Exporters Could Face Payment Delays With New Letter of Credit Rules
Released on: December 1, 2007, 12:48 am
Press Release Author: Alexandra Lewis
Press Release Summary: Insurance broker Aon is urging exporters to carefully review the changes in the new letter of credit rules to avoid costly discrepancies and payment problems.
Press Release Body: Insurance broker Aon is urging exporters to carefully review the changes in the new letter of credit rules to avoid costly discrepancies and payment problems.
The new UCP600 rules that came into effect this month aim to improve the handling and reputation of letters of credit through increased clarity and simplification. Letters of credit enable exporters to trade securely but their bottom line will be threatened if they do not understand the new rules. Exporters could also leave themselves exposed to non-payment and delayed payment if they do not adhere to the rules.
Ray Webb, managing director of Aon Forfaiting, said: "Currently, about 70% of documents presented under letters of credit are incorrect so exporters are exposing themselves to payment delays at best and possibly non-payment. This figure could increase if exporters do not thoroughly understand, or receive appropriate advice, on the implications of the new letter of credit rules".
"The new rules are the first revisions to the UCP rules since 1993. The changes aim to ensure that use of letters of credit grows and that they remain relevant as a tool to finance and help protect the risks of trade."
The revised letter of credit rules bring many important changes including:
* new definitions for greater understanding of the terms used in the regulations * updated operation of letters of credit in line with recent developments in trading, banking, transportation and insurance practices * introduction of the concept of 'reasonable time' which has been defined as 'a maximum of five banking days' * new rules for dealing with discrepant and lost documents * provisions for discounting of deferred payments
Letters of credit issued before July and valid beyond July will still be processed under the former rules (UCP500), creating a 'crossover' period when some letters of credit will be subject to UCP500 and others to UCP600, requiring extra vigilance from exporters.entertainment and media liability insurance
Aon UK is ranked by A.M. Best as the number one global insurance brokerage based on brokerage revenues and voted best insurance intermediary, offering classic sports car insurance, high value home insurance, entertainment and media insurance and construction site insurance.
Web Site: http://www.privateclients.aon.co.uk/privateclients/microsites/cars/classic.aspx