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Letter of Credit
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A Letter of Credit of credit is an undertaking given by the buyer's bank on behalf of the buyer to the seller, stipulated that if specified documents are presented within a stipulated date, the bank establishing the credit will pay the amount of the bill drawn in terms of such LC.

Parties to a letter of credit.

Buyer: also known as purchaser or one who applies to it:

Opening Branch/Bank: the branch/bank , which opens an LC and add its credit standing to that of the buyer.

seller : also known as the shipper and is the beneficiary under the credit.

Negotiating Branch or Bank : a branch/bank other than the opening branch or another bank at which the beneficiary may negotiate the drafts drawn under an LC.

Most Important

Types of Credit

1. Irrevocable- without recourse Letter of Credit : this type of LC cannot be cancelled by the buyer on whose behalf it is opened or be revoked by the bank,which has opened it without the consent of the beneficiary/seller.

2. Revocable- without recourse Letter of Credit: these are not legally binding undertakings between banks and beneficiaries. such credits may be modified or cancelled at any moment without notice to the beneficiary .

3. Revolving Letter of Credit: a revolving letter of credit is one which also provides that the amount of drawing stipulated in it will be available to the beneficiary again and again, as may be agreed between the buyer and the seller,withing a stipulated period.
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