Letter of credit is the dominant payment method in international trade settlement, which transforms commercial credit into bank credit and ensures the normal transaction. However, due to the principle of independence and abstraction of letter of credit transactions, unscrupulous businessmen have the opportunity to cheat, which leads to endless risks for foreign trade enterprises under the letter of credit settlement method.

First, the risk of "soft terms" and its prevention

1. The setting of soft terms in the selection of international trade terms.

For example, under FOB terms, the seller's shipment time is not specified, or under CFR or CIF terms, it is stipulated that the shipping company, ship name, loading date and destination port must be approved by the applicant.

This is one of the common soft clauses in letters of credit. The former enables the buyer to decide whether and when to ship according to his own intention, which makes it impossible for the seller to complete the delivery and collect the foreign exchange on time. The latter also makes the seller under the control of the buyer in terms of delivery and collection of foreign exchange.

If such a clause appears in the letter of credit, it will be extremely difficult to operate in the process of performance, and the initiative of payment is completely controlled by the applicant and the issuing bank.

Such clauses should be deleted, or the time of shipment, shipping company, name of ship, date of shipment and port of destination should be directly stipulated in the contract.

2. The setting of soft terms for the entry into force of the letter of credit.

That is, the temporary non-entry-into-force clause is stipulated in the letter of credit, and the letter of credit will take effect when certain conditions are met. It is usually stipulated that the validity of the letter of credit is conditional on the importer obtaining the import license or the importer confirming the sample.

This kind of letter of credit has become a disguised revocable letter of credit, which makes the responsibility of the issuing bank in an unstable state and is extremely unfavorable to exporters.

To deal with this situation, we can negotiate with the importer to set a time limit to inform whether the letter of credit is valid or not, so as to ensure the smooth progress of the transaction.

3. Settings of "Passenger Inspection Clause".

That is, it is stipulated in the letter of credit that the inspection certificate for presenting documents to the bank must be issued by the inspection institution or inspector designated by the buyer.

This clause greatly restricts the seller. If the inspection agency or inspector designated by the buyer fails to issue the inspection certificate under an excuse, the seller will bear the delivery risk and the bank will refuse to pay for the documents. If the seller fails to deliver the goods, the buyer will be liable for breach of contract, because the goods have quality problems and cannot be delivered on time.

In view of this clause, if you are not a reputable old customer, or really use this clause to ensure the quality during the transaction, you should resolutely refuse to accept this clause.

Two, the use of forward letters of credit fraud and prevention.

1. Use "packaged loans" for fraud.

Often, overseas "importers" carefully set up a "product resale" scam under the pretext of developing normal trade, signed a contract with domestic exporters, issued a long-term letter of credit, and asked exporters to buy raw materials from importers' affiliated enterprises in China, and then sell the products abroad after processing. With this letter of credit as collateral, exporters can apply to the export bank for financing before shipment. However, once the exporter remits the loan to the domestic affiliated enterprise according to the contract requirements, the "importer" will go abroad. The beneficiary can not only process the raw materials received as agreed into export documents for negotiation; Even if some raw materials can be received, there is no marketable way to process them into finished products, which eventually leads to product accumulation. Finally, the exporter ran out of funds and suffered heavy losses.

2. Use "open a letter of credit" to cheat.

Usually occurs in the feed processing industry. Often, it is the seemingly preferential terms put forward by the foreign party that induce China to sign two contracts with it at the same time, one is the contract for importing raw materials from China, and the payment method is a forward letter of credit; The other is the export contract of finished products made of imported raw materials, and the payment method is sight letter of credit. After the contract is signed, both parties will open a letter of credit through the bank according to the regulations, and the terms of the letter of credit are consistent with the contract. Both parties will deliver the documents to the bank according to the letter of credit in China, and China will accept long-term payment. However, the goods received by the Chinese side do not meet the requirements of the contract at all, and they cannot be processed into finished products for export, nor can they fulfill the export contract. However, according to the international practice of letters of credit, banks in China must make external payments on time, and China must make payments to banks. After the foreign party cheated the payment, it disappeared, causing irreparable losses to China.

To deal with the above risks, we should pay attention to the following issues: 1 We should have a clear understanding of the advantages and disadvantages of forward letters of credit. Although usance letter of credit is a quick and simple way of trade financing, it often hides the risk of being used by criminals. 2. Pay attention to the investigation of customers' credit status. We can comprehensively understand and master the operating conditions, assets, solvency, business reputation and relevance of the customers involved in the transaction through various channels such as domestic and foreign enterprise credit information systems, so as to judge the authenticity, feasibility and security of the transaction. 3 fully predict and prepare for the most unfavorable situation in the transaction. For example, we should have a full understanding of the marketability of raw materials and finished products involved in such transactions, so as to judge whether we can realize sales realization by other means when we encounter unfavorable situations, such as receiving materials but failing to make finished products or failing to export finished products as agreed, so as to minimize losses.