JPMorgan says it is seeing a resurgence in the use of letters of credit (L/Cs) in international trade, even though it concedes that L/Cs remain harder to come by than before.

Bernie Hart, Global product executive, logistics management with JPMorgan's Global Trade Services group, lists the growing popularity of L/Cs as one of nine key trends in 2009 impacting on global supply chains.

Credit tight

Hart says JPMorgan has seen a resurgence in the use of L/Cs to finance international trade, but adds in an interview with Industry Week that with credit tightening in all sectors, the supply of L/Cs has been declining while costs have risen dramatically.

"For the right borrower and the right transaction there are still deals to be done, but the market will remain tight for the near future," he predicts

Challenges

Other key challenges for those involved in global supply chains include the search for working capital and shortening the supply chain which, in the case of US firms, Hart reckons may involve switching away from Asian manufacturers towards Mexican producers.

Supply chain risk mitigation in an economic downturn is another key challenge according to Hart, who says those involved in global supply chains should focus on supplier financial risk, volatility in energy, commodity, labour rates and currency exchange, as well as unpredictable economic recoveries.

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