Abstract
Letter of Credit is the most important form of payment and clearing in final
estimate of international trade. It promotes with the development of international trade
in 19 century. Clearing with letter of credit is safer than other clearing methods, for
when using letter of credit, banker's credit takes the place of commercial credit. That is
to say, as long as the document is conform to the provisions of Letter of credit, the
bank will bear responsibility of payment first. Credits separate transactions from sales
or other contract. In the operation of credit, all parties concerned deal with document
instead of goods. In addition, because the parties of letter of credit are in different
countries or regions as well as some illegal business occur frequently, the business with
letter of credit has raised risks, and some fraud actions appear.
With the development of our country's reform and opening-up, China will enter
into WTO, international trade will develop further and letter of credit will be used in
international trade more frequently. At the same time, fraud in letter of credit will
occur more frequently. Over recent years, numerous cases concerning fraud in letter of
credit have shown the necessity to resolve problems in this field. Some scholars in our
country have made wide research in fraud in letter of credit and raised some ways in
prevention.
Key words:Letter of credit;Soft clause;Trade payment