I.Introduction

A letter of credit is a written payment guarantee issued by a bank at the request of an importer (buyer) to an exporter (seller),serving as a common settlement method in international trade.

II."Soft Clauses" in Letters of Credit

"Soft clauses" are restrictive or ambiguous terms in a letter of credit that may expose the beneficiary to potential losses.

Common soft clauses include:

(1) Non-immediate effect clauses: Such as L/Cs requiring separate bank notification,authorization documents,or local regulatory approval to become effective.

(2) Loss of cargo control clauses: For example,1/3 original B/L sent directly by beneficiary,bills of lading,etc.

(3) Importer-dependent clauses: Such as requiring non-standard factory inspection reports or quality certificates.

(4) Conditional restriction clauses: Like specifying particular shipping routes,vessel age limits,or special transport documents.

(5) Contradictory clauses: For instance,allowing combined transport B/L while prohibiting transshipment.

III.How to Avoid Risks from Soft Clauses

To mitigate risks from soft clauses,consider these strategies:

(1) Carefully review the documents: Identify "soft clauses" early and request amendments promptly.

(2) Choose reputable banks: Major,well-known banks are less likely to include beneficiary-unfavorable terms.

(3) Select creditworthy buyers: Verify buyer credibility and performance capability through credit reports.