'82% per cent of global Letters of Credit transactions are flawed'

K Parameswaran, a leading trade expert in international trade, says ignorance of exporters and negligence on part of importers resulted in rising number of trade disputes

To reduce risks of trade disputes substantially, exporters, importers and bankers need to adhere to trade facilitation rules of the Paris-headquartered International Chamber of Commerce (ICC), said speakers at a seminar on 'Managing risks through Letters of Credit (LCs)' held here on Thursday.

"Globally, 82 per cent of LC transactions are flawed (defective), as per a survey conducted by the ICC, resulting in exporters losing money, erosion of trust between exporters and importers and increased trade disputes," said K Parameswaran, a leading trade expert in international trade and finance.

A letter of credit is a document from a bank guaranteeing that a seller will receive payment in full as long as certain delivery conditions have been met.

Parameswaran said that ignorance of exporters in not understanding Letters of Credit, negligence on part of importers and bankers' failure to guide them have resulted in rising number of trade disputes. The seminar was organised by ICC India jointly with global financial services group BNP Paribas, industry body Federation of Indian Chambers of Commerce and Industry (FICCI) and Federation of Indian Export Organisations (FIEO), an apex body of India's export promotion organisations.

In his initial observations, Rajiv Vastupal, chairman, FICCI-Gujarat state council underlined the importance of following ICC trade facilitation rules and said that trade disputes, in the long run, discourage exporters and importers from engaging in trade practices.

Vastupal said that there are 298 large trade disputes arising out of flawed LCs pending before bankers while small trade disputes exceed lakhs and added that industry bodies are working towards achieving amicable solutions to solve these disputes.

ICC is the world's apex business organisation, promotes trade and investment across frontiers and helps business corporations and enterprises meet the challenges and opportunities of globalisation.