UNDERSTANDING SERVICES LETTER OF CREDIT (LC)

QUESTION

Dear Sir,

Could you help me understand the concept of a Services Letter of Credit? I would also appreciate it if you could provide a draft of a Services LC.

Looking forward to your assistance.

Best regards,

Jawad

Askari Bank Pakistan

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ANSWER

Hi,

A Services Letter of Credit (LC) is issued to guarantee payment for services rendered rather than for the delivery of goods. When issuing this type of LC, the following key points should be considered:

1. Omission of Shipment-Related Fields:

In MT 700, certain fields related to transportation and shipment are generally not applicable, such as:

• 43P (Partial Shipments)
• 43T (Transshipments)
• 44A (Place of Taking in Charge)
• 44E (Port of Loading)
• 44F (Port of Discharge)
• 44B (Place of Final Destination)
• 44C (Latest Date of Shipment)
• 44D (Shipment Period)

2. Field 45A (Description of Goods and/or Services):

• This field should specify “Services” instead of “Goods.”

3. Field 46A (Documents Required):

• Documents related to goods and transportation (e.g., Bill of Lading, Certificate of Quantity, Certificate of Origin, Packing List) are usually not required.
• Instead, documents such as an Inspection Certificate or an Acceptance Certificate may be necessary.

I hope this clarifies your query. Let me know if you need further details.

Best regards,

Mr. Old Man