| More and more businesses are interested in | | | | practices and regulations. It establishes what the |
| expanding their horizons. International trade allows | | | | parties are expected to do, what documents are |
| businesses to buy supplies from other countries and | | | | required for the transactions, and the terms both |
| sell their products abroad. | | | | exporter and importer agree beforehand. A letter of |
| The upside of international trade is that if a business | | | | credit works as a guarantee that the transaction will |
| decides to either import or export products or | | | | be done as agreed. |
| supplies the risks may be minimized. There are many | | | | The Letter of Credit is the promise given by a bank |
| risks to international trade. The advantage is that if a | | | | (Issuing Bank), acting on instructions from its |
| company is not successful in entering new markets it | | | | customer (payer) to pay certain sum of money to a |
| can take suspends operations and continue in the | | | | person or company (Recipient), through one of its |
| country of origin. | | | | correspondents Bank (Notifier), provided that certain |
| There are different legal documents and methods | | | | requirements are met, such a rule, are the delivery of |
| that allow companies to increase their working capital | | | | documents within a stipulated date. |
| and increase the accountability of their foreign | | | | This type of credit document is beneficial for the |
| transactions. We are talking about factoring, bank | | | | party paying for the merchandise, because payments |
| guarantees, and letters of credit. | | | | can only be done upon presentation of the letter of |
| A letter of credit is one of many methods to provide | | | | credit. |
| protection to both parties involved in international | | | | A letter of credit will provide the formality and legal |
| transactions. | | | | structure sufficient for transactions to be done |
| The letter of credit is a crucial part of the recipe | | | | properly. It evidences that the merchandise arrive in |
| when it comes to trade done outside borders. These | | | | the conditions expected. |
| documents have many useful features that make | | | | This type of credit document creates a link between |
| imports and exports easier and more reliable. The | | | | the exporter and the importer and works as a |
| letter of credit is grounded on international trade | | | | mechanism for payments that involves banks. |