Mitigating Techniques for Commercial Risk/Letter of Credit: Difference between revisions
wikademia>MSUglobal New page: {{TF3.5}} ==Letter of Credit== The letter of credit process begins after a buyer and seller conclude a sales contract providing for payment by a letter of credit. The buyer then instructs... |
No edit summary |
||
| Line 8: | Line 8: | ||
The issuing bank then delivers or transmits the credit to a bank in the seller’s country--the advising bank--that may also be the asked to confirm the credit. The advising/confirming bank notifies the seller that the credit has been issued. Once the seller has been advised that a letter of credit has been issued in his/her favor and is certain that he/she can satisfy the stated terms and conditions, the goods are shipped and required shipping documents assembled. | The issuing bank then delivers or transmits the credit to a bank in the seller’s country--the advising bank--that may also be the asked to confirm the credit. The advising/confirming bank notifies the seller that the credit has been issued. Once the seller has been advised that a letter of credit has been issued in his/her favor and is certain that he/she can satisfy the stated terms and conditions, the goods are shipped and required shipping documents assembled. | ||
<div style="float:right;">[[Mitigating Techniques for Commercial Risk/Loans|Prev]] | [[Mitigating Techniques for Commercial Risk/Documentary Draft Collection|Next]] | |||
[[Category:International Business]] | [[Category:International Business]] | ||
Revision as of 13:22, 28 September 2007
Letter of Credit
The letter of credit process begins after a buyer and seller conclude a sales contract providing for payment by a letter of credit. The buyer then instructs his bank--the issuing bank--to issue a letter of credit in favor of the seller. The sales contract may call for either a
- sight letter of credit pursuant to which the issuing bank agrees to make payment upon presentation of a sight draft and the required documents, or
- time letter of credit pursuant to which the issuing bank agrees to accept a time draft and pay at maturity upon its presentation with confirming documents.
The issuing bank then delivers or transmits the credit to a bank in the seller’s country--the advising bank--that may also be the asked to confirm the credit. The advising/confirming bank notifies the seller that the credit has been issued. Once the seller has been advised that a letter of credit has been issued in his/her favor and is certain that he/she can satisfy the stated terms and conditions, the goods are shipped and required shipping documents assembled.