Key points
- Typical forms: an inspection certificate or cargo receipt to be signed by the applicant or its nominee; the credit becoming operative only once an import licence is granted or the applicant gives notice; the vessel name or shipment date to be advised later by the applicant.
- A soft clause stops the beneficiary from making a complying presentation on its own, effectively handing control over payment back to the applicant.
- Spotting and dealing with soft clauses is one of the core tasks when an exporter examines a credit.
In practice
Soft clauses are common with new customers, high-risk regions and buyers with strong bargaining power. If the exporter fails to spot one on receiving the credit, it may produce and ship under the contract, only to find that a required document can be issued by the buyer alone – and the buyer is slow to sign. The usual outcome is a forced price reduction or a refusal to pay.
Experienced companies keep a soft-clause list that sets out common wording by risk level with recommended responses, and examiners check each clause against it. High-risk clauses must be amended before production or shipment is arranged. Because wording varies so much, the list needs continual updating as new cases emerge, with conclusions agreed jointly by documentation, sales and risk teams.
How Tranexio supports it
Tranexio provides a soft-clause library at the L/C examination stage, highlighting clauses that need attention by risk level and recording how each was resolved; amendments and examination results are linked to the contract and the shipment. See Letters of credit and collections.