9/7/2023 0 Comments Default payment letter sampleUnless the conditions of the LC state otherwise, it is always irrevocable, which means the document may not be changed or canceled unless the importer, banks and exporter agree. LCs can be arranged easily for one-time transactions between the exporter and importer, or used for an ongoing series of transactions.Ī letter of credit may be irrevocable, which means that it cannot change unless both parties agree or, it can be revocable, in which case either party may unilaterally make changes. In LC transactions, banks deal in documents only, not goods. The bank's obligation to pay is solely conditioned upon the seller's compliance with the terms and conditions of the LC. The LC is a separate contract from the sales contract on which it is based therefore, banks are not concerned with the quality of the underlying goods or whether each party fulfills the terms of the sales contract. The issuing bank will typically use intermediary banks to facilitate the transaction and make payment to the exporter. A letter of credit, also referred to as a documentary credit, is a contractual agreement whereby the issuing bank (importer's bank), acting on behalf of the customer (the importer or buyer), promises to make payment to the beneficiary or exporter against the receipt of complying stipulated documents.
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