Letter of Credit for Steel Imports

What Is a Letter of Credit and Why Use One for Rebar?

A Documentary Letter of Credit (LC) is a written commitment by the buyer’s bank (the issuing bank) to pay the seller a specified amount, provided the seller presents compliant shipping documents within a defined period. The governing rules are ICC Uniform Customs and Practice for Documentary Credits — UCP 600 (2007), universally adopted by banks worldwide.

For rebar procurement, LCs offer three fundamental advantages:

• Payment security for the seller: Payment is guaranteed by a bank — the seller ships only after confirming the LC is in place
• Delivery assurance for the buyer: The bank pays only when documents proving shipment are presented — the buyer cannot be charged without a Bill of Lading showing cargo was loaded
• Trade finance access: An LC in hand allows the seller to obtain pre-shipment financing from their bank against the irrevocable payment commitment

LCs are particularly common for rebar trade with buyers in the Middle East, West Africa, and Southeast Asia. German steel exporters routinely accept and process irrevocable LCs from established international banks.

Key LC Mechanics for Steel Transactions

Irrevocable vs Revocable

All modern trade LCs are irrevocable (UCP 600 Art. 3 deems all LCs irrevocable unless explicitly stated otherwise). Always specify “Irrevocable” in the LC application — a revocable LC can be cancelled by the issuing bank without notice and is not accepted by reputable steel exporters.

Confirmed vs Unconfirmed

A confirmed LC adds the obligation of a second bank (the confirming bank, typically in the seller’s country) to pay independently of the issuing bank. Confirmation is recommended when the issuing bank is in a high-country-risk jurisdiction or is not well-known in European banking circles. The confirmation fee is typically for the buyer’s account in the commercial negotiation.

Sight vs Usance (Deferred Payment)

A sight LC requires payment upon presentation of compliant documents. A usance or deferred payment LC (e.g., “90 days after Bill of Lading date”) gives the buyer extended payment terms — effectively trade finance. Usance LCs are common in rebar trade where buyers need time before paying. The seller can often discount a usance LC at their bank for immediate cash.

Documents Required in a Rebar LC

The LC must specify exactly which documents the seller must present. For German-standard rebar, the standard documentary set includes:

• Commercial Invoice: Buyer/seller details, LC number, goods description (grade, diameter, quantity, unit price, total), Incoterm and named port
• Full set of Clean On-Board Bills of Lading: 3 originals, made out to order and endorsed in blank (or consigned to the buyer’s bank if non-negotiable). Marked “Freight Prepaid” (CIF/CFR) or “Freight Collect” (FOB)
• Packing List: Bundle count, piece count, bundle weights, bar diameters and lengths, heat/cast numbers
• Mill Test Certificate (EN 10204 3.1): Issued by the steelworks, certifying chemical composition, mechanical properties (Re, Rm, Agt, k-ratio), and conformity to DIN 488 / EN 10080
• Certificate of Origin: Issued by the Chamber of Commerce, certifying German / EU origin — required for import duty preferences under many trade agreements
• Insurance Certificate or Policy: Required under CIF terms — at least 110% of invoice value, dated no later than the shipping date, covering all risks to destination port

Common LC Discrepancies in Rebar Shipments

A discrepancy occurs when presented documents do not exactly comply with the LC terms. Banks can reject discrepant documents, delaying payment. For rebar, the most common discrepancies are:

• Quantity tolerance exceeded: Always include “+/− 5% in quantity and value” per UCP 600 Art. 30 — rebar shipped weight varies slightly from rolling
• Description mismatch: The BL or MTC description does not exactly match the LC goods description — use precise but not over-specific wording
• Late shipment: The BL date is after the latest shipment date in the LC — build realistic lead times (3–6 weeks from LC receipt for rebar from a German port)
• Stale documents: Documents presented more than 21 days after the BL date (UCP 600 Art. 14c) — avoid specifying fewer than 15 days for rebar documentation
• MTC wording mismatch: Coordinate with the seller before issuing the LC to confirm the exact MTC grade and standard wording that will be used

Coordinating LC Requirements with Your Rebar Supplier

Before issuing the LC, share the draft application with the seller for review. Key items to confirm in advance:

• Exact beneficiary name and address matching the seller’s banking records
• Advising/confirming bank preferences in Germany or the seller’s country
• Goods description wording the seller’s documents will use
• Acceptable tolerance on quantity and value (recommend +/−5%)
• Whether partial shipments are permitted (for large orders)
• Transhipment permissions if routing via a hub port
• Incoterm and named port — see our Incoterms guide
• Whether an independent inspection certificate is required (SGS / Bureau Veritas)

We work regularly with international buyers who pay by LC. When you request a quote, indicate your preferred payment terms and we will provide beneficiary details, bank information, and a sample document set to guide your LC application. See our export and delivery page for the full list of documents provided per shipment.