Soft clauses may makeit lose its irrevocability,or make it impossible for the seller to perform the letter of credit,and are usually used to shift market risks.To avoid such problems,it should be ensured that the seller can control the issuance of all documents and that the buyer cannot take delivery of the goods before payment.

I.Definition and Impact of Soft Clauses

Soft clauses are terms in international trade,generally referring to trap clauses that may threaten the interests of the seller.

By setting soft clauses,the buyer may make the letter of credit lose its irrevocability,or make it impossible for the seller to perform the letter of credit,usually to shift market risks.

A letter of credit with soft clauses may have a negative impact on the seller.For example,the seller may not be able to complete the delivery within the specified time,resulting in the buyers right to refuse payment.

II.Identification and Response to Soft Clauses

The key to identifying soft clauses is to ensure that the buyer cannot take delivery of the goods before obtaining the documents by paying,and that the issuance of all documents is under the control of the seller or an official institution.

2.For the identified soft clauses,the seller should argue on just grounds or adopt flexible measures to persuade the buyer to cancel these clauses.For example,the clause "original bill of lading to be sent directly to the buyer" can be modified to "copy of the bill of lading to be sent to the buyer," allowing the buyer to take delivery of the goods in advance,but this must be guaranteed by the bank.

III.Prudent Selection of Soft Clauses and Letter of Credit Review

For some large buyers,there may be soft clauses in their letters of credit.The seller needs to make a choice according to the specific situation,but should always be vigilant.

When the customer chooses to settle by letter of credit,the seller needs to carefully review the letter of credit terms to ensure that there are no problematic clauses.

If there are objections,the letter of credit can be returned to the bank for modification; if there are no objections,the letter of credit can be accepted and fulfilled on time.

The link of reviewing the letter of credit is very important,requiring the seller to have solid knowledge of letters of credit and a cautious attitude.