Letters of credit in favor of exporters in the United States are
usually sent by
SWIFT and in a prescribed format. A SWIFT
format indicates the issuing bank at the top (“received from”) and
has numbers at the left for specific information such as:

31C: date credit issued
31D: expiration date
50: order customer (account party)
59: beneficiary (the exporter - usually customer of the bank)
41D: available “by payment” or “by negotiation”
42C: tenor of drafts
42D: bank on which drafts are drawn
44A: shipping dispatch point: place of export
44B: shipping destination point: place of import
44C: latest shipping date (year/month/day)
45A: goods being shipped and terms of trade (FOB, CIF, etc.)
46A: documents required to draw under letter of credit
47A: additional conditions: this is often where it mentions if TT
reimbursement is acceptable (“TT” means tested
48: period for presentation of documents (if silent, 21 day
maximum after shipping date on bill of lading, but within expiry
date; see UCP600, 43a)
49: confirmation instructions: requests advising bank to confirm;
usually states “without”, i.e. no confirmation.
53A: issuing bank’s U.S. correspondent who will act as
reimbursing bank
71B: who pays for banking charges outside the issuing bank’s
country?  Usually beneficiary pays for charges in the United
72: bank to bank information: almost always states that the credit
is operative and subject to the UCP 600. However, the SWIFT
convention is that all letters of credit sent by SWIFT are subject
to the Uniform Customs and Practices (UCP) for Documentary
Credits (Number 600 revised in 2007).
78: instructions to advising bank: includes information on where
documents are to be sent and from which U.S. bank to claim
reimbursement and where drafts are to be sent.

SWIFT stands for Society for Worldwide Interbank Financial
, and is a bank group which has set-up
global standards for sending and receiving authenticated
instructions for wire transfers and letters of credit. SWIFT is
increasingly replacing the tested telex.  Some letters of credit are
sent by tested telex, and these usually are in a free format
without the numbered designations at the left.

Banks around the world have set up testing arrangements with
each other on a telex and SWIFT basis. This is the basic level of
a correspondent banking relationship to allow the sending of
letters of credit and payment under these letters of credit.
Most foreign banks have cut back on the number of accounts
maintained in the United States to eliminate idle balances and
reduce the cost of reconcilement of numerous unnecessary
accounts. Foreign banks are increasingly maintaining specialized
dollar accounts at selected banks to handle specific kinds of

By setting up specialized accounts for specific kinds of
transactions, the foreign banks have greatly simplified their
reconciling process and their ability to control these accounts.
Presenting conforming documents, specifying that the L/C is
“available by negotiation”, and reimbursement instructions are all
important considerations for an exporter being paid on a timely
basis.  Instructions in a letter of credit may call for the documents
to be sent back to the issuing bank for a final examination before
allowing payment to be made.  For example, when US banks
issue letters of credit, they may require documents to be
sent back to the US bank for a final examination before payment
is made (“available by payment” with issuing
bank - see 41.D on the SWIFT).

Many export letters of credit in favor of US beneficiaries are
“available by negotiation” and allow for TT (“tested
teletransmission”) reimbursement which is done either by an
authenticated SWIFT message or a tested telex.  If the US bank
examining the documents for strict compliance to the terms of the
letter of credit per the UCP 600 finds no discrepancies, the US
bank can request reimbursement from the issuing bank’s
US correspondent for this purpose (often the issuing bank’s New
York or Los Angeles branch).  Since payment is made before the
issuing bank sees the documents, this method of payment is
more risky and in many instances the issuing bank will not
authorize TT reimbursement. For example, if payment is made to
the beneficiary under TT reimbursement and the issuing bank
later does find discrepancies in the documents, the issuing bank
can require that the US paying bank return the money (if the
importer does not waive the discrepancies).  If the export letter of
credit does not allow for TT reimbursement and documents are
sent back to the issuing bank with drafts to its US reimbursing
bank, the examination process at the issuing bank may slow down
the payment process.  The exporter’s documents may sit in a
stack waiting to be examined and when they are examined,
discrepancies may be found which necessitates calling the
importer for permission to waive the discrepancies.  This waiver
may not be made immediately which will also slow down the
payment process.

Exporters often mistakenly believe that requesting the advising
bank to confirm the letter of credit will speed up their payment.
However, a confirmation by a US bank is a promise to pay by the
US bank in the event the issuing bank does not make payment
under the letter of credit when clean (no discrepancies)
documents are presented.  Thus, the confirmation typically
protects the exporter against the issuing bank failing to pay
because the issuing bank is bankrupt or adverse economic
circumstances have occurred (such as foreign exchange
controls).  For usance letters of credit where the drafts are drawn
on a US reimbursing bank, once the drafts have been “accepted”
by the US bank, the exporter has the credit risk of the US bank.  
Thus, if an exporter requests a confirmation on a usance letter of
credit where the drafts are drawn on a US bank, the confirmation
is basically protecting the exporter during the period from the
date of issuance on the letter of credit to the date when the time
draft is accepted by the US bank. If the time draft were drawn on
the issuing bank, the confirmation would still protect the exporter
during the acceptance period.

International Letter of Credit