L/C’s are out and T/T’s are in for import/export Settlement

As a method of import/export settlement, T/T’s (Telegraphic Transfer) are expanding to replace L/G (Letter of Guarantee).

According to the Korea International Trade Association (KITA), exports through L/G’s stood at 37.2 billion dollars or 26.8% of total exports from January to November last year. Those numbers have been steadily decreasing from 43.1% in 1997, to 38.8% in 1998, 31.1% in 1999, and 27.5% in 2000.

However, T/T’s only accounted for 29.4% of total export amounts in 1997 but have continued to increase to 37.2% in 1998, 40.8% in 1999, 42.9% in 2000, and 44.4% in the January to November period last year.

Imports have also showed the same trend, with L/G’s diminishing and T/T’s enlarging. L/G’s shrank to 54.2% in 2000, from 76.1% in 1997, 62.1% in 1998, and 56% in 1999. They further decreased to 50.2% during the last 11 months from January 2001. On the other side of the fence, T/T’s expanded to 28.5% in 2000, from a paltry 10.4% in 1997, 16.4% in 1998, 21.9% in 1999. The first 11 months of last year saw import T/T’s expand to 34.8%

This trend has been attributed to increased trust between companies, to heighten heightening and export cargoes by long-term contracts and increase around central pivot pivoting around developed countries such as those in North America and Japan.
An official at KITA said, “It is useless to use the advent of L/C’s economy.”