Update to the ITFA Guide to Structured Letters of Credit

Note on section 5.2 – Case Law

Following the publication of the Guide in April 2021, the wording of section 5.2 has been amended to clarify the case law analysis referring to the position in China. The previous wording might have been misleading in appearing to suggest that courts in China would adopt a different position compared to other courts that have heard cases involving Structured LCs. ITFA has no reason to believe that the position in China would be any different to the other jurisdictions.

In summary, the analysis suggests that a Structured LC transaction should be documented in line with UCP600. It should be clear that all parties involved in the transaction are aware and informed of its nature and purpose and that there is an underlying trade transaction (which can be between companies in the same group). Cases make it clear that fraudulent transactions would not be upheld.

The updated version of the Guide is accessible to ITFA members here.
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