Complaints about Chinese banks refusing to pay out on letters of credit (L/Cs) because of small documentary discrepancies have resurfaced from Canadian exporters to China.

The exporters say that Chinese buyers of Canadian goods are using the discrepancies to back out of deals in which the commodities or goods they have purchased have tumbled in price while being shipped as a result of the global downturn.

Examples

The Vancouver Sun has highlighted several cases where exports to China by Canadian firms have gone wrong.

In one lumber deal the buyer is said to have refused to pay because a document that should have read "anti-surfaced stain" in fact read "anti-surfac stain."

In another case payment was withheld because a company was named "ABC Limited" on one document and "ABC Ltd" on another.

Shared experiences

The paper quotes a Vancouver-based trade financier who says he has met with counterparts - from New York and Hong Kong as well as Canada - who shared his experience that "Chinese L/Cs are beginning to take the worse practices of their past."

"They are recently re-practicing a bad habit of digging up frivolous discrepancies. By finding these, they have a good pretext not to pay," he is quoted as saying.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.