What is a letter of credit workability review, and when should it happen?

By Saurabh Goyal, Founder & CEO of Phlo Systems. Published 24 July 2026.

Ask a trading operations team when they scrutinise a letter of credit and the honest answer is usually: when the documents are being assembled, days before presentation. By then the vessel has sailed, the certificates are issued, and every defect in the credit itself has hardened into a discrepancy. The cheap moment to fix a letter of credit is the day it arrives, and the discipline of using that moment has a name: the workability review.

The 30-second answer: a workability review reads the credit, as issued, against the sales contract and asks one question: can we actually comply with this, with the shipment we are really going to make? Its output is not a risk memo. It is an amendment request, sent while the applicant still wants the trade to happen and an amendment costs a small bank fee, instead of a refusal notice after shipment, when nothing can be changed.

What the review actually checks

A credit can be unworkable in several distinct ways, and they hide in different fields.

The geometry of the dates. The latest shipment date (field 44C), the expiry date (31D) and the presentation period (field 48, or the 21-day default under UCP 600) have to leave a physically possible corridor: time to load before 44C, then enough room between shipment and expiry to assemble certificates from third parties and present. A credit that expires ten days after the latest shipment date, in a trade whose inspection certificates take two weeks to issue, is a refusal notice with a delay on it.

The credit against the contract. Quantity and tolerance (39A) against what the contract allows you to load; the goods description (45A) against what the invoice will say; ports (44E and 44F) against the intended routing; partial shipment and transhipment flags (43P and 43T) against how the cargo will actually move. Every mismatch is either an amendment now or a discrepancy later.

Soft clauses. Some conditions put your payment at the applicant's discretion: a document that only the applicant can issue or countersign, an inspection certificate from a company the applicant controls, a clause that the credit becomes operative only upon some event the applicant triggers. A credit with a soft clause is not a bank undertaking; it is an option held by your buyer. These clauses are the single best reason the review must happen before you commit the cargo.

Non-documentary conditions. UCP 600 article 14(h) says that if a credit contains a condition without stipulating a document to evidence it, banks deem the condition not stated and disregard it. In practice non-documentary conditions create arguments, and arguments create delay. They are cheap to convert into a documentary requirement by amendment, and dangerous to leave ambiguous.

Impossible or contradictory requirements. A certificate from an issuer who does not operate at the load port. Two clauses that cannot both be satisfied. A required document described so vaguely that no issuer would put their name to it. These read like edge cases; they appear in real credits with startling regularity, because credits are assembled from the applicant's template, the bank's template, and fragments of the contract, by people who will never have to present under them.

Draft, issued, and the drift between them

There is a second, quieter failure mode. Many traders review the draft credit carefully, approve it, and then file the issued credit unread on the assumption that the bank issued what was approved. Banks usually do. Sometimes they do not: a field is retyped, a clause from the bank's standard template replaces the negotiated wording, a tolerance quietly disappears. The only defence is a field-by-field comparison of the issued instrument against the approved draft, flagging every change and, more importantly, which side each change favours. A change that widens your obligations after you priced the trade is exactly the kind of thing that deserves an amendment request on day one.

Why the timing is the whole point

Everything above can be found at presentation time too. The difference is what finding it then is worth. On the day the credit arrives, every problem on the list above is an email: the applicant wants the goods, the relationship is warm, and an MT707 amendment costs a modest fee. After shipment, the same problems are discrepancies, and the remedies shrink to one: asking the applicant to waive, from the weakest negotiating position you will occupy in the entire trade. The workability review does not require new information. It requires doing the reading three weeks earlier than habit dictates.

The review also has to run against the credit as it currently stands, not the credit as issued. Amendments arrive throughout the life of a credit, and each one changes what compliance means; a review that ignores them is reviewing a document that no longer exists.

Frequently Asked Questions

What is a workability review of a letter of credit?

It is a structured check, performed when the credit is received, that the credit's terms can actually be complied with: dates that leave a feasible corridor for shipment and presentation, terms that match the contract, no soft clauses that put payment at the applicant's discretion, no impossible or contradictory documentary requirements. Its output is an amendment request while amendments are still cheap.

What is a soft clause in a letter of credit?

A clause that makes payment depend on something the applicant controls: a document only the applicant can issue or countersign, an inspection by a party the applicant nominates, or a condition that activates the credit at the applicant's discretion. Soft clauses convert a bank undertaking back into counterparty risk and should be amended away before goods are committed.

What is a non-documentary condition under UCP 600?

A condition in the credit that no document is stipulated to evidence. Under article 14(h), banks disregard such conditions when examining documents. Since 2023 revisions of practice notes have refined the treatment, but the operational advice is unchanged: convert the condition into a documentary requirement by amendment, or have it removed, rather than leave its status to argument.

When should a letter of credit be reviewed?

Three times. When the draft is negotiated. When the issued credit arrives, against both the contract and the approved draft. And whenever an amendment arrives, because each amendment changes what compliance means. The review that saves the most money is the second one, because it is the last point at which changing the credit is routine.

How Phlo Systems helps

opsPhlo runs the workability review as a first-class step in its L/C workbench. It extracts the terms from the MT700 or PDF advice, resolves amendments into the credit's current state, checks the credit against the deal it is meant to pay for, flags soft clauses, non-documentary conditions, impossible documents and date geometry that does not work, and composes the amendment request letter for you, on the day the credit arrives rather than the week the documents are due. See how opsPhlo reviews a credit.

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Related reading:

• Why are most letter of credit presentations refused on first presentation?
• What is a back-to-back letter of credit, and why must the two credits mirror?

Saurabh Goyal is the Founder & CEO of Phlo Systems. He has built finance and trading systems for commodity houses since 2008.