LC
- MT707 → Amendment
KEY INSIGHT
“In a Sight LC, payment is fast… but only when documents are perfect.”
CONCLUSION
- Sight LC = Fast payment
- Documents control payment
- Shipment occurs before payment
Most importantly:
“Fast payment does not mean automatic payment.”
Need assistance reviewing LC or structuring your deal? Contact us.
CONTACT US FOR ASSISTANCE:
WhatsApp:
IR. Zaki
http://www.wasap.my/60192297179/OilPetroleum
(Mr. Saif)
http://www.wasap.my/60105375779/OilPetroleum
(Ms. Nur)
http://www.wasap.my/601129291396/OilPetroleum
Email:
gngroup.sb@gmail.com
sales.gngroupsb@gmail.com
Website:
https://www.gngroupsupplies.com/
https://gngroupsupplies.blogspot.com/