Chinese demand is soaring for all manner of imported goods, from consumables to construction equipment.

But some who are involved in US exports to China are saying that companies eyeing opportunities in this burgeoning market should take care when it comes to striking deals based on letters of credit (L/Cs).

Documentary errors

American Pacific Group (APG), which specialises in assisting US-based companies strike-up and develop relationships with Chinese counterparts, reckons the tasks of co-ordinating financing and shipping arrangements can be challenging.

According to a principal of APG, Terry Protto, exporters should be particularly diligent about how L/Cs are drawn up. "Your letter of credit better be written exactly according to instructions," he told the Portland Business Journal.

The same journal quotes Protto as saying he has heard of instances of where a shipment is rejected at the border when something as simple as a comma is out of place on financial documentation.

L/C security

Another US company, construction equipment dealer, Hoffman International, has reported difficulties securing the type of L/C security it would expect in a deal.

"When you are on their turf, you have to give more than you would if you are on your own," senior vice president at Hoffman International, Musya Tumanyan told a local US business journal.

Confirmation refusal

The Piscataway-based company eventually secured a US$1 million contract to supplyChina with US-built milling trucks, asphalt mixers and pavers.

But according to Tumanyan,the Bank of China refused to confirm an L/C in the deal, even though Hoffman had to deliver the equipment to the customer before payment for the goods could be made.

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