A Number Of Legal Problems With The Documentary Credit

Commercial letter of credit has been widely used in the business field between seller and buyer. International Chamber of Commerce (ICC), a non-government institution, enacts the regulations and standards, which is called Uniform Custom and Practice (UCP) as an international custom law from 1933. Over 170 countries have recognised UCP in their domestic courts as an international custome law. UCP has been used between bank and commercial business field. It has been changed through the improvement of shipping, science and technology. ICC reforms the UCP against the needs of improvement of the shipping and technologies.Most of the countires support the doctorine being strictly compliance, independence principal and the abstractions for the letter of credit. But recently due to the some of the businessmen used the disadventage of the commercial letter of the credit as a tool for the fraud, the commercial letter of the credits has been facing diffculties. Therefore, many countires are trying to protect the fraud. But they can not find any good methods to prevent the fraud. Also ICC asks for assistance from the domestic courts of each countires for the fraud. Most of domestic courts in each country refer the domestic customs and cases to balance the law enforcement of commercial letter of credit, but the outcomes are different between each country. Believing that more legal study on the comercial letter of credit is needed, present study examines many foreign and domestic cases, draws a conclusion from the legal aspect on the commercial letter of credits and distinguish the custom,fraud,defraud of the commercial business as follows;1. Regarding the fraud, ICC asks for assitance from the domestic court of each countires, but each countries judge the fraud differently. Therefore, the commercial letter of credit can't be defined by a compliance opinion in each domestic court. It is accepted that commercial letter of credits issues are very complicated.2. Due to the disadventages of the commercial letter of the credits, nowaday, most of the small and medium trading companies stop using the commercial letter of the credits as a payment tool. Therefore, letter of credits will become a function of guarantee payment methods in the future. Seller can email the original invoice, packing list and inspection report directly to the buyer and get paid. Seller can instruct the shipper to surrender the original bill of lading to the buyer. Time can be saved, so is the labour cost and other fees. This solution will solve the problems of strict compliance, indepedent principals and abstraction of commercial letter of credits. 3. Sum up the main points of studies being done in the commercial letter of the credits used in Chinese domestic court. Courts in China sustain the strict compliance compared to other countries.4. Rectititude the meaning of fraud and defraude using in China,and make a distingtion between commercial customs,and the fraud, fraud and violet of the contract, differentiate the letter of indeminity and letter of guarantee and civil liability. 5. Suggest a prevention of fraud and clarify the violet of international business contract from the fraud.6. Commentary for the eucp.1.0 and the ISBP as a supplement of the UCP 500 to reduce the strictly compliance and substantial compliance.