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Copyright © International Chamber of Commerce (ICC). All rights reserved.
( Source of the document: ICC Digital Library )
The world of trade, like other sectors, is preoccupied with the financial crisis. For that reason, it's only natural that we devote much of this Insight to how it's affecting letters of credit. We wanted a well-rounded overview; that's why we asked L/C professionals from four countries to report on how bankers and traders in their regions are coping with the slowdown. Not surprisingly, with some exceptions, their reports are pretty gloomy. Typical is the comment of our US correspondent, Michael Quinn: "The news," he says, "has not been very good."
Indeed it hasn't. L/C practitioners are all too aware of the impact: credit constraints, deals falling through, falling levels of merchandise trade and a dearth of trade finance available to importers and exporters. More sinister, perhaps, is the tendency of some banks to renege on their obligations regarding L/Cs or to seek out trivial discrepancies to avoid making payment.
These are all disturbing signs, but as our reporters point out, all is not bleak. Looking ahead, some see an enhanced role for L/Cs. Wang Shanlun, our Chinese correspondent, sums it up this way: "Because the L/C is one instrument providing a certain level of security, my own belief is that it will play an important role in restoring the confidence we need."
In other news, with the URDG revision moving into its (perhaps) final phases, Christof Radtke, a lawyer and member of ICC's Commission on Commercial Law and Practice, makes the case that the URDG should not just be written for bankers; it should be, in his words, "a product balancing the interests of the banking world and the business world". And N.D. George, in a "Documentary dialogue" with Sir Roy Goode, argues that URDG's statement of breach should not be required if a guarantee does not require it.
Plenty of controversy here. That's what we like.
Ron Katz Editor