Credit Problemslending problems
Recently, I have learnt of many cases where unexperienced documentary auditors have found void mismatches and have been outvoted by executive bankers when they have been contested by the recipient. Keeping all your critical employees trained on a periodic basis and making sure you work with bankers and shippers who know your operation and are willing to work with you and not against you is critical.
Issues with letters of credit
Now it is hard to get tech auditors and it is doubtful whether small letters of credit are viable; it is doubtful whether they are 100% self-liquidating; there is more regulation related to commercial financing in general; more risks are imposed on some jurisdictions that are no longer manageable by banking; LCDs are now sometimes used for payments and not just seen as guarantees of payments; in many banking institutions in newly industrialising nations the LC is sometimes seen as a reversible tool.
UCP 600 does not always address this; LC does not always mirror the economic realities of today's markets; VPs sometimes tolerate L/Cs from purchasers without fully realizing the impact of expense and risks on the company; Challenging conditions can result in delay and resulting expense from requesting changes or additional documentation; employees cannot focus enough on detail when drafting documentation; information needs to be effectively passed on by all parties engaged in the processes; novice reviewers can create problems and delay the processes.
It is also important to bear in mind that for trade and export finance, a letter of credit is not the only way to ensure a successful trade or export financing operation.