Read MarineHowTo.com's article on Battery Banks & Over Current Protection, section AIC & Why Its Critically Important. It refers to Section 11.10.1.2 of the ABYC standard, subsection 11.10.1.2.3.2 which states for banks with 2200 CCA or 500Ah they require a fuse with a minimum AIC rating of 20kA at 125V if the battery's Short Circuit Rating exceeds 10kA. Most Lithium batteries do, and a bank surely does. To my knowledge, only a Class-T fuse meets this requirement.There is some debate in ABYC about the Class T fuse and the need for the 20,000 AIC rating. When a new technology comes on the market, standards organization tend to be cautious until the field has more experience with it. They also know that boat owners, builders, and repair techs will cut corners on any standard.
For the DIY among us, the standards are aspirational, where we can we should comply with them. Where we can't, we should try to get as close as we reasonably can.
For your specific example, what is the shortest distance you can make it? My primary lead is 8 or 9" to the fuse. A recent surveyor inspected it and said it was fine. The alternative is to sheath the wire in a flame/fire resistant sheath. The goal is to prevent a fire from starting from a short between the battery and fuse. A short wire is less likely to have something abrade it and cause a short, a much longer wire does have more opportunity, hence the fire proof sheathing.
8" vs 7", I would not see it being a reason to fail the inspection. But remember ABYC is the LOWEST standard. you can (and usually should) go above and beyond. In your case you could put a short loom section on your cables, and you would be covered. If you ever have an issue that requires Insurance Company intervention, you may wish you had if they find out you didn't adhear to the ABYC in the smallest respect.