Risk Under Letter Of Credit And Its Precaution

The letter of credit, as a way of the international settlement on the bases of banking credit, offers the trading guarantee for businessmen from different countries. The exporters can settle the payment safely and timely with bills of document corresponding to the letter of credit after they delivered the goods. And on the other hand, the importers can also receive the goods successfully with the guarantee of banking credit. Therefore, in the international businesses, the L/C is generally accepted by the exporters and the importers, which has already become a pervasive way of payment.However, the risks of the L/C happen constantly, which brings great challenge and much doubts to this traditional way of international settlement. How to do with the L/C turns into the focus for people in the business field, banking field and law field. This article just tries to discover the problems, search for proper solutions and build up the vitality of the L/C by studying the risks of the L/C.The article began with the L/C, including the concept of the L/C, settlement principles, reasons why the L/C comes into being and the rationality that this settlement exists. Secondly, the article analyzed the status in quo and characteristics on the bases of the risks of the L/C from the practice of the L/C. Moreover, the article pointed out the signification of researching the risks of the L/C. By analyzing the classifications, the reasons and the influences of the risks of the L/C, the article also induced the operating risks, the cheating risks and environmental risks faced by the main parties in the operation of the L/C, such as the bank, the applicant and the beneficiary. The conclusion is induced in this article, that is to say the reasons why the risks of the L/C form and the influences on the settlement itself, on the exporters and the importers, on the bank and on the whole international trade. Finally, the article put forward some effective measures to keep away the risks of the L/C from both the outside and the inside of the whole procedure of L/C.