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Letter of Credits

Letter of Credits

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Published by UjjalB
International Credit Instrument
International Credit Instrument

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Categories:Types, Business/Law
Published by: UjjalB on Feb 14, 2010
Copyright:Attribution Non-commercial


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Introduction toLetters of Credit
Presented ByNishant Tigga
What is a letter of credit? Why isit used?
Seller in country A –Malaysia
Seller sells palm oil tothe buyer shippedfrom Malaysia toRotterdam
Risk to
seller if itparts with
possession and titleand ships goods onbasis of buyer’spromise to payalone
Buyer in country B -USA
Buyer buys palm oilfor delivery atRotterdam
Risk to
buyer if itpays for goodsbefore
Plus immediate tyingup of buyer’scapital
What is a letter of credit? Why isit used?
“A letter of credit is a commercialinstrument used as a means of financing international businesstransactions”
“A letter of credit is a contract underwhich a bank agrees to pay the seller inconnection with the export of specificgoods against the presentation of specified documents relating to thosegoods … Thecred it is issued at therequest of the buyer (the applicant) infavour of the seller (the beneficiary)”

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