Documentary Letters Of Credit Risk And Prevention

With the fast enlargement of the scale and amount of money of international trade, and the diversified trends in international trade products and trading methods, the international trade activities are becoming more and more complicated, and risks in international trading are increasing sharply because of uncertain factors increasing. Therefore, it has become a popular trend to choose means of payment with high efficiency and low risk at the same time in international trade. Using letter of credit as a payment method provides great guarantee for both exporters and importers, since in this method bank credit replaces traditional commercial credit, which means bank takes first responsibility in paying money and therefore decrease many uncertainties of payment resulted from uncertainties of trading.However, because of independent, abstract criterion and problems of bank credit, many illegal business men make use of this method, as a result, all parties faces great risks in settlement of letter of credit. Studying cheating methods in letter of credit has become a popular topic in domestic thoery field, and the author also make this topic as the focus of this article. Futhermore, icc is amending ucp 500 which has been used widely in international trade. The final version will come up this year and will be named as ucp600, which will show a new way for letter of credit development. It will appear a new round of studying international practices of l/c in 2007. Based on opinions of icc, this article analyzes the clauses which have great possibilities of being amended the reason of amending. Moreover, resulted from some parties being unfamiliar with l/c , it appears many mistakes in using l/c. This article analyzes the risks and measures for keeping away from these risks from angles of international practices and banking practices, so that all parties in l/c could make sure it's safe to conclude businesses with l/c and avoid risks.This article make detailed research into features, structures, trends and cheating methods in l/c and also make detailed research into risks and ways for avoid these risks.