Foreign Trade Pactions Need To Be Cautious &Nbsp; &Nbsp; Importers' Unclear Creditworthiness Brings Foreign Trade Risks.

Therefore, whether the bank credit of a letter of credit can be fully realized depends to a large extent on the commercial credit of the applicant.

In international trade, the business credit of the importer as the applicant is playing an important role in the letter of credit payment.

Although the relationship between L / C and sales contract and the independent abstract principle of L / C are stipulated in UCP500, letters and sales contracts are not two separate trades in the actual import and export business, but the two aspects of a trade. The fundamental combination point is the commercial credit of importers and exporters, rather than "independent abstract" bank credit.

Therefore, after signing the sales contract between the exporter and the importer, the two sides agreed to pay by letter of credit, which does not mean that the paction will be reached. In international trade, the following situations often occur.

1. importers do not issue permits.

(1) as a result of market price changes and other reasons, in order to avoid market risks, importers do not open their certificates on their own interests.

Whether a letter of credit can be opened or not depends on the business credit of the importer, without the request of the applicant, no bank will issue a contract for the sale of documents independent of the contract to the beneficiary.

An example of an importer who does not sign a sale contract is common in international trade.

In September 2, 2000, I signed a corn sales contract with the Japanese import company, which stipulates that our company will provide 1000 tons of corn in Northeast China to the Japanese company before November 20th, the price is 0.126 US dollars / kg, and the payment is L/C.

Our export company acquired 1000 tons of corn in the Northeast before November 10th, ready for shipment.

But at this time, the price of corn on the international market suddenly dropped, and the buyer asked for a reduction in the price of the goods. Otherwise, the letter of credit was refused. Finally, though many discussions were made, the buyer opened the letter of credit.

But during this period, some of the corn was caught in the rain, and the buyer lowered the price so that our export company suffered huge losses.

(2) when a pport document is a sea waybill, an air waybill or a multimodal pport form, the exporters will lose control of the goods because they are not like the bill of lading as a document of title at that time. Therefore, even if the importer does not open a letter of credit in exchange for these documents, they will easily withdraw the goods.

In May 2002, my Hualong (alias) precision instrument company signed a contract for the sale of precision instruments with an American company, which stipulates that the air pportation method should be L/C. The US company should open the letter of credit to the Hualong company after the plane takes off.

In May 19th, the Hualong company installed the precision instruments on the plane. At 9, the plane took off on time.

But after the take-off, the US company did not open the letter of credit, and the Hualong company failed to reach the US company through any means.

Finally, it was confirmed that after the goods arrived at the destination airport, they had been picked up by the delivery notice and identity confirmation, which caused two losses to the Hualong company.

2. importers aim at fraud.

There are mainly two forms of expression for the exporter to provide a false letter of credit, namely, the letter of credit which is intentionally forged or fraudulent by the importer, and the two is that the importer and the bank with bad credit have opened the letter of credit.

Since the reform and opening up, international illegal traders have repeatedly used fraudulent letters of credit to cheat our exports, which has brought huge losses to our export enterprises.

Although the seventh provision of the UCP500 requires the advising bank to check the signing and mortgage of the letter of credit to determine the authenticity of the letter of credit, it is very difficult for the advising bank to determine the degree of credit of the issuing bank, too.

3. the importer instructed the issuing bank to issue a "soft clause" letter of credit, the so-called soft clause letter of credit.

It refers to importers who use exporters' lack of knowledge and experience in international trade and eager to export. There are provisions in the L / C which are advantageous to importers but difficult to control and difficult to find by exporters. This clause may cause exporters to perform contracts or lay down foreshadowing for the issuing bank and the applicant to cancel the payment contract.

The soft clause of the letter of credit is concealed and fraudulent. Our export enterprises must be cautious when conducting the verification.

(1) stipulate the port of destination, date of shipment, etc., in accordance with the written notice of the applicant or the notice of amendment of the issuing bank.

The opening applications for such letters of credit are mostly middlemen, and the risk of performing is very great for exporters.

Due to the uncertainty of the future market, the middlemen have not signed the sales contract with the next house or the home has not yet opened the letter of credit. In order to win the supply of goods, the middleman has issued such letters of credit to the exporter.

From this we can see that trade itself is very uncertain, and middlemen are faced with huge market risks. Once the market changes are unfavorable to middlemen, the intermediate chamber of Commerce will deter or refuse to inform the port of destination and the date of shipment from its own interests, so that the letter of credit will not become a mere scrap of paper, and its related sales contracts can not be carried out. Therefore, if our exporters encounter such letters of credit, we must think twice before performing the contract.

(2) the invoice or inspection document in the presentation documents must be signed by the importer or its designated commodity inspection authority.

Such letters of credit are difficult to determine because of the fact that the documents are controlled by the importer and whether the beneficiary can collect the foreign currency safely. If the buyer is not a long-term customer and has a good reputation, it is better not to accept such letters of credit.

An export company has acted as an agent for a domestic enterprise to export the structural parts of the house. The letter of credit requires that the inspection certificate issued by an overseas inspection institution designated by the applicant should be pasted on the back of the invoice. When the certification company is trying to verify, the export company points out that this clause may be a buyer's trap. If it is not disposed of, it will result in two empty loans. However, the enterprise insists that the export company accept the letter of credit on the grounds of reliable relationship.

After the shipment, the export company took a lot of trouble to get the invoice stipulated in the letter of credit, and the letter of credit had lost its function over the time of presentation, and finally, it cost a lot of money to obtain the payment through the commercial credit.

(3) the beneficiary negotiate with the buyer's receipt of goods or the pfer documents jointly signed by the seller and the buyer.

A letter of credit containing such a clause may in fact be regarded as a clause "after the goods are sold". The buyer usually has to complete the control of the goods to issue the goods receipt or pfer document.

If the buyer refuses to issue receipts or handover documents or even reject goods on the grounds that the quality of the goods is unqualified and the packaging fails to meet the requirements, it will make it difficult for the beneficiary to estimate the economic losses.

A letter of credit with a class of terms does not conform to the original intention of the letter of credit, such as "symbolic delivery" and "documentary trade", and is not acceptable in trade.