Letter of Credit 1

[CGLares]

Good day to all.

Can someone be kind to explain me what is a "Letter of Credit"?

I searched on the internet but it doesn't appears clearly.

I mean, if someone can put an example about how does it work, payment, time, etc. I'm new on this.

Regards.

 

[Latexman]

Letter of Credit

Good luck,
Latexman

To a ChE, the glass is always full - 1/2 air and 1/2 water.

 

[berkshire]

I would purchase aircraft using a bank letter of credit, which was handed over to the seller only when the aircraft showed up on a dock in the USA.
B.E.

You are judged not by what you know, but by what you can do.

 

[Hoxton]

Your bank may be able to help,if it deals internationally, they often have guidance documents or a web section. Letters of Credit are normally used for international trade only. There are cheaper and easier methods of payment guarantee for domestic trade wherever you are.

We used standard phrases in our international bids like "contract will only be effective after buyers bank issues a Confirmed Irrevocable Letter of Credit written in a form acceptable to Seller, payment in Sterling.

Payment in sterling, or US dollars, because you may not want payment in sellers local currency. Their government might impose exchange controls, so you cannot get the money!


Other points to note, it works on documentation, not the goods. So you want to have the money on a clearly defined set of documents, eg bill of lading, inspectors certificate etc.

If you are shipping several items, you may want payment on each shipment, not the whole. You may have a contract to supply 100 compressor sets, then find you cannot get them all on one ship....