Plastics : Letter of Credit SWIFT Message Breakdown for the plastic industry

An LC SWIFT message is the standardized electronic communication system banks use to process Letters of Credit for international plastic trade transactions.

Letter of Credit is a bank guarantee that promises payment to a seller once they deliver goods and provide required documents, protecting both buyer and seller in international trade transactions.

Key message components:

MT700 (letter of credit issuance):

• Contains buyer and seller details, plastic product specifications, shipping terms, required documents, and payment conditions. 
• For plastic manufacturing, this includes specific plastic grades, quality standards, packaging requirements, and delivery schedules.

MT701 (LC amendment):

• Used to modify terms like plastic specifications, delivery dates, or payment amounts after the original LC is issued but before shipment.

MT750 (advising bank notification):

• Confirms LC receipt and authenticity to the plastic manufacturer, allowing them to begin production with payment assurance.

Critical information for plastic manufacturers:

• Product specifications (plastic type, grade, color, additives)
• Quality certifications required (FDA, food-grade, recycling codes)
• Shipping terms (FOB, CIF, delivery location)
• Documentation requirements (certificates of analysis, packing lists, inspection reports)
• Payment timeline (sight payment versus deferred payment)

Why it matters:

• SWIFT messages provide legal, standardized proof of payment commitment, allowing plastic manufacturers to confidently produce expensive custom orders for international buyers without payment risk. 
• The structured format ensures all parties understand exactly what plastic products must be delivered, when, and how payment will be processed through the global banking system.
• This system is essential for large plastic manufacturing deals where production costs are high and international trust is crucial.

LC SWIFT Message Breakdown for Plastics Manufacturing:

Basic Elements (MT 700):

• 27: message sequence number
• 40A: irrevocable/revocable credit
• 20: unique LC reference
• 31C: issue date
• 40E: applicable rules (UCP 600) are international banking rules published by the International Chamber of Commerce that standardize how Letters of Credit work globally

Irrevocable credit cannot be changed or cancelled without agreement from all parties and hence provides maximum security.
Revocable credit can be modified or cancelled by the buyer at any time.It offers little protection and is seldom used.

Party information:

• 50: buyer details
• 59: seller details
• 52A: issuing bank
• 57A: advising bank
• 51A: confirming bank (if any)

Financial terms:

• 32B: currency code and amount
• 39A: tolerance percentage
• 41A: available with/by details
• 42C: drafts at (payment terms)
• 42A: drawee bank

Product details (45A):

Material specifications:

• Resin type/grade
• Physical properties
• Chemical composition
• Color/appearance
• Quality standards

Commercial terms:

• Unit price
• Total quantity
• Packaging details
• Delivery terms
• Testing requirements

Required documents (46A):

Commercial:

• Invoice
• Packing list
• Weight certificate
• Origin certificate

Technical:

• Material test reports
• Quality certificates
• Inspection reports
• Safety compliance

Transport:

• Bill of lading which is a legal document that serves as a receipt for shipped goods and proof of ownership transfer 
• Export declaration
• Shipping documents

Shipment terms:

• 44A: loading location
• 44F: destination port
• 44C: latest ship date
• 44D: transfer period
• 43P: partial shipments
• 43T: transshipment which is a process of transferring cargo from one ship or transport mode to another at an intermediate port during its journey to the final destination.

Banking conditions:

• 71B: bank charges
• 48: document presentation period
• 49: confirmation instructions
• 78: banking instructions
• 72: sender to receiver info

Additional requirements:

• Special conditions
• Amendment terms
• Document preparation rules
• Discrepancy handling

Sample LC for plastic manufacturing:

MT 700 - Documentary credit:

• 27: sequence 001/001 (numbering system indicating this is message 1 of 1 total messages)
• 40A: irrevocable Documentary Credit
• 20: LC123456789 
• 31C: 230208 (Feb 8, 2023)
• 40E: UCP Latest version

Parties:

• 50: Plastic Buyer Co Ltd Import Street New York, USA
• 59: Plastic Manufacturer Ltd Export Road Shanghai, China
• 32B: USD 250,000.00

Product Details (45A):

• Type: High-Density Polyethylene (HDPE)
• Grade: PE100
• Melt Flow Index: 0.25-0.35 g/10min
• Density: 0.945-0.955 g/cm³
• Quantity: 50 MT
• Unit Price: USD 5.00/KG
• Packaging: 25kg bags

Documents Required (46A):

• Commercial Invoice (3 originals)
• Packing List (3 copies) which is detailed document that lists all items in a shipment, including quantities, weights, dimensions, and packaging details
• Certificate of Analysis that verifies a product meets specified quality standards and technical requirements through laboratory testing and inspection
• Bill of Lading which is a legal document that serves as a receipt for shipped goods
• Certificate of Origin that states which country the goods were manufactured or produced in
• Material Safety Data Sheet

Shipment Terms:

• 44A: Shanghai Port, China
• 44F: New York Port, USA
• 44C: Latest Shipment Date: 230308
• 43P: Partial Shipments Not Allowed

Payment Terms:

• Sight payment: is a type of payment that must be made immediately upon presentation of required shipping documents to the bank. There are no waiting period or credit terms involved.
• Documents Presentation: Within 21 days
• Bank Charges: Each party bears own charges