Research On Legal Aspects Of Banking Documentary Examination In The Letter Of Credit

The L/C is an important method of payment in international transactions, which should be issued according to the trade contract. The L/C plays a core role in promoting the development of international trade and supporting the flourishing of world economic prosperity. In recognition of the special function of L/C, it was even referred to as "the blood of international commerce" by british judges. However, in recent years, the rate of L/C use has declined greatly. Evidently, the L/C system is facing a serious developmental crisis. Through the analysis of this phenomenon, the decline of L/C use in international trade practices is attributed to the high refusal rate by banks arising from the process of the examination of documents. In the operation of L/C, a confirming bank and the issuing bank must determine whether or not the documents appear on their face to comply with the terms and conditions of the L/C. Only when the documents presented complies with the terms of L/C can they be honored. The responsibility of nominated bank is acting on its nomination. Therefore, the examination of the documents is an extremely vital and complicated step during this procedure. Moreover, which standards should be used to judge whether the documents presented is consistent with the terms of L/C is the key question during the examination of documents. In L/C practice, there has not been a uniform and specific standard by which to determine documentary compliance. Currently, the principle of strict compliance is one of the basic standards for examination of documents. UCP600stipulates that "complying presentation means a presentation that is in accordance with the terms and conditions of the credit, the applicable provisions of these rules and international standard banking practice". Undoubtedly, it will have significant effects on the examination of documents. These basic rules of L/C can provide opportunities for fraud. In order to prevent L/C fraud and decrease the rate of refusal in PRC, there is a need to establish and improve the legislative regime. This will promote the sustainable development of international trade.This thesis comprises five main parts. The core of this thesis examines the theory surrounding the standard for examination of documents. At the same time, it discusses and analyzes fraud exception, which is related with strict compliance. The structure of the thesis is as follows:in the first part, the basic concept of a L/C is introduced; the second part analyses the law and its application of L/C in the context of the current international conditions and domestic legal analysis; in the third part, the three key historical standards for examination of documents are discussed; the fourth part describes the core principle in the examination of documents-the principle of strict compliance-and discusses new developments in the examination of documents, and; finally, the thesis focuses on aspects of fraud exception which are relevant to the examination of documents. It is hoped that this paper could contribute to the promotion and optimisation of the efficiency and function of L/C structure by researching the standard of examination of documents.