LC vs TT: Which Payment Method to Choose for Rice Import?

Letter of Credit (LC) small - Documentary Credit

LC Advantages for the Buyer

Letter of Credit small - Documentary Credit

Conditional payment - exporter paid only if documents comply
Documents (quality, quantity, dates) verified by your bank before payment
Double bank guarantee - your bank AND the exporter's bank commit
Strong legal protection in case of dispute
International standard for large orders

LC Disadvantages for the Buyer

Letter of Credit small - Points to Note

High cost - bank charges 0.5% to 1.5% of the amount
Slow process - LC opening: 5 to 10 working days
Document complexity - minor deviation = discrepancy
Requires a bank offering LC services (not all Beninese banks)
Costly amendments if terms change

Step-by-Step LC Process (Benin → India)

Commercial Agreement

You and the Indian exporter sign a pro-forma invoice specifying quantity, variety, FOB/CIF price, port, timelines and payment terms "LC at sight".

LC Opening

You go to your bank in Benin (issuing bank) and request LC opening. You provide the exact terms. The bank blocks or freezes the full amount in your account.

Transmission to Indian Bank

Your bank transmits the LC to the exporter's bank in India (advising/confirming bank) via the SWIFT network.

Shipment and Documents

The exporter ships the goods and prepares all documents required by the LC (B/L, invoice, phytosanitary, COO, etc.). These must comply 100% with LC terms.

Document Presentation

The exporter presents documents to their Indian bank. The bank checks compliance with LC terms.

Payment

If documents comply, your bank pays the exporter (for "at sight" LC). You receive original documents and can clear your cargo at Cotonou port.

Telegraphic Transfer (TT) small - Wire Transfer

TT Advantages for the Buyer

Telegraphic Transfer small - SWIFT Wire

Fast - transfer in 1 to 3 working days
Cheaper - fixed bank fees (typically $25–60)
Simple - no complex documentation
Ideal for established trusted partners
Flexible - easy to adjust for repeat orders

TT Risks for the Buyer

Telegraphic Transfer small - Points to Note

Advance at risk - 30% or 100% before shipment = little recourse if problems arise
No bank guarantee on quality or quantity
Difficult to recover in case of fraud or dispute
Full trust rests on the exporter's reputation

Common TT Structures in Rice Trade

TT Structure	How It Works	Buyer Risk Level	When to Use
100% TT in advance	Full payment before shipment	Very high	Never with a new supplier
TT 30/70	30% before shipment, 70% against documents	Moderate	Trusted partner, 3rd order+
TT against documents (CAD)	Payment only against presentation of original documents	Low	Established relationship, intermediary bank
TT after receipt	Payment after inspection at destination	Very low for buyer	Rarely accepted by serious exporter

Final Comparison: LC vs TT for Beninese Importers

Factor	Letter of Credit (LC)	Telegraphic Transfer (TT)
Buyer security	Very high	Depends on structure
Cost	0.5%–1.5% of amount	$25–60 fixed
Setup time	5–10 working days	1–3 days
Complexity	High small - very precise documents required	Low
Quality protection	Documents verified by bank	No bank guarantee
Recommended for	First order, new supplier, large volume	Established and verified supplier, regular volume
Accepted by Draba Ventures	Yes	Yes (30/70 structure)

Our Recommendation for Beninese Importers

First order: Always use LC at sight. The additional cost (0.5–1.5%) is your insurance against fraud and quality disputes. This is the international professional standard. From the 3rd order onwards with an exporter whose reliability is proven: move to TT 30/70 (30% on order, 70% against B/L copy). Never do 100% TT in advance with a supplier you do not know well.

FAQ small - LC and TT for Rice Import to Benin

Can all Beninese banks issue a Letter of Credit?

No, not all of them. Major commercial banks present in Benin such as Ecobank, Bank of Africa, Orabank, SGBS and UBA generally offer this service. Check with your regular bank whether they provide documentary credits (LC) for imports. Some banks require collateral or 100% cash coverage of the LC amount.

What is the minimum amount to open an LC?

Most banks have no strict minimum, but in practice LCs are used for amounts from $5,000–10,000 upward. For smaller orders (less than half a container), LC bank charges can represent a disproportionate share of total cost. In those cases, TT with a verified exporter is more practical.

What is a "discrepancy" in an LC and how do you avoid it?

A discrepancy occurs when the documents presented by the exporter do not match the LC terms exactly small - even a misplaced comma can create one. To avoid discrepancies: draft the LC in simple, precise terms; avoid overly complex conditions; and ensure the exporter receives an exact copy of the LC before shipment so they can prepare compliant documents.

Is TT 30/70 secure enough for a second order?

TT 30/70 (30% advance + 70% against B/L copy) is reasonable for a second or third order with an exporter whose first delivery went well. The 70% against B/L means you pay the balance only when you see that the goods have been loaded on the vessel. This is an acceptable balance between security and simplicity for an established relationship.

Does Draba Ventures accept LC at sight?

Yes, Draba Ventures accepts LC at sight for first orders. We are accustomed to working with African buyers who prioritise documentary security. Our bank in India is a nationalised commercial bank of the highest tier, fully compatible with the international SWIFT network.

Order on LC or TT small - We Accept Both

Draba Ventures adapts to your preferred payment method. LC at sight for first orders, TT 30/70 for established relationships. Contact us to discuss payment terms.

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