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"Dear Cathy" Discusses Amending Export Paperwork After the Shipment
by Catherine J. Petersen

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Dear Cathy,
I am stressed and need advice.
Our company received a very high value letter of credit from our customer in Dubai. Our sales and contract team were very involved in negotiating the bid, developing the contract and reviewing the letter of credit with the customer. All parties (our team of engineers, sales, contracts and legal and the customer) agreed that the payment under the letter of credit would be in two parts. We agreed that 80% would be paid upon shipment of the goods from the USA with submission of the documentation required under the letter of credit by the bank. The remaining 20% will be paid upon successful installation at the buyer's facility in Dubai. The buyer's inspection agent is to issue an inspection certificate for us to present to the bank with our draft for this balance.
Here's the problem. The sales and engineering team negotiated with the buyer to have one part ship directly from Italy to Dubai. The buyer said that was just fine, since it would save money for everyone on the project. The problem comes from the next decision that was made: They did not amend the letter of credit! Instead, it was a "handshake" amendment; the buyer said this would be just fine.
It gets worse. We issued documentation for the value of the order as stated within the letter of credit (this included the value of the item from Italy), and we stated in the documentation that the country of origin of all the merchandise was the USA. We provided all the documentation to our freight forwarder in the USA who submitted the documents to the bank for reimbursement.
The shipment from Italy is being held by customs in Dubai; it is critical to the installation of our product at the plant in Dubai and obtaining the balance of payment under the letter of credit. Help—ideas are needed!
Stressed and in need of advice!
Dear Stressed (and in need of advice),
What next?
Here are a few suggestions that I hope will help you with your situation:
  1. Work closely with your freight forwarder, their agent in Dubai and the buyer's customs broker, and the buyer regarding the documentation. There are many steps that they may recommend. Immediately advise all parties of the:

    1. country of origin for all products on each shipment, and

    2. value of the goods shipped from Italy and the USA.

  2. Instruct your USA-based freight forwarder to amend the Electronic Export Information (EEI) made for your USA shipment to reduce the value of the transaction; subtract the value of the shipment that was transported directly from Italy to Dubai.

  3. Develop a letter of credit amendment process within your organization to avoid "handshake" amendments to future letters of credit.

  4. Initiate a letter of credit training program for your entire team to avoid similar situations in the future that cause increased costs for changes and corrections after a shipment has occurred, plus disrupt the installation of the product at the customer's facility.

  5. Establish an internal letter of credit review team and process once the order has been received and input into your ERP system, especially for high value transactions. Changes in production, product origin, delivery times and documentation can be caught to avoid export compliance and letter of credit payment issues.
You and your team have resources at your finger tips to avoid problems with shipping and commercial documents in the future! They include:
I wish you and your team the best!

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