INTERNATIONAL CONTRACTS ( INTERNATIONAL TRADE LAW) Essay

INTERNATIONAL CONTRACTS ( INTERNATIONAL TRADE LAW) - Essay Example is put at 6% works out to a staggering figure of the US$ 420 million per year3 A bulk of this amount represents cost of using the documentary letter of credit. About 30 % of the import trade of the U.S. is paid through this letter of credit mode.4 The percentage of six as the transaction cost is not a small amount. Major portion of this cost is attributed to the return or refusal of the bankers involved at various stages of the routing of the documents from the importing end to the exporting end for reasons of accompanying documents not complying with the descriptions stipulated in the governing letters of credit. Although the ICC 5 sponsored UCP 5006 of 1993 governing the handling of the letter of credit during the course of transactions between the importers and exporters has recently been simplified by the UCP 600 7 in 2007 for hassle free transactions, it is still inadequate to keep pace with the fast paced transactions in the wake of electronic commerce that has emerged during t he last few decades. This paper seeks to highlight the various legal barriers that parties involved have to face in the documentation of the international trade, different modes of payments in practice including the documentary letter of credit and justify the need for a more favourable climate for documentation which can be more aptly called as negotiation of documents for collection of payments for goods and services supplied in the course of international trade. This is the predominant type of mode of payment for international transactions for goods and services which the UCP 600 (formerly UCP 500) is entirely devoted to. The payment is collected through the party usually a bank or two corresponding banks trusted by the buyer and seller. The buyer’s bank is the issuing bank and the seller’s bank is the confirming bank. Since the buyer and seller come from different legal jurisdictions banks are invariably different enjoying the confidence of the respective sides i.e the buyer