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Importance of documentary credit in international trade: analysis of risk and prevention measures

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Resumo:In international trade settlement, letters of credit (documentary credit), documentary collections, and remittances are generally accepted international settlement methods. Letters of credit take the leading position, with the characteristics of bank credit and the reciprocal rights and obligations of buyer and seller. It has the function of guaranteeing security to both exporters and importers; therefore, it is relatively safe means of settlement, which guarantees the adequate functioning of international transactions. However, due to their characteristics, letters of credit are not exempt from risks in their practical application. Therefore, the study of the risk and preventive measures of the letter of credit has a strong relevance to the practice of international trade. This dissertation mainly analyzes the risk that the applicant, the bank (issuing bank and negotiating bank) and the beneficiary may face in the process of using the credit, and puts forward the corresponding risk prevention measures. Using a qualitative approach, we found a unique perspective and new findings on the risk and risk prevention measures. The results of this exploratory study suggest that there is a consensus in considering the principle of letter of credit independence as one of its main sources of risk. This consensus suggests that future development of the letter of credit involves reducing their independence, without completely losing its independence essence. The evolution of letters of credit may also include the cooperative development of operations and the use of digital platforms to facilitate the investigation of the credibility of business partners.
Autores principais:Zan Zan Zhang
Assunto:Documentary credit Risk Preventive measures Crédito documentário Risco As medidas preventivas
Ano:2020
País:Portugal
Tipo de documento:dissertação de mestrado
Tipo de acesso:acesso aberto
Instituição associada:Universidade do Minho
Idioma:inglês
Origem:RepositóriUM - Universidade do Minho

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