Home >> Articles & Tutorials >> How To Understanding The Letter Of Credit And Its Types

How To Understanding The Letter Of Credit And Its Types

By Jessica Thomson : A how to tutorial about Business with step by step guide from Jessica Thomson.

Introduction

Confirmed irrevocable letters of credit need also confirming bank's written consent in order any modification or cancellation to be effective.

Steps

  1. A letter of credit (LC) is a promise made by the issuing bank to pay the seller of goods if the buyer fails to make the payment; It, more or less, acts as a bank guarantee to the seller. They are common in international trade. For example, importers and exporters might use letters of credit to protect themselves. In addition, communication can be difficult across thousands of miles and different time zones, and therefore, a LC spells out the details so that everybody's on the same page.

    Letters of Credit are available in many forms few of them are mentioned below.

    Commercial Letters of Credit: These are primary payment tool in international trade such as import and export transactions. These are a means of payment to be utilized when the principal perform its duties.
    Standby Letters of Credit: Under this payment is made to the beneficiary of the LC when there is a breach of the principal's obligation. For example, a construction company has been awarded with a tender. If this construction company cannot fulfil its obligations under the project contract beneficiary of the standby letter of credit can apply to the nominated bank for the payment. However, the nominated bank considers only the terms and the conditions of the standby letter of credit and the rules governing the credit when deciding a complying presentation.
    Revocable Letters of Credit: They give issuer the amendment or cancellation right of the credit any time without prior notice to the beneficiary. Since revocable letters of credit do not provide any protection to the beneficiary, they are not used frequently.
    Irrevocable Letters of Credit: Irrevocable Letters of Credit cannot be amended or cancelled without the agreement of the credit parties. Unconfirmed irrevocable letters of credit cannot be modified without the written consent of both the issuing bank and the beneficiary. Confirmed irrevocable letters of credit need also confirming bank's written consent in order any modification or cancellation to be effective.

    Each type of letter of credit has its own advantages and use. So referring to the list you can choose your type of letter of credit and ripe its fruits.

Tips

  • Bronze Wing Trading LLC provides Letter of Credit | LC to the buyers/importers who do not have enough cash flow or bank facilities to import their merchandise.

Related Resources

For more information on letter of credit, check out the info available online; these will help you learn to find the standby letter of credit!

Was this helpful? 1 0 Thanks,Successful Vote! 1 Comments




Related Answers & Tutorials

More answers and tutorials come with rich photos, detailed steps related to How To Understanding The Letter Of Credit And Its Types.

  • What does google doodle of october 12 mean?

    Have you noticed october 12 google doodle? Big G letter and 5 flash balls. What does it mean? i think the first G letter means the G of google, right? If yes, what the other 5 balls mean? When i click then, they can change to different animation and jump. Please tell me the meaning of google...

    Asked Oct 17`11 at 02:57

    Mackie L
  • LEASE BUY FINANCIAL INSTRUMENT BG MTN POF

    We have direct and efficient providers of Bank Guarantee (BG s), Insurance Guarantees, MTN, Bank Drafts, Standby Letters of Credit (SBLC) and Third Party Guarantees. If you are a potential Investor or principal looking to raise capital, we will be happy to answer any questions that you have...

    Topics:  insurancebg sblcHotmail

    Asked Aug 05`13 at 17:38

    marquez
  • How to get my student credit card approved?

    i want to know possible is it for my student card to get approved? I m an international student working part time in the US, and recently applied to a regular credit card a month ago which got denied and a student credit card by BoA a week ago. I just got a letter from BoA, stating that I do not...

    Asked Aug 23`11 at 01:07

    Ray Johnson
  • For the maintenance of the principle of jewelry, you know how much?

    Usually in the market by selling 925 silver pure silver are, rather than 999 this sterling silver jewelry forging a more solid than an easy to wear and deformation, the real 999 sterling silver is very such as the sterling silver necklace , like gold, added a silver alloy made out The jewelry...

    Asked Oct 30`13 at 03:23

    mutalisa
  • Working principle of main components of concrete mixer

    The continuous concrete mixer model MAO C gives a stream of mixed concrete based on volumetric proportioning. Material is fed into one end from two or more aggregate conveyors, cement screw feeder and flow-metered water. The powerful twin-shaft mixing action transforms the raw materials into a...

    Asked Oct 10`13 at 02:32

    susie
  • The Consequences of the cult of Gay

    If you disagree with the cult of Gay you are inter-alia a homophobic fascist, an illiterate, an uneducated cretin, a hump-backed farmer Gay Cult . The truth is the Cult of Gay is just like any other cult that wants relevancy, power, control over education and the media, and a revisionist...

    Asked Oct 17`13 at 07:20

    craigread02
  • The prices of different model of batching plant

    Daswell is engaged in the supply of mobile concrete batching plant with the capacities of 25m3 h, 30m3 h, 50m3 h and 60m3 h. The specialty of these portable concrete batching plants is that they are truly mobile with pneumatic braking or towing attachment by a tractor. These mobile concrete...

    Asked Nov 27`13 at 10:00

    susie
  • The prices of different model of batching plant

    Daswell is engaged in the supply of mobile concrete batching plant with the capacities of 25m3 h, 30m3 h, 50m3 h and 60m3 h. The specialty of these portable concrete batching plants is that they are truly mobile with pneumatic braking or towing attachment by a tractor. These mobile concrete...

    Asked Nov 27`13 at 10:00

    susie
  • The prices of different model of batching plant

    Daswell is engaged in the supply of mobile concrete batching plant with the capacities of 25m3 h, 30m3 h, 50m3 h and 60m3 h. The specialty of these portable concrete batching plants is that they are truly mobile with pneumatic braking or towing attachment by a tractor. These mobile concrete...

    Asked Nov 27`13 at 10:00

    susie
  • The prices of different model of batching plant

    Daswell is engaged in the supply of mobile concrete batching plant with the capacities of 25m3 h, 30m3 h, 50m3 h and 60m3 h. The specialty of these portable concrete batching plants is that they are truly mobile with pneumatic braking or towing attachment by a tractor. These mobile concrete...

    Asked Nov 27`13 at 10:01

    susie
  • The prices of different model of batching plant

    Daswell is engaged in the supply of mobile concrete batching plant with the capacities of 25m3 h, 30m3 h, 50m3 h and 60m3 h. The specialty of these portable concrete batching plants is that they are truly mobile with pneumatic braking or towing attachment by a tractor. These mobile concrete...

    Asked Nov 27`13 at 10:02

    susie
  • The prices of different model of batching plant

    Daswell is engaged in the supply of mobile concrete batching plant with the capacities of 25m3 h, 30m3 h, 50m3 h and 60m3 h. The specialty of these portable concrete batching plants is that they are truly mobile with pneumatic braking or towing attachment by a tractor. These mobile concrete...

    Asked Nov 27`13 at 10:02

    susie
  • The prices of different model of batching plant

    Daswell is engaged in the supply of mobile concrete batching plant with the capacities of 25m3 h, 30m3 h, 50m3 h and 60m3 h. The specialty of these portable concrete batching plants is that they are truly mobile with pneumatic braking or towing attachment by a tractor. These mobile concrete...

    Asked Nov 27`13 at 10:03

    susie

You are reading How To Understanding The Letter Of Credit And Its Types.

Do you like it? Share with friends!