A recent seminar in India has heard claims that the vast majority of letter of credit (L/C) transactions are flawed.

Participants at the seminar organised by ICC India, BNP Paribas, the Federation of Indian Chambers of Commerce and Industry (FICCI) and the Federation of Indian Export Organisations (FIEO), also heard calls for industry players to take actions to avoid and resolve trade disputes.

L/C discrepancies

"Globally, 82 per cent of L/C transactions are flawed, resulting in exporters losing money, erosion of trust between exporters and importers and increased trade disputes," according to international trade and finance advisor, Krishnan Parameswaran.

He told delegates at the seminar that exporters' lack of understanding of L/Cs as well as negligence on the part of importers and a lack of guidance from bankers have resulted in an increasing number of trade disputes.

Dispute resolution

Chairman of FICCI-Gujarat state council, Rajiv Vastupal, stressed the importance of following ICC rules and argued that trade disputes can discourage exporters and importers from international trade.

Vastupal said he knew of 298 large trade disputes that he reckoned had resulted from discrepant L/Cs. He urged industry bodies to work together to find ways of amicably resolving such disputes.

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