This paper analyses the two principles of letter of credit, in order to prepare the theory basis for the risks analysis afterwards. For the different parties (exporter, importer, banks), possible risks and frauds are shown with case studies. The paper also puts forward the advice for various risks and intends to indicate that risks still exit in letter-of-credit transaction even it is the safest method of payment nowadays in international trade. Those risks may happen on each party, which is not only the exporter, but also the importer and banks. Rights for each party always come with the appropriate obligations.
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