Trade Risk Prevention Under Air Pportation Mode

In June 1999, an export company in Zhejiang reached an export contract with a India importer for a total amount of more than 60 thousand US dollars. The terms of trade stipulated in the contract were CFR NEW DELHI BY AIR, and the payment was 100% irrevocable letter of credit at sight. The shipment date was from August 1999 to Shanghai by air.

After the contract was concluded, the importer opened a letter of credit on time by a commercial bank in India. The notifying bank and the negotiating bank were all domestic banks. The terms of the letter of credit were "CNF NEW DELHI", and the exporters did not care much about it at that time.

After they have received the letter of credit, they have dispatched the goods according to the stipulations, and have prepared the documents required by the letter of credit and negotiated the formalities.

However, the domestic negotiating bank received a notice of refusal from the issuing bank shortly after sending the relevant documents to the India issuing bank. The reason for the refusal of payment was inconsistent with the document: the price term "CFR NEW DELHI" on the commercial invoice was not in line with the "CNF NEW DELHI" in the letter of credit.

After hearing the news, the exporter immediately contacted the importer to ask for payment, and at the same time sent a telex through the domestic negotiating bank to the issuing bank to declare that the discrepancy was not established and required the other party to fulfill its obligation of reimbursement in accordance with the provisions of UCP500.

But the importer and the issuing bank ignore this. In this case, the exporter immediately contacted the cargo carrier. His freight forwarder in New Delhi informed the goods that the goods had already been taken away by the consignee.

In such a passive situation, the exporter had to agree to the request that the other party cut the price by 20% as the final solution to the problem.

From the above cases, we can see that the root cause of the exporter's passive situation is the loss of the right to goods.

The exporter's loss of goods right before payment is due to the characteristics of AIR WAYBILL.

As we all know, the biggest advantage of a letter of credit is bank credit guarantee. Although the bank deals only with documents, it does not ask the specific circumstances of the goods.

If the buyer fails to pay the redemption order, he will not be able to get the goods, which can be realized in the sea way, because the bill of lading is the certificate of title, and the buyer can only pick up the bill of lading from the bank by way of the bill of lading from the bank.

Air waybill under the air pport mode, the air waybill does not have the characteristics of the document of title, it is only the pport contract concluded between the air carrier and the shipper and the receipt of the goods received by the carrier or his agent.

Because the time of air pportation is very short, usually the goods are delivered to the destination before the consignor passes the air waybill to the consignee, so the consignee can pick up the goods with the arrival notice of the carrier and the relevant identity certificate.

In this way, even if the letter of credit is used as a means of settlement, it is not very safe for sellers.

However, in practice, we often encounter the situation of air pportation, for example, some perishable goods, fresh goods, seasonal goods and high value and low volume commodities.

How to guard against the risk of letter of credit under the air pportation mode, I think the following measures are taken: 1.

比如要求买方在出货前预先电汇一定比例的货款，以分散风险；　二、严格审查进口商的资信情况，包括财务状况、经营状况、付款记录等，以核定其信用额度，决定合同金额的大小；　三、严格审查开证行的资信情况，以免出现开证行故意找出“不符点”拒付，使买方不付款提货，造成钱、货两空的局面，必要时可要求对信用证加具保兑；　四、如果货物金额太大，可要求分批交货；　五、要求将航空运单的收货人做成“凭开证行/偿付行指示”（TO ORDER OR TO THE ORDER OF THE ISSUING/REIMBURSING BANK）；　六、严格认真地根据信用证制作单据，做到“单单一致，单证相符”，在单据方面不给对方造成任何的可乘之机。

We also request the negotiating bank to cooperate closely. When the issuing bank / reimbursing bank has a change, we must argue with the other party and act in strict accordance with the UCP500 and other relevant international practices, and safeguard our legitimate rights and interests. Seven, insurance export credit insurance.

Export credit insurance is to protect the loss caused by the commercial risks and / or political risks of foreign importers to their exporters; eight, to maintain close contact with the air carriers and their agents at the destination, because before the consignee has taken the goods, if the exporter is aware of any change, the exporter / shipper has the right to request the air carrier to return, or change the consignee, or change the destination.