LC Cost Calc

A **Letter of Credit (LC)** is an ironclad guarantee of payment, but ONLY if the presented documents match the LC's requirements perfectly. Even a misplaced comma can lead to a "Discrepancy," which triggers immediate financial penalties and grants the buyer the right to refuse payment until the error is waived.

Primary Leaks in Export Revenue:

• Discrepancy Fees: Standard banking charges (typically $75-$150) applied per presentation containing errors.
• Negotiation Interest: If your bank provides immediate funds before verification from the issuing bank, you incur interest costs for the 'transit' period.

For high-value industrial machinery or bulk commodities, LC leakages can erode net profits by 0.5% to 1.5%. Finance managers use this tool to determine whether it is more cost-effective to "pay and waive" or to recall documents for corrections, which extends the Days Sales Outstanding (DSO).