Risk Prevention Of Soft Clause In Letter Of Credit

LC( letter of credit), as one of the most important means of bank payments, has been widely used in international trade settlement by merchants and banks in various countries now. After accessed to the WTO,China has huge foreign trade volume and become the largest exporter and second largest importer,that means China has become an important force in stabilizing the world economic growth. It is necessary for the import and export businessmen in China to use the LC for payment. However, LC is a double-edged sword, while favored by the national traders also bring a lot of business risk to them.The soft clause of LC is the one we should arouse enough attention to the problem, it has become a major obstacle role while LC playing a means of payment. The international community on this issue is still not clearly defined, nor the formation of a unified understanding. Lack of understanding the of The soft clause of LC, will bring a huge risk to both sides in trade. This paper focus on analyzing the manifestations of soft credit terms and putting forward recommendations of the risk reduction and prevention measures, hoping to provide references and suggestions for improving the legislation of the credit system, and provide a useful reference for banks and trading companies. This article includes the following four parts.The first part is a introduction about the basic understanding of the terms of the letter of credit soft, includes the concept, recognition and common manifestations of soft terms of the letter of credit. The manifestations of the soft terms of LC are varied and complex, they are very important for helping recognizing and understanding the soft terms of LC. This section focus on analyzing the recognition and common manifestations of soft terms of the letter of credit, in order to look forward to a clearer understanding of what is soft credit terms, credit soft terms common manifestations.The second part is the main reasons and the harm to the soft terms of the letter of credit analysis, The reason mainly includes some subjective mentality from the parties of international trade to find the reason and find the reason from the international trade the objective external environment, "An antidote against the disease by looking for a cause". And damage the soft terms of the problem to the credit analysis, The huge harm means that we must take corresponding preventive measures.The third part is mainly on analyzing the soft terms of the letter of credit and risk prevention hampered relief, including the underlying contract, hinder relief under the credit risk on soft terms, and focus on discussing the measures of prevent the credit soft terms, hoping for a better resolve and prevent the risk that arising by the the soft terms of the letter of credit, maintain the important position of LC in international trade payment methods.The fourth part is the development and improvement how to prevent the credit soft terms, including improve the standard formats letters of credit, establish an effective identification standards, perfect the applicant protection mechanisms, and clearly defined the terms of the letter of credit soft. Each point of perfecting the credit will mean reducing the probability of the emergence of soft clause in letter of credit, in order to safeguard the legitimate interests of bilateral trade.