Export transactions without LCs up sharply in past decade: gov't

SEOUL, March 15 (Yonhap) -- Export transactions without letters of credit (LC) rose sharply in the past decade as companies moved to cut financial costs, the government said Sunday.

The Ministry of Knowledge Economy said exports that did not involve the taking
out of LCs accounted for 81.1 percent of all transactions last year from 56.9
percent in 1997.
It said among non-LC deals, those carried out through "simple" direct payments
like the use of wire transfers and direct deposits to bank accounts between
sellers and buyers accounted for 74.2 percent of all transactions in 2008
compared to 32 percent 10 years earlier.
The ministry in charge of industrial policy and trade promotion said the sharp
rise reflects a move towards a "buyers market" where importers move to reduce
transaction costs associated with LCs.
It added that because many companies deal with the same buyers on a regular
basis, the need for banks to guarantee payment has diminished over the years.
"Overall, the doing away with LCs can be viewed as a positive trend since many
industrialized countries have adopted this simplified and direct form of
transaction," an official said. He noted, however, that due to the global
economic downturn and rising concerns about the health of many foreign companies
it may be advisable to take precautions.
He said to guard against possible repercussions, companies should take the time
to check credit ratings and other possible risk factors associated with doing
business with foreign companies.
yonngong@yna.co.kr
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