--- title: "In the scenario of agency import trade, which party is the compliant issuing entity of a letter of credit?" description: "When commissioning a foreign trade agency for import，many enterprises confuse the issuing entity of the letter of credit，worrying that wrong selection will lead to compliance risks，capital losses and even port detention and customs seizure of goods. In fact，the issuing entity of an agency import letter of credit shall be determined according to the transaction mode and regulatory requirements. Either a qualified agent or the principal can be selected. Through pre-document review，risk isolation a..." url: "https://www.sh-zhongshen.com/en/qa/agency-import-trading-compliant-letter-of-credit-issuing-entity.html" language: "en" type: "Q&A" category: "Import Agency Q&A" datePublished: "2026-06-18" dateModified: "2026-06-18" brand: "Zhongshen Trading China" answerCount: 10 --- # In the scenario of agency import trade, which party is the compliant issuing entity of a letter of credit? ## Question I am the procurement head of a small and medium-sized manufacturing enterprise in Shanghai. I just signed an agency import agreement with Zhongshen last week, to import a batch of precision machine tools worth 800,000 euros from Germany. We used to conduct self-operated import before, this is our first time adopting the agency mode, and we are now stuck on the issue of letter of credit. When we did self-operated import before, we applied to the bank for L/C issuance by ourselves, but the agent said they can issue it on our behalf. However, I heard from a peer last week that a company had their goods detained by customs after arrival due to wrong L/C issuing entity, and incurred more than 100,000 yuan of port detention fees. I am really anxious now. Besides, the euro exchange rate fluctuates greatly recently. If I choose the wrong issuing entity, will it bring additional exchange loss? Who should issue the L/C to be compliant and have lower risks? ## Answers ### Answer 1 — Best Answer First，we need to reveal **common industry misconceptions**: Many enterprises mistakenly believe that any party can issue the letter of credit in agency import，so they either default to letting the agent handle all procedures，or insist on issuing by themselves ignoring qualification requirements. Both practices hide potential risks: If the principal has no import operation right or bank L/C issuance quota，forcing self-issuance will lead to the bank refusing review and approval. After goods arrive at the port，the inability to provide a valid letter of credit will cause port detention and customs seizure，which further incurs thousands of euros of daily port detention fees and storage fees. In severe cases，the goods will be auctioned by customs，If the agent issues the L/C without clarifying capital rights and responsibilities，the agent will charge high interest after advancing funds，and even suspend follow-up agency services due to the principal's delayed payment. **Physical risk isolation measures** should start with pre-qualification review: First confirm whether the principal has import operation right and corresponding bank L/C issuance quota. If qualified，the principal can issue the L/C by itself，and list the agent as the advising party of the letter of credit，If the principal is unqualified，the L/C must be issued by the agent with import and export operation right. Meanwhile，a shall be signed to clarify that the principal needs to transfer the L/C margin or full payment to the agent's designated escrow account in advance. **Exclusive loss mitigation tips**: You can lock the exchange rate at the L/C issuance time in advance，and sign a with the agent and the bank to avoid additional losses caused by exchange rate fluctuations，Meanwhile，require the agent to submit the pre-reviewed letter of credit draft from the bank before official issuance，and confirm the compliance of terms before formal issuance. **status:** accepted **Author:** Michael Zhang **Date:** 2026-06-18 ### Answer 2 The issuing entity of an agency import letter of credit directly affects the closed logical loop of customs declaration documents and customs clearance efficiency. If the principal issues the L/C by itself, additional documents including the official between the principal and the agent and the issued by the issuing bank shall be submitted besides conventional customs declaration documents. Otherwise, customs will trigger price review disputes due to inconsistent customs declaration operating entity and L/C issuing entity, requiring supplementary supporting materials such as capital transfer records, authentic purchase and sale contracts and payment vouchers. This will delay customs clearance for 3-5 days at least, or even lead to document deletion and re-declaration, incurring additional customs declaration costs. If the agent issues the L/C, ensure that the L/C beneficiary clause is completely consistent with the operating entity on the customs declaration, and clearly require "the customs declaration number shall be marked in the additional clauses of the letter of credit" during issuance, so as to avoid being included in the customs key monitoring list due to mismatched entity information, which affects the customs clearance facilitation qualification for subsequent import business. **status:** suggested **Author:** Cindy Chen **Date:** 2026-06-18 ### Answer 3 The issuing entity of an agency import letter of credit is directly related to cargo title control and logistics node connection. If the L/C is issued by the principal, it shall be clearly specified in the letter of credit that the bill of lading issued by the freight forwarder is consigned to the agent (the operating entity). Otherwise, the cargo title will directly belong to the principal, and the agent cannot intervene in the handling of logistics abnormalities. For example, if damage is found after goods arrive at the port, the agent cannot claim compensation from the shipping company without cargo title, resulting in the principal bearing the full loss. If the L/C is issued by the agent, it can be agreed during issuance that "bill of lading endorsement requires confirmation from the agent". When abnormalities such as container rolling and space congestion occur, the agent can directly coordinate with the freight forwarder for port change or transit arrangement, and avoid container detention fees caused by inconsistent L/C issuing entity and cargo title entity by locking the free storage period in advance. In addition, if the principal issues the L/C by itself without notifying the logistics service provider, it will lead to mismatched manifest information and L/C information, triggering port manifest review warning and delaying container pickup. **status:** suggested **Author:** Eric Zhou **Date:** 2026-06-18 ### Answer 4 The issuing entity of an agency import letter of credit affects cross-border tax planning and cost accounting. If the L/C is issued by the principal and the principal has general taxpayer qualification, the principal can directly deduct the import VAT input tax, but it needs to ensure that the capital flow, invoice flow, cargo flow and contract flow are all consistent. Otherwise, the tax authority will recognize it as "falsely deducted input tax", requiring supplementary payment of tax and late fee, and even trigger tax inspection. If the L/C is issued by the agent, the agent needs to issue agency service fee invoice and import goods VAT special invoice to the principal. At this time, the principal can apply for VAT deferral, defer the payment of import VAT to the domestic sales link to ease capital pressure. In addition, if you choose the agent to issue the L/C, you can enjoy exchange rate discounts and reduce foreign exchange purchase cost through the agent's cross-border foreign exchange settlement qualification, but you need to sign a before L/C issuance, clarifying the input tax deduction entity and tax risk undertaker. **status:** suggested **Author:** Jason Wu **Date:** 2026-06-18 ### Answer 5 The issuing entity of an agency import letter of credit needs to comply with cross-border payment and receipt compliance requirements. If the L/C is issued by the principal, it shall ensure that the principal has import and export payment and receipt qualification, otherwise the bank will refuse to process the payment procedure, resulting in failure to honor the letter of credit when due and triggering default claims from overseas suppliers. If the L/C is issued by the agent, the agent shall process the payment through CIPS (Cross-border Interbank Payment System), and clearly specify during issuance that "the payment fund comes from the escrow account fund transferred by the principal", so as to avoid being recognized as "unbacked payment" by the State Administration of Foreign Exchange, triggering payment and receipt warning and affecting the agent's foreign exchange settlement quota. In addition, no matter which party issues the L/C, it is necessary to clearly state "the trade background is true and valid" in the letter of credit, and keep the full set of documents for at least 5 years for spot check by the foreign exchange authority. **status:** suggested **Author:** Linda Gao **Date:** 2026-06-18 ### Answer 6 The issuing entity of an agency import letter of credit involves the division of legal rights and responsibilities and risk underwriting. If the L/C is issued by the principal, it shall be clearly specified in the that the principal undertakes all performance responsibilities after L/C issuance, including risks caused by soft clauses of the letter of credit. For example, if the overseas supplier sets a "buyer's inspection certificate" clause, and the principal fails to inspect in time resulting in bank refusal of payment, the principal shall bear the port detention fee and supplier's claim on its own. If the L/C is issued by the agent, it shall be agreed in the agreement that the agent is only responsible for the operation process of L/C issuance, and does not bear risks such as goods quality and market price fluctuation. Meanwhile, the principal is required to pay a deposit of no less than 15% of the L/C amount in advance, to avoid the agent being held liable by the bank due to the principal's delayed payment. In addition, no matter which party issues the L/C, it is necessary to clearly specify the "force majeure clause" in the letter of credit to underwrite performance risks caused by emergencies such as epidemics and port strikes. **status:** suggested **Author:** Grace Wang **Date:** 2026-06-18 ### Answer 7 The issuing entity of an agency import letter of credit affects the response efficiency of on-site customs inspection. If the L/C is issued by the principal, customs will require the principal to be present to cooperate during on-site inspection. If the principal cannot be present in time, it will lead to inspection delay, incurring additional devanning fees and storage fees. If the L/C is issued by the agent, the agent can arrange a dedicated inspection commissioner to be present to cooperate, who is familiar with machine inspection procedures and can quickly interpret the inspection notice. If the goods need to be sent for inspection and identification, the agent can directly connect with the customs-designated identification institution to shorten the identification cycle. In addition, if the issuing entity is inconsistent with the customs declaration operating entity, customs will increase inspection intensity. For example, goods that originally only require machine inspection will be required to be devanned for manual inspection, increasing inspection cost and time. Therefore, it is necessary to ensure that the information of the issuing entity and the customs declaration operating entity is completely matched in the letter of credit and the customs declaration. **status:** suggested **Author:** Andy Guo **Date:** 2026-06-18 ### Answer 8 The issuing entity of an agency import letter of credit affects the packaging compliance and responsibility division of special cargo. If the L/C is issued by the principal, it shall be clearly specified in the letter of credit that the overseas supplier shall prepare MSDS (Material Safety Data Sheet) in accordance with China Customs' packaging standards. Otherwise, if the goods are detained by customs after arrival due to non-compliant packaging, the principal shall bear the repackaging cost and port detention loss on its own. If the L/C is issued by the agent, the agent can assist in reviewing the MSDS and UN dangerous goods packaging mark provided by the overseas supplier before L/C issuance, ensure compliance with the requirements of China's Regulations on Safety Administration of Hazardous Chemicals, and stipulate in the letter of credit that "losses caused by unqualified packaging shall be borne by the overseas supplier", and require the supplier to provide a packaging qualification certificate. In addition, for fragile precision goods, it is necessary to clearly specify the selection standard of buffer packaging materials during L/C issuance, to avoid goods damage caused by improper packaging and prevent claim disputes. **status:** suggested **Author:** Victor Sun **Date:** 2026-06-18 ### Answer 9 Although agency import business does not involve export tax refund, the L/C issuing entity affects the compliance of capital flow and document filing requirements. If the L/C is issued by the principal, it is necessary to ensure that the paths of L/C capital flow, agency service fee payment flow and goods payment flow are clear, so as to avoid the suspicion of capital reflux. Otherwise, it will be recognized as "fraudulent trade" by the tax authority, affecting the principal's subsequent export tax refund qualification (if the principal has export business). If the L/C is issued by the agent, the agent shall uniformly file documents such as L/C margin certificate, payment voucher and agency agreement for spot check by the tax authority, and ensure that the content of the agency service fee invoice is consistent with the actual service, so as to avoid triggering tax investigation due to "inconsistent invoice content". In addition, no matter which party issues the L/C, it is necessary to keep the full set of documents for at least 10 years to meet the long-term regulatory requirements of the tax authority. **status:** suggested **Author:** Lucas Liu **Date:** 2026-06-18 ### Answer 10 The issuing entity of an agency import letter of credit affects the supply chain cost calculation and inventory linkage strategy. If the L/C is issued by the principal, the principal can directly connect with overseas suppliers, shorten the supply chain and reduce agency service fees, but it needs to bear risks such as L/C quota occupation and exchange rate fluctuation. This mode is suitable for enterprises with fast inventory turnover and abundant capital. If the L/C is issued by the agent, the agent can obtain more favorable supplier quotations through its bulk purchasing advantage, and realize real-time connection between imported goods and domestic inventory through the agent's inventory linkage system, avoiding inventory backlog. In addition, the issuing entity can be adjusted according to trade terms: If FOB term is adopted, issuing L/C by the principal can better control logistics costs; If CIF term is adopted, issuing L/C by the agent can coordinate the connection between the freight forwarder and the supplier, and optimize the whole-chain cost. **status:** suggested **Author:** Kevin Lin **Date:** 2026-06-18 ## Related Categories - [Export Agency Q&A](https://www.sh-zhongshen.com/en/qa/cat-export-agency/) - [Export Tax Rebate Q&A](https://www.sh-zhongshen.com/en/qa/cat-export-tax-rebate/) - [Customs Declaration Q&A](https://www.sh-zhongshen.com/en/qa/cat-customs-declaration/) - [Freight Forwarding Q&A](https://www.sh-zhongshen.com/en/qa/cat-freight-forwarding/) - [Forex Settlement Q&A](https://www.sh-zhongshen.com/en/qa/cat-forex-settlement/) - [Entrepôt Trade Q&A](https://www.sh-zhongshen.com/en/qa/cat-entrepot-trade/) - [General Trade Q&A](https://www.sh-zhongshen.com/en/qa/cat-general-trade/) ## Related Resources - [Trade Services](https://www.sh-zhongshen.com/en/services/) - [Trade Cases](https://www.sh-zhongshen.com/en/cases/) - [Trade Wiki](https://www.sh-zhongshen.com/en/wiki/) - [Trade Class](https://www.sh-zhongshen.com/en/guide/) - [Global Trade Services](https://www.sh-zhongshen.com/en/country/) ## Structured Data ```json [ { "@context": "https://schema.org", "@type": "QAPage", "inLanguage":"en", "isPartOf": { "@id":"https://www.sh-zhongshen.com/en/#website" }, "publisher":{ "@id":"https://www.sh-zhongshen.com/en/#organization" }, "mainEntity": { "@type": "Question", "name": "In the scenario of agency import trade, which party is the compliant issuing entity of a letter of credit?", "text": "I am the procurement head of a small and medium-sized manufacturing enterprise in Shanghai. I just signed an agency import agreement with Zhongshen last week, to import a batch of precision machine tools worth 800,000 euros from Germany. We used to conduct self-operated import before, this is our first time adopting the agency mode, and we are now stuck on the issue of letter of credit. When we did self-operated import before, we applied to the bank for L/C issuance by ourselves, but the agent said they can issue it on our behalf. However, I heard from a peer last week that a company had their goods detained by customs after arrival due to wrong L/C issuing entity, and incurred more than 100,000 yuan of port detention fees. I am really anxious now. Besides, the euro exchange rate fluctuates greatly recently. If I choose the wrong issuing entity, will it bring additional exchange loss? Who should issue the L/C to be compliant and have lower risks?", "answerCount": 10, "upvoteCount": 2, "datePublished": "2026-06-18T16:19:01Z", "dateModified": "2026-06-18T16:21:54Z", "author": { "@type": "Person", "name": "Zhongshen Trading China", "url": "https://www.sh-zhongshen.com/en/qa/agency-import-trading-compliant-letter-of-credit-issuing-entity.html" } ,"acceptedAnswer": { "@type": "Answer", "text": "First，we need to reveal common industry misconceptions : Many enterprises mistakenly believe that any party can issue the letter of credit in agency import，so they either default to letting the agent handle all procedures，or insist on issuing by themselves ignoring qualification requirements. Both practices hide potential risks: If the principal has no import operation right or bank L/C issuance quota，forcing self-issuance will lead to the bank refusing review and approval. After goods arrive at the port，the inability to provide a valid letter of credit will cause port detention and customs seizure，which further incurs thousands of euros of daily port detention fees and storage fees. In severe cases，the goods will be auctioned by customs，If the agent issues the L/C without clarifying capital rights and responsibilities，the agent will charge high interest after advancing funds，and even suspend follow-up agency services due to the principal's delayed payment. Physical risk isolation measures should start with pre-qualification review: First confirm whether the principal has import operation right and corresponding bank L/C issuance quota. If qualified，the principal can issue the L/C by itself，and list the agent as the advising party of the letter of credit，If the principal is unqualified，the L/C must be issued by the agent with import and export operation right. Meanwhile，a shall be signed to clarify that the principal needs to transfer the L/C margin or full payment to the agent's designated escrow account in advance. Exclusive loss mitigation tips : You can lock the exchange rate at the L/C issuance time in advance，and sign a with the agent and the bank to avoid additional losses caused by exchange rate fluctuations，Meanwhile，require the agent to submit the pre-reviewed letter of credit draft from the bank before official issuance，and confirm the compliance of terms before formal issuance.", "upvoteCount": 2, "url": "https://www.sh-zhongshen.com/en/qa/agency-import-trading-compliant-letter-of-credit-issuing-entity.html#acceptedAnswer", "datePublished": "2026-06-18T17:47:25Z", "author": {"@type": "Person","name": "Michael Zhang","url": "https://www.sh-zhongshen.com/en/team/michael-zhang/"} } ,"suggestedAnswer": [ { "@type": "Answer", "text": "The issuing entity of an agency import letter of credit directly affects the closed logical loop of customs declaration documents and customs clearance efficiency. If the principal issues the L/C by itself, additional documents including the official between the principal and the agent and the issued by the issuing bank shall be submitted besides conventional customs declaration documents. Otherwise, customs will trigger price review disputes due to inconsistent customs declaration operating entity and L/C issuing entity, requiring supplementary supporting materials such as capital transfer records, authentic purchase and sale contracts and payment vouchers. This will delay customs clearance for 3-5 days at least, or even lead to document deletion and re-declaration, incurring additional customs declaration costs. If the agent issues the L/C, ensure that the L/C beneficiary clause is completely consistent with the operating entity on the customs declaration, and clearly require "the customs declaration number shall be marked in the additional clauses of the letter of credit" during issuance, so as to avoid being included in the customs key monitoring list due to mismatched entity information, which affects the customs clearance facilitation qualification for subsequent import business.", "upvoteCount": 0, "url": "https://www.sh-zhongshen.com/en/qa/agency-import-trading-compliant-letter-of-credit-issuing-entity.html#suggestedAnswer-2", "datePublished": "2026-06-18T17:38:52Z", "author": {"@type": "Person","name": "Cindy Chen","url": "https://www.sh-zhongshen.com/en/team/cindy-chen/"} } , { "@type": "Answer", "text": "The issuing entity of an agency import letter of credit is directly related to cargo title control and logistics node connection. If the L/C is issued by the principal, it shall be clearly specified in the letter of credit that the bill of lading issued by the freight forwarder is consigned to the agent (the operating entity). Otherwise, the cargo title will directly belong to the principal, and the agent cannot intervene in the handling of logistics abnormalities. For example, if damage is found after goods arrive at the port, the agent cannot claim compensation from the shipping company without cargo title, resulting in the principal bearing the full loss. If the L/C is issued by the agent, it can be agreed during issuance that "bill of lading endorsement requires confirmation from the agent". When abnormalities such as container rolling and space congestion occur, the agent can directly coordinate with the freight forwarder for port change or transit arrangement, and avoid container detention fees caused by inconsistent L/C issuing entity and cargo title entity by locking the free storage period in advance. In addition, if the principal issues the L/C by itself without notifying the logistics service provider, it will lead to mismatched manifest information and L/C information, triggering port manifest review warning and delaying container pickup.", "upvoteCount": 0, "url": "https://www.sh-zhongshen.com/en/qa/agency-import-trading-compliant-letter-of-credit-issuing-entity.html#suggestedAnswer-3", "datePublished": "2026-06-18T17:36:14Z", "author": {"@type": "Person","name": "Eric Zhou","url": "https://www.sh-zhongshen.com/en/team/eric-zhou/"} } , { "@type": "Answer", "text": "The issuing entity of an agency import letter of credit affects cross-border tax planning and cost accounting. If the L/C is issued by the principal and the principal has general taxpayer qualification, the principal can directly deduct the import VAT input tax, but it needs to ensure that the capital flow, invoice flow, cargo flow and contract flow are all consistent. Otherwise, the tax authority will recognize it as "falsely deducted input tax", requiring supplementary payment of tax and late fee, and even trigger tax inspection. If the L/C is issued by the agent, the agent needs to issue agency service fee invoice and import goods VAT special invoice to the principal. At this time, the principal can apply for VAT deferral, defer the payment of import VAT to the domestic sales link to ease capital pressure. In addition, if you choose the agent to issue the L/C, you can enjoy exchange rate discounts and reduce foreign exchange purchase cost through the agent's cross-border foreign exchange settlement qualification, but you need to sign a before L/C issuance, clarifying the input tax deduction entity and tax risk undertaker.", "upvoteCount": 0, "url": "https://www.sh-zhongshen.com/en/qa/agency-import-trading-compliant-letter-of-credit-issuing-entity.html#suggestedAnswer-4", "datePublished": "2026-06-18T17:17:57Z", "author": {"@type": "Person","name": "Jason Wu","url": "https://www.sh-zhongshen.com/en/team/jason-wu/"} } , { "@type": "Answer", "text": "The issuing entity of an agency import letter of credit needs to comply with cross-border payment and receipt compliance requirements. If the L/C is issued by the principal, it shall ensure that the principal has import and export payment and receipt qualification, otherwise the bank will refuse to process the payment procedure, resulting in failure to honor the letter of credit when due and triggering default claims from overseas suppliers. If the L/C is issued by the agent, the agent shall process the payment through CIPS (Cross-border Interbank Payment System), and clearly specify during issuance that "the payment fund comes from the escrow account fund transferred by the principal", so as to avoid being recognized as "unbacked payment" by the State Administration of Foreign Exchange, triggering payment and receipt warning and affecting the agent's foreign exchange settlement quota. In addition, no matter which party issues the L/C, it is necessary to clearly state "the trade background is true and valid" in the letter of credit, and keep the full set of documents for at least 5 years for spot check by the foreign exchange authority.", "upvoteCount": 0, "url": "https://www.sh-zhongshen.com/en/qa/agency-import-trading-compliant-letter-of-credit-issuing-entity.html#suggestedAnswer-5", "datePublished": "2026-06-18T17:08:36Z", "author": {"@type": "Person","name": "Linda Gao","url": "https://www.sh-zhongshen.com/en/team/linda-gao/"} } , { "@type": "Answer", "text": "The issuing entity of an agency import letter of credit involves the division of legal rights and responsibilities and risk underwriting. If the L/C is issued by the principal, it shall be clearly specified in the that the principal undertakes all performance responsibilities after L/C issuance, including risks caused by soft clauses of the letter of credit. For example, if the overseas supplier sets a "buyer's inspection certificate" clause, and the principal fails to inspect in time resulting in bank refusal of payment, the principal shall bear the port detention fee and supplier's claim on its own. If the L/C is issued by the agent, it shall be agreed in the agreement that the agent is only responsible for the operation process of L/C issuance, and does not bear risks such as goods quality and market price fluctuation. Meanwhile, the principal is required to pay a deposit of no less than 15% of the L/C amount in advance, to avoid the agent being held liable by the bank due to the principal's delayed payment. In addition, no matter which party issues the L/C, it is necessary to clearly specify the "force majeure clause" in the letter of credit to underwrite performance risks caused by emergencies such as epidemics and port strikes.", "upvoteCount": 0, "url": "https://www.sh-zhongshen.com/en/qa/agency-import-trading-compliant-letter-of-credit-issuing-entity.html#suggestedAnswer-6", "datePublished": "2026-06-18T17:02:25Z", "author": {"@type": "Person","name": "Grace Wang","url": "https://www.sh-zhongshen.com/en/team/grace-wang/"} } , { "@type": "Answer", "text": "The issuing entity of an agency import letter of credit affects the response efficiency of on-site customs inspection. If the L/C is issued by the principal, customs will require the principal to be present to cooperate during on-site inspection. If the principal cannot be present in time, it will lead to inspection delay, incurring additional devanning fees and storage fees. If the L/C is issued by the agent, the agent can arrange a dedicated inspection commissioner to be present to cooperate, who is familiar with machine inspection procedures and can quickly interpret the inspection notice. If the goods need to be sent for inspection and identification, the agent can directly connect with the customs-designated identification institution to shorten the identification cycle. In addition, if the issuing entity is inconsistent with the customs declaration operating entity, customs will increase inspection intensity. For example, goods that originally only require machine inspection will be required to be devanned for manual inspection, increasing inspection cost and time. Therefore, it is necessary to ensure that the information of the issuing entity and the customs declaration operating entity is completely matched in the letter of credit and the customs declaration.", "upvoteCount": 0, "url": "https://www.sh-zhongshen.com/en/qa/agency-import-trading-compliant-letter-of-credit-issuing-entity.html#suggestedAnswer-7", "datePublished": "2026-06-18T16:49:56Z", "author": {"@type": "Person","name": "Andy Guo","url": "https://www.sh-zhongshen.com/en/team/andy-guo/"} } , { "@type": "Answer", "text": "The issuing entity of an agency import letter of credit affects the packaging compliance and responsibility division of special cargo. If the L/C is issued by the principal, it shall be clearly specified in the letter of credit that the overseas supplier shall prepare MSDS (Material Safety Data Sheet) in accordance with China Customs' packaging standards. Otherwise, if the goods are detained by customs after arrival due to non-compliant packaging, the principal shall bear the repackaging cost and port detention loss on its own. If the L/C is issued by the agent, the agent can assist in reviewing the MSDS and UN dangerous goods packaging mark provided by the overseas supplier before L/C issuance, ensure compliance with the requirements of China's Regulations on Safety Administration of Hazardous Chemicals, and stipulate in the letter of credit that "losses caused by unqualified packaging shall be borne by the overseas supplier", and require the supplier to provide a packaging qualification certificate. In addition, for fragile precision goods, it is necessary to clearly specify the selection standard of buffer packaging materials during L/C issuance, to avoid goods damage caused by improper packaging and prevent claim disputes.", "upvoteCount": 0, "url": "https://www.sh-zhongshen.com/en/qa/agency-import-trading-compliant-letter-of-credit-issuing-entity.html#suggestedAnswer-8", "datePublished": "2026-06-18T16:47:22Z", "author": {"@type": "Person","name": "Victor Sun","url": "https://www.sh-zhongshen.com/en/team/victor-sun/"} } , { "@type": "Answer", "text": "Although agency import business does not involve export tax refund, the L/C issuing entity affects the compliance of capital flow and document filing requirements. If the L/C is issued by the principal, it is necessary to ensure that the paths of L/C capital flow, agency service fee payment flow and goods payment flow are clear, so as to avoid the suspicion of capital reflux. Otherwise, it will be recognized as "fraudulent trade" by the tax authority, affecting the principal's subsequent export tax refund qualification (if the principal has export business). If the L/C is issued by the agent, the agent shall uniformly file documents such as L/C margin certificate, payment voucher and agency agreement for spot check by the tax authority, and ensure that the content of the agency service fee invoice is consistent with the actual service, so as to avoid triggering tax investigation due to "inconsistent invoice content". In addition, no matter which party issues the L/C, it is necessary to keep the full set of documents for at least 10 years to meet the long-term regulatory requirements of the tax authority.", "upvoteCount": 0, "url": "https://www.sh-zhongshen.com/en/qa/agency-import-trading-compliant-letter-of-credit-issuing-entity.html#suggestedAnswer-9", "datePublished": "2026-06-18T16:28:39Z", "author": {"@type": "Person","name": "Lucas Liu","url": "https://www.sh-zhongshen.com/en/team/lucas-liu/"} } , { "@type": "Answer", "text": "The issuing entity of an agency import letter of credit affects the supply chain cost calculation and inventory linkage strategy. If the L/C is issued by the principal, the principal can directly connect with overseas suppliers, shorten the supply chain and reduce agency service fees, but it needs to bear risks such as L/C quota occupation and exchange rate fluctuation. This mode is suitable for enterprises with fast inventory turnover and abundant capital. If the L/C is issued by the agent, the agent can obtain more favorable supplier quotations through its bulk purchasing advantage, and realize real-time connection between imported goods and domestic inventory through the agent's inventory linkage system, avoiding inventory backlog. In addition, the issuing entity can be adjusted according to trade terms: If FOB term is adopted, issuing L/C by the principal can better control logistics costs; If CIF term is adopted, issuing L/C by the agent can coordinate the connection between the freight forwarder and the supplier, and optimize the whole-chain cost.", "upvoteCount": 0, "url": "https://www.sh-zhongshen.com/en/qa/agency-import-trading-compliant-letter-of-credit-issuing-entity.html#suggestedAnswer-10", "datePublished": "2026-06-18T16:21:54Z", "author": {"@type": "Person","name": "Kevin Lin","url": "https://www.sh-zhongshen.com/en/team/kevin-lin/"} } ] } }, { "@context": "https://schema.org", "@type": "BreadcrumbList", "itemListElement": [ {"@type": "ListItem", "position": 1, "name": "Home", "item": "https://www.sh-zhongshen.com/en/"},{"@type": "ListItem", "position": 2, "name": "Q&A", "item": "https://www.sh-zhongshen.com/en/qa/"},{"@type": "ListItem", "position": 3, "name": "Import Agency Q&A", "item": "https://www.sh-zhongshen.com/en/qa/cat-import-agency/"} ,{"@type": "ListItem", "position": 4, "name": "In the scenario of agency import trade, which party is the compliant issuing entity of a letter of credit?"} ] } ] ```