letter of credit

In international sales transactions where the transportation of goods through borders is necessary, both the seller and the buyer wish to minimize the risk they have to face due to factors like distance, difference in currency and culture, or like foreign laws and regulations. The seller wants to make sure that he receives the purchase price upon shipment of the goods. The buyer, in contrast, is not willing to pay unless he is assured that the goods are of the contracted quality and quantity and all other requirements set out in the sales contract are fulfilled. These conflicting interests of the parties become reconcilable with the adequate listing of the documentary requirements of the letter of credit. The letter of credit arrangement typically involves three parties: banks; buyer , and the seller.

Keywords:

letter of credit , seller , bank , buyer