Selection And Study Of Letter Of Credit Under Transit Trade Mode

In recent years, with the increasing improvement of the investment environment in China, pillar industry shows obvious growth momentum that preponderant transit trade avoid trade barriers and reduce transaction costs then rise. With Bank credit intervening, usance letter of credit as transit trade is widely used in the settlement of goods payment, grant it more protection for three parts of trading, and the convenience of financing can be fully enjoyed. But according to the relevant provisions of the foreign exchange control, the payment of cancel after verification needs export proceeds for proof. Transit trade often in order to receive income after spending, the incoming using remittance and the spending using the usance letter of credit, and the using of usance letter of credit is a settlement way for the bank credit instead of commercial credit, and the banks undertake the due obligations. But the essence of the settlement of the usance letter of credit is according to the buying and selling of the documents stipulated, and the bank is not responsible for whether the authenticity of the documents and the quality is real or not. Therefore, for the three parties trading, choosing a way for payment by letter of credit is also carrying some risk, which is the same as other ways of clearing. However, there are kinds of types of letter of credit, which offer different options for the three parties. Therefore, how to choose a usance letter of credit settlement way becomes transit trade problems and it must be solved. How to choose the usance letter of credit settlement way depends on all parties to measure their income and risk preference on the basis of the negotiations, in addition, the characteristics of the goods with trade, trade regions, trading habits, corresponding laws and regulations are closely linked. In short, in transit trade, reasonable risk avoiding must adjust to the local conditions and flexible choice settlements. This paper is trying to elucidate the reasonable choice of usance letter of credit settlement in transit trade case, and on the basis of the overall credit to transit trade settlement risk in case of choice to analysis of the credit settlement of settlement, the problems and causes existing in reality, and combine with the new situation of credit. Through comparative analysis of two credit settlement ways that the back-to-back credit and the transferable credit, we discuss Chinese transit trade settlement sprang out of the actual usance letter of credit .