I. Unique Challenges of Used Car Export L/C
Challenge Specific Issue Risk Level
Non-uniform quality Condition varies per vehicle, hard to describe with single standard ⭐⭐⭐⭐⭐
Uncertain quantity Some vehicles may be excluded due to inspection issues ⭐⭐⭐⭐
Inspection standard disputes Different understanding of "good condition" ⭐⭐⭐⭐⭐
Complex documentation Multiple documents required (inspection, registration, license, etc.) ⭐⭐⭐⭐
II. 7 Core L/C Clause Setup Points
Point 1: Goods Description Clause
· Must clearly state "USED VEHICLE" or "SECOND-HAND CAR"
· List VIN numbers (may reference proforma invoice)
· Allow quantity tolerance (e.g., +/- 1 unit)
Sample clause:
"Description of Goods: USED VEHICLES, SPECIFICATIONS AND VIN NUMBERS AS PER PROFORMA INVOICE NO. [XXX] DATED [DATE]. QUANTITY: [X] UNITS, +/- 1 UNIT ALLOWED."
Point 2: Inspection Clause
· Specify recognized inspection agency (CCIC, TÜV, SGS)
· Specify report requirements (VIN, conclusion, date)
· Specify inspection time and place (pre-shipment at China port)
Sample clause:
"INSPECTION CERTIFICATE ISSUED BY CCIC (CHINA CERTIFICATION & INSPECTION GROUP) OR OTHER MUTUALLY AGREED INSPECTION AGENCY, STATING THAT THE VEHICLES ARE IN GOOD WORKING CONDITION AND MEET THE EXPORT STANDARDS."
Point 3: Document Package Required
Document Requirement Mandatory
Commercial Invoice VIN list, unit price, total value ✅
Packing List Vehicle position (container number) ✅
Bill of Lading Clean, "SHIPPED ON BOARD" ✅
Inspection Report CCIC or agreed agency ✅
Export License Issued by MOFCOM ✅
Vehicle Registration Certificate Copy acceptable ⚠️ Case by case
Certificate of Origin If required by destination ⚠️ Case by case
Point 4: Presentation Period
· Recommend "15-21 days after B/L date"
· Used car export involves multiple government stamps – too short a period leads to discrepancies
Point 5: Payment Terms
· AT SIGHT L/C safest – pay upon document presentation
· Avoid USANCE L/C unless with interest (3-5%/year)
Point 6: Discrepancy Handling
· Cap discrepancy fees (e.g., not exceeding $100 per discrepancy)
· Allow document amendment and re-presentation
Point 7: Transshipment and Partial Shipment
· Specify if transshipment allowed (e.g., via Singapore, Dubai)
· Specify if partial shipment allowed
III. Common Discrepancies and Prevention
Common Discrepancy Cause Prevention
VIN mismatch with invoice Data entry error or vehicle swap Verify each VIN before document issuance
Inspection report date after shipment date Inspection completed after loading Inspect first, then ship
Quantity mismatch between B/L and invoice Some vehicles not loaded Confirm final quantity before shipment
Export license number missing on invoice Omitted critical info Create "invoice checklist"
Missing signature/stamp Document preparer oversight Two-person review mechanism
IV. L/C Process Flow
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Step 1: Sign sales contract, agree on L/C payment
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Step 2: Buyer opens L/C (seller reviews before confirmation)
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Step 3: Seller prepares goods, inspection, export license
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Step 4: Ship goods, obtain B/L
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Step 5: Prepare complete presentation documents
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Step 6: Present documents to bank (advising or negotiating bank)
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Step 7: Bank reviews (5-7 working days)
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Step 8: Issuing bank pays (if discrepancies, buyer acceptance required)
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Step 9: Settlement received
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V. Practical Recommendations
Recommendation 1: Review L/C draft before opening
· Request buyer send draft L/C for seller review
· Confirm all clauses are workable before buyer issues final L/C
Recommendation 2: Guard against "soft clauses"
· Beware of "inspection report issued by buyer's designated person"
· Suggest amending to "independent third-party agency agreed by both parties"
Recommendation 3: Purchase L/C insurance
· Sinosure provides accounts receivable insurance for L/C transactions
· Covers issuing bank bankruptcy, political risk, buyer rejection
Recommendation 4: Alternative payment structure
· Use T/T for initial transactions
· After trust established, use 30% T/T + 70% L/C