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.
References in periodicals archive ?
This little primer is a good read for any commercial lawyer desiring to shepherd a documentary credit transaction from inception to success.
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.
This article was first published in the Oct-Dec 2006 issue of DCInsight, a quarterly journal on Documentary Credits brought out by the International Chamber of Commerce which can be ordered at iccbooks.
Having as its prerequisite the existence of a relationship of commercial trust between buyer and seller, the BPO lies in between documentary credit and open accounts (bank transfers), combining some advantages of both: of the former, for example, the reduction of the risk of non-payment; of the latter, the simplicity and speed of execution.
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.
Among these policies were the popular short-term trade credit and documentary credit policies, the foreign investment insurance policy; critical/strategic supplies (CAPEX) policy for supplies made by foreign companies into local projects of strategic nature; and XoL policy suitable for crude oil suppliers and aluminium smelters and other projects.
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.
It is important to understand if the presentation under a Documentary Credit is a fraudulent one aimed to abuse the banking system to siphon off money against a cargo which is non-existent.
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.
Nanning Branch will mainly serve domestic and foreign-invested corporate customers, offering them a wide range of banking and financial solutions in Renminbi and foreign currencies, including customer deposits; short, medium, and long-term loans; bills acceptance and discounting; trading of government bonds, financial bonds and other securities (except equities); documentary credit and bank guarantees, remittance and settlement; and credit search and consulting services.