Analysis Risk of Exporter and Importer in Letter of Credit with Take on the Role of the Fundamental Principles of Letter of Credit in Creation of these Risks

Letter of Credit is based on the principle of autonomy and doctrine of strict compliance. These two principles give a special feature to the letter of credit and convert it into the safest and most common method of payment in international trade. However, in any business, especially in international trade, there is a possibility of the creation of risks for exporter and importer. Although, The letter of credit is the safest method of payment but it is exposed to different risks. Among credit risks for Exporter and importer, sometimes the principle of autonomy and doctrine of strict compliance are the main cause of the risks. The main credit risks of exporters come from ignorance of exporters about conditions of the letter of credit. The importer also faces with risks such as the risk of fraud. In this way, an exporter gets credit from banks by providing fake documents, while there is not any commodity for exporting. In this paper, we attempt to review and explain these risks and focus on cases that the principle of autonomy and the doctrine of strict compliance are effective in the creation of risks, and eventually we give solutions to managethese risks.