letter of credit

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letter of credit:

see credit, letter ofcredit, letter of,
commercial instrument through which a bank or other financial institution instructs a correspondent institution to advance a specified sum of money to the bearer.
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credit, letter of,

commercial instrument through which a bank or other financial institution instructs a correspondent institution to advance a specified sum of money to the bearer. The document is called a circular letter of credit when it is not addressed to any particular correspondent. In effect, a letter of credit is a draftdraft,
in banking, order by one party to another party to pay a stated sum to the person or firm in whose favor the draft is made. It is similar in form to the ordinary bank check. Often the drawer and the drawee of a draft are the same person.
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, save that the amount is merely stated as a maximum not to be exceeded. Letters of credit, mainly used by travelers, greatly simplify nonlocal business transactions. Those who issue such letters are usually so well known that any bank will honor the letter upon proper identification. Travelers' checks are a modified form of a letter of credit. They are issued in coupons, upon whose face a value is usually expressed in terms of the currency of a particular country. In the United States they are issued by express companies and banks. Circular letters of credit require that each payment, as it is made, be endorsed by the firm making payment so that other banks may know how much of the total credit has been used.
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References in periodicals archive ?
The text, a part of the Short Course in International Trade Series, is a brisk primer on documentary credits for practitioners under pressure to learn quickly the basics of this highly regulated form of payment.
b) Clean import loan - rather than being triggered by the receipt of a documentary credit or documentary collection, the advance is made on presentation of supplier invoices and evidence of shipment only.
Until around the year 2000, domestic receivables were credit-insured and exports subject to documentary credit from banks.
Sayam pointed out that the Company will propose the investment insurance of Algerian enterprises and documentary credit insurance.
* Letters of credit: refer to the Uniform Customs and Practices for Documentary Credit (UCP 500)
Speakers were: Vincent O'Brien, a member of the ICC Banking Commission and ICC and Chair of the ICC Market Intelligence Group (MIG); and Khalil Matar a Certified Documentary Credit Specialist, a Certified Internal Auditor, and the seminar was attended by trade professionals, experts in documentary credit, sales and purchasing managers and trade consultants, bankers and others.
During debates following the presentation of report on Algeria finances presented by the Governor of the Central Bank, members have put particular emphasis on issues related to the unofficial trading of foreign currencies, the investment and documentary credit.
They failed to recognize that in documentary credit rules, fraud is an exception.
A letter of credit is a form of documentary credit whereby a bank guarantees payment on behalf of a buyer, subject to the condition that the beneficiary (exporter) submits documents conforming to the terms of the letter of credit.
Fee and commission income from the documentary credit for the second quarter of this year, amounting to $907,000, was 62 per cent more than the $558,000 earned in the first quarter.
The credit facilities are comprised of 38 per cent Murabaha financing and 62 per cent multi bonds and documentary credit.