Financial Risk Analysis and Prevention of L C?

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1. Strengthen credit risk management and attach importance to credit investigation. When concluding a contract, it is necessary to conduct an in-depth credit investigation, including the mutual credit understanding between the buyer and the seller, and the credit understanding between the bank and the applicant and the beneficiary. Before the transaction, the basic situation of the customer can be carefully reviewed by the credit investigation agency, and the registered capital, profit and loss, business scope, company equipment, the address of the opening bank, the first and the account number, the business style and the past history, etc., are necessary to investigate and evaluate, and select customers with good credit as their best partners.

In the transaction, often communicate with the salesman, and give guidance and help to the salesman in the process of trading. After the transaction, the accounts receivable and uncollected accounts are used as a means of monitoring to prevent the generation of bad debts, so that the risk can be avoided to the greatest extent possible and play a role in the smooth progress of the business.

2. Carefully review the letter of credit. After receiving the L/C, the seller should review the L/C and the contract terms in a timely and serious manner, and be particularly vigilant against the soft terms. Once the seller finds that there are inconsistencies or unacceptable terms in the letter of credit, it should immediately request the buyer to change the certificate, otherwise it will fall into a passive situation.

1. Advantages and disadvantages of L/C payment.

Advantages and disadvantages of letter of credit payment:

Advantages: (1) When the settlement is made by L/C, the beneficiary's (exporter's) receipt is guaranteed, especially when the exporter does not know the importer very well, and the advantages of L/C are more significant in the foreign exchange control of the importing country.

2) The letter of credit method makes the financial burden of both parties more balanced.

Disadvantages: (1) It is easy to produce fraud, because the letter of credit has a self-sufficient document, the relevant bank only deals with the characteristics of documents, and there are fake documents.

2) The L/C method has complex procedures and many links, which is not only time-consuming, but also costly, and the links such as document examination should be more technical, which increases the business cost.

2. Can an irrevocable letter of credit be revoked?

Letter of credit is a payment method that is frequently used in the world, and it is a written certificate with a high function. An irrevocable letter of credit can only be revoked if:

1. The negotiation documents submitted by the seller are inconsistent with the letter of credit, and once there is a discrepancy, although it may be a non-material discrepancy, the issuing bank has the right to refuse to pay, and once the document is refused, the letter of credit is equivalent to being revoked.

2. If the L/C is amended and the L/C becomes an inoperable L/C, it can be revoked.

Irrevocable letter of credit: refers to a letter of credit that once a letter of credit is issued, the issuing bank may not unilaterally modify or revoke the letter of credit without the consent of the beneficiary or the relevant parties within the validity period.

L/C settlement is the main way of international settlement, some foreign customers in order to deceive foreign trade companies often open L/C to gain trust, and some foreign trade companies often do not understand the other party's creditworthiness, by the L/C "trust"."Neglect to take precautions. The content of the letter of credit is subject to a clause in the letter of credit, the realization of which depends entirely on the issuer, and the beneficiary will not be subject to any inevitable dishonour regardless of his efforts. This is the "trap" of Lifusan using the "soft terms" of the letter of credit to defraud.

There are several types of common soft clauses:

1. If the letter of credit is not effective for the time being, the letter of credit will take effect after the import license is issued or the letter of credit will be notified to take effect after the sample is confirmed by the issuer;

2. The shipping company, ship name, port of destination, port of departure or surveyor, and the date of loading shall be notified by the issuer or agreed by the issuer, and the issuing bank will notify the issuer separately in the form of a revised letter;

3. The payment obligation will be fulfilled only after the goods arrive at the port of destination and pass the importer's inspection;

4. The designated beneficiary must submit an inspection certificate issued by a foreign inspection agency or a certificate issued by the applicant's designated representative, etc., and this kind of fraud often occurs in CFR CIF contracts.