Exporters across the world are finding it increasingly tough to do letter of credit (L/C) business, particularly with China according to some reports.

Obtaining L/Cs for sales to China is becoming harder for sellers in a variety of industries in the US, India and Vietnam.

No alternatives

One of several reports of an increasing shortage of L/Cs for exports to China appears in the US journal, Shipping Digest.

It says the L/C problem is particularly bad in emerging markets such as China and India because buyers there do not have the range of sophisticated L/C alternatives available in more mature financial markets.

Orders cancelled

One exporter hit particularly hard by the Chinese L/C shortage is Cross Creek Sales, a US sawmill, whose president explained the extent of the problem to the US shipping journal.

"We were getting ready to ship the regular monthly shipment of 40 containers of lumber we've been selling to one big firm in China when all of a sudden they sent us an email saying they were going to have to hold up on that month's shipment because they couldn't get a L/C opened by their bank," said Richard Burnett.

More shortages

Other reports of China's L/C shortage tell of its severe impact across a range of industries including India's iron ore and steel sectors.

Another market adversely impacted by the L/C shortage is Vietnam's until recently burgeoning new business of selling foodstuffs to Chinese customers.

Chinese banks are making it tougher for buyers to obtain L/Cs and there have been increasing reports of banks refusing to honour L/Cs (DC World News, 11 November 2008).

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