Can Import Agencies Use Letters of Credit? Compliance & Exchange Loss Pitfalls to Avoid in Practice

No Policy Barriers to Import Agencies Operating Letters of Credit

With 20 years of frontline import operation experience,I met Mr.Wu from Jiangsu Province two years ago.He was importing a batch of industrial testing instruments from Germany,and the foreign seller insisted on payment by sight irrevocable L/C.He approached three agencies in succession,but all declined,citing overly complex L/C processes and high risks.As long as an agency has import and export operation rights and corresponding foreign exchange settlement qualifications,it can handle import L/Cs; there are no prohibitive policy requirements.

The reason many small agencies refuse L/C business is not that they cannot do it,but that they find the risk control procedures cumbersome,lack sufficient bank credit lines,and have no professional team for document review.So they simply turn down such requests.Based in Shanghai,we handle import orders from countries around the world every day,and process over ten L/C import transactions each month.Whether it is issuing L/Cs on behalf of clients or assisting enterprises in issuing their own L/Cs,our processes are well-established.

Comparison of Two Mainstream Models for Import Agencies Operating Letters of Credit

Enterprises can choose the appropriate model based on their own qualifications.There is no absolute good or bad; the best option is the one that suits them.For example,small and medium-sized enterprises new to import business without their own bank credit lines will find it most hassle-free to work with a formal agency to issue the L/C on their behalf.

Key Pitfalls to Avoid for Import Agencies Operating Letters of Credit

• Ownership of goods must be clearly specified in both the L/C terms and the agency contract.The goods ownership corresponding to the L/C must match the import declaration entity.In 2026,the State Administration of Foreign Exchange (SAFE) has increased the intensity of consistency checks on foreign exchange receipts and payments under trade transactions.Mismatched information will directly trigger inspection and verification,delaying the customs clearance cycle.
• Discrepancies in bank document review must be pre-checked.For every L/C we handle,we help clients review the full set of documents in advance,including the consistency of information on bills of lading,certificates of origin,and commercial invoices,to avoid additional discrepancy fees or even bank rejection due to minor errors.
• Exchange loss risks must be locked in advance.The cycle from L/C issuance to payment usually takes 1-3 months.Global exchange rate fluctuations remain frequent in 2026,so we advise clients to handle forward exchange locking in advance to avoid additional costs caused by RMB fluctuations.

Frontline Practical Case Review

Last year,Supervisor Qi handled a batch of natural rubber imported from Thailand,which is classified as general chemical cargo.The foreign seller insisted on L/C payment,and the client had no credit line for issuing L/Cs,so they asked us to issue it on their behalf.The client’s core requirements were smooth customs clearance,access to tariff reduction under RCEP,and cost control.

We first helped the client verify the HS code classification to ensure consistency between declaration elements and physical goods information.Then we worked with the bank to issue the L/C,and assisted the client in locking the exchange rate through forward exchange locking.During pre-review of overseas documents,we found that the HS code on the certificate of origin issued by the foreign seller did not match the pre-classified code we had.If this incorrect document had been used upon arrival,not only would the client have been unable to enjoy RCEP tariff reduction,but the bank would have rejected payment due to document discrepancies.We immediately notified the foreign seller to amend the document,and completed the correction before the goods departed.

In the end,the goods cleared customs smoothly upon arrival,successfully enjoying a 10% RCEP tariff reduction.No additional detention fees or document amendment fees were incurred,and the entire process was completed 4 days earlier than the client expected,with no additional exchange losses.

Compliance and Fee Risks to Be Aware of in Advance

Issuing fake L/Cs for foreign exchange is an absolute compliance red line.From the end of 2025 to the first half of 2026,more than ten small agencies at Shanghai Port have been penalized for helping clients issue fake L/Cs to arbitrage foreign exchange,with their import and export operation rights revoked.Enterprises working with such agencies will also bear joint liability.

Hidden fee traps are common.Many small agencies only quote low agency fees initially,and add miscellaneous fees such as L/C issuance fees,cable fees,discrepancy fees,and document amendment fees during settlement.Many enterprises have suffered losses from this.For all L/C business we handle,we list all possible fees in the contract in advance,with no additional surcharges.

Demurrage risks are easily overlooked.Delays in customs clearance due to document issues can result in demurrage fees ranging from thousands to tens of thousands of yuan per day.Many small agencies do not have a pre-document review process,and will not take responsibility if problems arise,leaving the enterprise to bear the costs.

Zhongshitong is rooted in Shanghai Port,with the ability to coordinate declaration across national ports.Our global agency network can complete pre-review at the document issuance stage overseas,resolving issues before the goods depart to avoid additional costs upon arrival.Whether it is general cargo,chemicals,machinery and electronics,or other categories,we can meet corresponding compliance requirements to ensure smooth processes.