Trade Finance
Trade Finance Documents: The Complete Checklist Banks Check (2026)
In trade finance, the documents are the deal — banks pay against paper, not promises. Here is the complete trade finance documents checklist: commercial invoice, bill of lading, packing list, certificate of origin, LC, bill of exchange and more, plus the discrepancies that delay payment.
Why documents matter in trade finance
In trade finance, the documents are the deal. A bank that issues a letter of credit does not inspect your factory or your buyer’s warehouse — it pays against paper that proves a shipment happened under the agreed terms. The same logic drives factoring and LC discounting: a financier advances cash against documents that show a genuine, collectable receivable.
That is why documentary compliance is the difference between getting paid in days and waiting months. One mismatch between the invoice and the bill of lading can freeze an LC payment until the buyer’s bank accepts a discrepancy waiver.
The core trade finance documents checklist
| Document | Purpose | What the financier checks |
|---|---|---|
| Commercial invoice | States what was sold and at what price | Amount matches LC/invoice, correct description |
| Packing list | Details the contents and packing of the shipment | Consistency with invoice and transport document |
| Bill of lading / airway bill | Proof of shipment and title to goods | Clean, on-board, shipped within LC dates |
| Certificate of origin | Confirms where the goods were made | Eligibility for tariffs and trade agreements |
| Insurance certificate | Covers the goods in transit | Coverage amount and validity match shipment |
| Letter of credit (MT700) | The bank’s payment promise | All terms, expiry, amounts and conditions |
| Bill of exchange (draft) | Demands payment at sight or at tenor | Correct tenor, amount, and endorsement |
| Inspection certificate | Certifies quality or quantity (if required) | Issued by the named party, dated correctly |
The letter of credit set
When your deal runs on an LC, the document set is dictated by the LC itself. The MT700 spells out exactly which documents are required — often the invoice, B/L, packing list, certificate of origin and insurance certificate — and the terms they must satisfy.
Compliance is judged under UCP 600, the ICC rules that govern letters of credit. Documents are examined on their face only: amounts must be consistent, descriptions must match, dates must be met, and every required document must be present. If the presentation is compliant, the issuing bank must pay; if not, payment can be refused until the buyer waives the discrepancies.
Common LC discrepancies that delay payment
- Invoice amount or description not matching the LC.
- Shipment made after the LC’s latest shipment date.
- A stale bill of lading — presented too long after shipment.
- Bill of lading not endorsed, or showing a port different from the LC.
- Missing or wrongly dated insurance or inspection certificates.
- Late presentation after the LC expiry date.
Every one of these is fixable if you catch it before presentation. A quick self-check against the MT700 can save you a discrepancy fee, a waiver request, and days of payment delay.
Documents and LC tenors
The document set also carries the payment timing. A sight LC pays on presentation of compliant documents; a usance LC carries a tenor — commonly 60, 90 or 120 days — after which the issuing bank pays. The tenor is written into the documents and drives how long your cash is locked up.
That is where discounting comes in: a compliant usance LC can be discounted after presentation, so the documents that would normally tie up your cash for 90 days instead unlock an advance within days. See our guide to LC discounting for the full mechanics.
What you need to open an import LC — importer’s checklist (India)
If you are the buyer in India, the LC is opened on your side — before the seller ships. Your AD Category-I bank issues the MT700 on your instruction, so the checklist is about your application and your bank’s FEMA/KYC checks, not the seller’s shipping papers.
| Document / step | What to submit | Bank checks |
|---|---|---|
| LC application | Bank’s LC opening form — amount, currency, beneficiary, expiry, latest shipment date, Incoterms, port of loading/discharge, tenor (sight/ usance 60/90/120 days) | UCP 600 completeness; FEMA conformity |
| Underlying contract | Proforma invoice or purchase order / sales contract | Genuine trade, pricing, quantity |
| IEC + GST + KYC | IEC, GST registration, PAN, board resolution/POA for signatory, company KYC | IEC live on DGFT, GST active, sanction/AML screening |
| Import licence (if required) | DGFT licence for restricted ITC(HS) goods; otherwise free import | ITC(HS) policy check — free vs restricted vs prohibited |
| Margin / collateral | Cash margin (often 10–25% for known importers, higher for new), FD lien or working-capital limit earmark | Credit appraisal; standby LC/bank guarantee if advance > USD 200,000 or as per 2026 EXIM Guidelines AD-determined threshold |
| FEMA declaration | Undertaking that import conforms to FTP and FEMA Current Account Rules | Payment tenor aligned to contract per RBI EXIM Guidelines 2026 (old 6-month import payment cap removed) |
- Shipping documents (B/L, invoice, packing list, CoO, insurance, draft) are not submitted at opening — they are presented later by the exporter and checked against the MT700 at sight or at usance maturity.
- Fees at opening: issuance commission (often 0.2–1.5% p.a. pro-rata to usance), SWIFT/doc charges (~₹1,500–2,000) and FEDAI/FEMA handling — paid by applicant unless LC says otherwise.
- For restricted goods (e.g., certain chemicals, electronics) attach the DGFT licence with the LC application — AD bank cannot open otherwise.
Digital documents and paperless trade
Trade documents are going digital. Electronic bills of lading (eBL) are being adopted by major carriers, the LC has been electronic via SWIFT for decades, and digital trade platforms now handle document flows, compliance checks and financing in one place.
For the exporter, the practical benefit is speed: documents that travel digitally remove the courier leg from the payment cycle, and a platform that checks your documents against the LC before presentation can cut discrepancies dramatically.
How trad handles documents and financing
Clean documents are the cheapest financing you can get — they are what a factor or LC discounter relies on to advance cash. On trad, the buyer financing checker tells you whether factoring or LC discounting is available for your buyer’s market before you negotiate terms, so you structure the deal around documents that can actually be financed.
Check your buyer before you negotiate terms
See factoring scores, LC discounting coverage and the recommended product for your buyer country — free, in seconds.
Open the financing checkerFrequently asked questions
What documents are required for trade finance?
The core set is a commercial invoice, packing list, transport document (bill of lading or airway bill), certificate of origin, insurance certificate, and — where a letter of credit is used — the LC itself (SWIFT MT700) and a bill of exchange. Financiers check these to confirm that real goods shipped to a real buyer under agreed terms.
What is a SWIFT MT700?
MT700 is the SWIFT message type by which a bank issues a letter of credit. It carries all the LC terms — amount, beneficiary, shipment terms, documents required, and the tenor. For an exporter, the MT700 is the payment promise from the issuing bank in machine-readable form.
What happens if my documents do not match the LC?
A single discrepancy can make the LC unpayable at first presentation — the bank may refuse payment until the discrepancy is waived by the buyer. That is why LC documentary compliance is strict: invoice amounts must match the LC, shipment dates must be met, and every required document must be present and consistent.
Is the bill of lading proof of shipment?
Yes — a clean, on-board bill of lading issued by the carrier is the standard proof that goods were shipped on board a named vessel. Financiers treat it as evidence that the export actually happened, which is why discrepancies in the B/L are among the most common causes of payment delay.
Can trade documents be electronic?
Increasingly, yes. Electronic bills of lading (eBL) and paperless trade processes are growing, and digital trade platforms handle documents natively. The LC itself has always been electronic via SWIFT; the transport and title documents are the ones still transitioning to digital form.
Who checks the documents — the bank or the financier?
Both, at different stages. Under an LC, the issuing and negotiating banks check documents for compliance with UCP 600. When you factor an invoice or discount an LC, the financier checks the same documents to confirm the receivable is genuine and financeable. Clean documents are the cheapest financing you can get.
What documents are needed to open an import letter of credit in India?
As the importer (applicant), you apply to your AD Category-I bank with: LC application (bank format with amount, tenor, Incoterms, ports), proforma invoice or purchase order, board resolution/power of attorney for the signatory, IEC, GST registration, and — for restricted goods — the DGFT import licence. The bank runs KYC, sanctions and FEMA checks, assesses margin/collateral (often 10–25% for established importers, higher for new relationships), then issues the LC via SWIFT MT700. Required at issuance is the contract, not the shipping documents — those are checked later at presentation.
What documents are needed for an import letter of credit at presentation?
At presentation, the exporter’s bank presents what the MT700 asked for — typically commercial invoice, packing list, bill of lading/airway bill (clean, on-board), certificate of origin, insurance certificate, and the bill of exchange (draft) with the correct sight/usance tenor. The issuing bank checks all of them against the MT700 and UCP 600 before paying or accepting the usance obligation.