Letters of Credit
For new trading entities, a letter of credit is often an excellent means to arrange payment. It compromises the exposures on both sides of the trade.
A letter of credit is used to reduce the risk in international trade. It is a contract in letter form, written by a bank (issuing bank) on behalf of the buyer (applicant). The issuing bank then forwards the letter of credit, which is transmitted through a bank. If you are the exporter, you must have your foreign buyer specify your bank to be the advising bank. Similarly, if you want to have the letter of credit confirmed, you should have your buyer include the request for confirmation on the application for the letter of credit.
Because the advising bank has no contact with the ...
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