TAILIEUCHUNG - LETTER OF CREDIT (LC)

A standard, commercial letter of credit (LC) is a document issued mostly by a financial institution, used primarily in trade finance, which usually provides an irrevocable payment undertaking. The letter of credit can also be source of payment for a transaction, meaning that redeeming the letter of credit will pay an exporter. Letters of credit are used primarily in international trade transactions of significant value, for deals between a supplier in one country and a customer in another. In such cases the International Chamber of Commerce Uniform Customs and Practice for Documentary Credits applies (UCP 600 being the latest version) | Letter of credit L C LETTER OF CREDIT LC A standard commercial letter of credit LC is a document issued mostly by a financial institution used primarily in trade finance which usually provides an irrevocable payment undertaking. The letter of credit can also be source of payment for a transaction meaning that redeeming the letter of credit will pay an exporter. Letters of credit are used primarily in international trade transactions of significant value for deals between a supplier in one country and a customer in another. In such cases the International Chamber of Commerce Uniform Customs and Practice for Documentary Credits applies UCP 600 being the latest version . They are also used in the land development process to ensure that approved public facilities streets sidewalks storm water ponds etc. will be built. The parties to a letter of credit are usually a beneficiary who is to receive the money the issuing bank of whom the applicant is a client and the advising bank of whom the beneficiary is a client. Almost all letters of credit are irrevocable . cannot be amended or canceled without prior agreement of the beneficiary the issuing bank and the confirming bank if any. In executing a transaction letters of credit incorporate functions common to giros and Traveler s cheques. Typically the documents a beneficiary has to present in order to receive payment include a commercial invoice bill of lading and documents proving the shipment was insured against loss or damage in transit. Terminology Origin of the term The English name letter of credit derives from the French word accreditation a power to do something which in turn is derivative of the Latin word accreditivus meaning trust. This applies to any defense relating to the underlying contract of sale. This is as long as the seller performs their duties to an extent that meets the requirements contained in the letter of credit. Types and related terms Letters of credit LC deal in documents not goods. The LC .

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