Importers unknown risks associated with credit
International trade, the parties, that is, exporters and importers, separated by vast oceans, is difficult to understand each other’s capital and the credibility of the situation, it is difficult to establish mutual trust. To address this issue of conflicting commercial credit, banks involved in its bank credit, resulting in the letter of credit. However, the fundamental condition for international trade has not changed, buyers and sellers still do not fully understand each other. Banks do not separate out other than the importer to the exporter as the beneficiary of the letter of credit, the issuing bank is based on the applicant (usually the importer) before the request to open a letter of credit. Banks not only to safeguard their own interests, but also the interests of applicants and the issuing inseparable, exporters could hardly know about the creditworthiness of Issuing Bank, exporters and importers are still unable to because of the involvement of bank credit to build mutual confidence.
Therefore, the letter of credit bank credit is fully achieved to a large extent dependent on the applicant’s business credit card to open. In international trade, as the importer issuing the applicant’s commercial credit in the credit payment plays an important role. Although the “UCP500″ contract for the sale set forth in the letters of credit and letters of credit relations and the independence of abstract principle, but in the actual import and export business, letters of credit and contract of sale is not completely separate the two pen trade, but a two aspects of trade, the underlying point is the importer and exporter of commercial credit, rather than “independent abstraction” of bank credit. Therefore, exporters and importers of a contract of sale, the parties have agreed to pay letter of credit does not mean that a deal reached in international trade, the following situations occur frequently.
1. Importers are not issuing
(1) as the market price changes and other reasons, as to avoid market risks, importers from their own interests, deliberately refrained from issuing. Can the opening of letters of credit are not independent abstract banker, but on the importers of commercial credit, without issuing the applicant’s request, there is no one out to the beneficiary bank outside of the contract documents independent of the sale of contract. Signed a contract for the sale and the importer is not issuing an example not uncommon in international trade. September 2, 2000, I have an export company and Japan’s imports of corn, the company signed a sales contract requiring the company to November 20th to Japan in northeast China provide 1,000 tons of corn, the price of 0.126 U.S. dollars / kg, payment method for the L / C at sight. China’s export company in November 10 in the Northeast bought 1,000 tons of corn, ready to ship for delivery. But this time the international market, maize prices plunge, the buyer is asking to lower the price, otherwise refused to open letters of credit, the last despite repeated discussions so that the buyer open to letters of credit. However, during this period part of the corn wet rain, the buyer as a depressed price, so I export companies suffered huge losses.
(2) When the transport documents, is a sea waybill, air waybill, or multimodal transport alone, because these documents at this time not as the property bill of lading as evidence that the goods were loaded on the carrier after the exporters have lost control over the goods Therefore, even if the importer does not open letters of credit in exchange for those documents, they are also very easy to put away the goods. In May 2002, I Hualong (a pseudonym) Precision Instrument Company and a U.S. company to sign a sales contract precision instrument, the requirement for air transport mode, mode of payment for the L / C at sight, the U.S. company to the aircraft after take-off to the Hualong the company off from the letter of credit.
May 19, Hualong will produce a good precision instrument on board the aircraft, the aircraft took off 9:00.
However, after the plane took off, the U.S. company did not come to open letters of credit, Hualong contact the company through a variety of methods are less than the U.S. company, would feel something not good. Finally confirmed and cargo to the destination airport, has been by virtue of picking and identity confirmation notice withdraw, to Hualong company caused the loss of the purchase price two empty.
2. Importer intended to defraud
To provide false letters of credit to exporters, the so-called false letters of credit, mainly in two ways: First, the importer intentionally false or fraudulent use of bank letters of credit opened in the name; two importers in collusion with bad credit banks to open letters of credit.
Since the reform and opening up, the international unscrupulous traders who often cheat with false letters of credit of China’s export goods to China’s export enterprises has brought huge losses. Although the “UCP500″ Article 7 of the advising bank and the TEST KEY verify the signing of letters of credit in order to determine the authenticity of the letter of credit, but to inform line separated by vast oceans but also because it is difficult to determine the extent of credit issuing bank.
3. Importer instructed the Issuing Bank to open a “soft terms” the so-called soft terms of the letter of credit letter of credit.
Refers to the lack of international trade, exporters, importers to use the knowledge and experience and eager to export mentality, in the letter of credit with some of the benefit importers and exporters are more difficult to control and difficult to find provisions, which may lead exporters to be difficult performance of the contract or to the Issuing Bank and the Issuing of payment the contract to lift the applicant foreshadowed. The soft terms of the letter of credit with a hidden and deceptive, China’s export enterprises in the trial permits must be careful, the following is the letter of credit customarily used “soft terms”:
(1) provides that the port of destination, shipping date for issuing the applicant a written notice or notice changes to the Issuing Bank shall prevail. The issuing of such letters of credit applicants are mostly brokers, exporters risky in terms of performance. Because of the uncertain market outlook, brokers have not yet signed a contract of sale with the next home or next home not to open a letter of credit, in order to fight for supply, so brokers out of such letters of credit to exporters. It can be seen that there is a big trade itself, the uncertainty, brokers face enormous market risk, once the adverse changes in the market for brokers, intermediaries from its own interests, an excuse to delay or refuse to notify the port of destination, shipment date By doing so, not only the letter of credit become a dead letter, associated with the implementation of a sales contract can not, therefore, China’s export enterprises in case of such letters of credit, how to perform the contract must think twice before taking any action, pending receipt of a clear destination port, shipping revised after the date of notification for the best way to perform the contract parties.
(2) to pay alone, according to documents in the invoice or inspection by the importer or its designated inspection authorities signed into force. Such letter of credit was due solely controlled by the importer to pay the beneficiary can receive the payment safely is more difficult to determine, on the beneficiaries is very negative, if the buyer is not a long-term clients and a good reputation, it is best not to accept such letters of credit. An export company has a business agent of domestic exports of housing structural parts, letters of credit required pasted on the back of the invoice designated by the applicant issuing an outside inspection agency issued the inspection shows that the trial license to the enterprises that export companies may be the buyer of this article trap, improper disposal will result in payment of two empty, but relations between the enterprise in order to secure the ground insisting that the exporting companies to accept the letter of credit. After loading, exporting companies charge a lot of twists and turns were able to obtain letters of credit under the invoice, exceeding the one-period delivery, letters of credit loss of a role in the final to spend large sums of money to obtain loans through commercial credit side.
(3) The beneficiaries of a receipt for goods issued by virtue of the buyer or the buyer and the seller signed the handover documents the common negotiation. In fact the letter of credit containing such terms can be regarded as “first post-shipment shall” clause, the buyer generally in complete control of the goods under the goods can be issued a receipt or transfer of documents. If the buyer of goods of inferior quality, packaging does not meet requirements excuse refused to issue a receipt or transfer of goods, documents, or even rejection of goods, the beneficiary will result in incalculable economic losses. Containing parts of speech provisions of the letters of credit and letters of credit intended to “symbolic delivery” and “documents trade” does not match the 10 million in trade unacceptable.