n SA Mercantile Law Journal = SA Tydskrif vir Handelsreg - The UCP 600 : a new law applicable to documentary letters of credit : analysis

Volume 21, Issue 2
  • ISSN : 1015-0099
  • E-ISSN: 1996-2185



Documentary letters of credit (also known as 'letters of credit' or simply, 'credits', and referred to as such below) are essential to international trade, often being described as its 'lifeblood' or 'backbone'. However, the use of letters of credit has been somewhat decreasing worldwide for the last couple of years, in spite of an upsurge in their use after the economic crises in Southeast Asia a decade ago. Many reasons have been advanced to explain this decline, including increasingly costly bank charges, divergent interpretations by banks in different jurisdictions, and the incidence in documentary rejections by banks. Some surveys have indicated that as many as 70 per cent of letters of credit are rejected by banks on their first presentation by the beneficiary. In spite of the relative decrease in the use of letters of credit, international trade and commerce remains dependent upon it.

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