Key point:

To efficiently and legally handle letter of credit cases, accurately identify letter of credit fraud, and equally protect the legitimate rights and interests of both Chinese and foreign parties.

Summary of Cases

Case 1:

At the beginning of 2020, the seller, Swiss BB Company, continuously delayed shipment to Zhejiang AA Company due to the epidemic, and both parties continuously modified the loading date of the letter of credit. Afterwards, Swiss BB Company was still unable to obtain the bill of lading by the agreed deadline for loading, but did not negotiate with Zhejiang AA Company to postpone the loading date and modify the letter of credit. Instead, it issued a bill of lading on behalf of the captain that met the requirements of the letter of credit for the latest loading date and demanded payment of nearly 5 million US dollars from the issuing bank, bringing huge risks to Zhejiang AA Company's future pickup. Zhejiang AA Company has applied to Hangzhou Intermediate People's Court to suspend payment under the letter of credit.

Case 2:

In 2021, Zhejiang AA Company signed a "Procurement Contract" with Swiss BB Company, which stipulated that Swiss BB Company would directly deliver the goods to downstream buyers of Zhejiang AA Company. The final payment of the contract would be determined by downstream buyers based on the final weight and test results. But Swiss BB Company submitted the forged "Final Test Certificate" and "Final Invoice" signed by the downstream buyer to the letter of credit issuing bank without confirmation of the quality and price of the goods from the downstream buyer, and demanded the final payment of 2.15 million US dollars. Zhejiang AA Company has applied to Hangzhou Intermediate People's Court to suspend payment under the letter of credit.

Results

In both cases, when Zhejiang AA Company applied, the deadline for the final acceptance of the letter of credit was less than 48 hours (one of which was less than 24 hours). The Hangzhou Intermediate People's Court promptly accepted and formed a Judicial panel to work overtime for review. According to the case of suspected L/C fraud, after collecting the full amount of deposit, it made a ruling to suspend payment under the L/C in accordance with the law and delivered it to the issuing bank at the first time. The beneficiaries of the letter of credit, namely the two Swiss companies, voluntarily corrected their errors, reached a settlement with Zhejiang AA Company, and continued to complete the transaction.

Typical significance

Letter of credit is a common settlement method in international trade, which effectively solves the problem of mutual distrust between import and export parties and provides convenience for financial integration between them. In recent years, the COVID-19 has broken out and continued worldwide, which has adversely affected international trade and increased the risk of L/C fraud on imports. In both cases, the Hangzhou Intermediate People's Court ruled in a timely manner to suspend payment based on the specific situation of suspected letter of credit fraud. The beneficiaries of the letter of credit did not apply for reconsideration, but instead admitted their mistakes and actively negotiated, ultimately facilitating both parties to continue completing the transaction and successfully resolving the dispute. Zhejiang AA Company specially presents a banner and a thank-you letter to the Hangzhou Intermediate People's Court, expressing admiration for the professional level and professionalism demonstrated by the court in efficiently handling cases in accordance with the law. The proper handling of these two cases fully reflects the Hangzhou Intermediate People's Court's adherence to the concept of equal protection of the legitimate rights and interests of both Chinese and foreign parties, actively playing its role in foreign-related commercial trials, and supporting Chinese enterprises in using international trade rules to safeguard their legitimate rights and interests in accordance with the law, providing strong judicial protection for the healthy development of China's foreign oriented economy.