Letters of Credit/Letters of Credit
|Unit 4.5-Letters of Credit|
Letters of Credit
Documentary or letters of credit, as they are more commonly referred to, come in many forms. These options were created to make this banking instrument flexible and applicable to a wide variety of business transactions. The different types of letters of credit can be used in many combinations or independently. The type of letter of credit chosen for a transaction is based on the parties and countries involved, the risks associated with the transaction as well as the products or services being bought and sold.
To easily understand the different types of letters of credit, an international manager must be comfortable with the terminology and definitions of the parties and actions associated with this banking instrument, including, but not limited to, terms such as applicant, beneficiary, issuing bank, advising bank, discrepancy, and amendment.