Study On The Standard For Bank’s Examination Of Documents Under Documentary Credit

Under the letter of credit, if exporters want to receive the payments for goods, theyhave to give a "complying" presentation. How to judge the standard of "complying"depends on the behavior of banks. Examination of Documents is the basic guarantee forthe smooth conduct of the entire L/C transactions. Uniform Customs and Practice forDocumentary Credits (UCP600), International Standard Banking Practice(ISBP681),Uniform Commercial Code (UCC) and "Some Provisions Concerning Letter of Credit"promulgated by Supreme People s Court are important documents about L/C, which tosome extent provide guidance for banks. But these rules on the standard for examinationof documents lack of specific and objective criteria, which lead to several differentstandards in the actual operation of L/C, such as literal compliance, substantialcompliance and strict compliance. The uncertainty of examination standard willinevitably lead to the unpredictable results, which will seriously affect the healthydevelopment of the L/C.By analyzing the strengths and weaknesses of the three mainstream standards, itcan be seen that strict compliance standard is the best one, which helps to balance theinterests of all parties. However, in practice, the banks are often difficult to follow therule of strict compliance. Many external factors will affect their decisions, such as thebasis of the transaction, market conditions, applicant credit status, which will lead banksto choose the standard inclined to mirror compliance. The actual examination standardshave a great harm to beneficiary. But the International Chamber of Commerce andcourts are bound to constraint these uncertainty. Through theoretical analysis, the bestresult of these constraints is to lead bank examination standards gradually return to theideal standard of neutral strict compliance.Through analyzing the bank s examination standards, it will help the users tore-recognize the "bank credit" of L/C and have a more comprehensive and accurateunderstanding of this settlement. The aim of this article is to guide a properunderstanding of the letter of credit in favor of beneficiaries and give them somepractical recommendations.