Letter Of Credit
- A letter of credit is the most commonly used form of secure payment.
- It is a document issued by a financial institution at the buyer's request and instructions.
- It spells out the terms under which the seller will be paid.
- Pay the seller a certain amount when it produces documents according to the instructons.
- It acts as an escrow account.
- A letter of credit is the preferred method of payment in trade with areas outside of Western Europe, Canada, and the United States.
- Because it offers independent assurance to the both exporter and buyer.
- A letter of credit is a critical document, so it is imperative that the seller issue clear guidelines to the buyer on how to open a letter of credit.
© 2004 John Michael Pierobon