Letter Of Credit International Trade - 1234 Words

Student name: Institution name: Course Instructor: International trade Letter of Credit (L/C) and a draft A letter of credit is a written pledge by a buyer’s or importer’s bank to the exporter or seller’s bank. The letter of credit guarantees payment of a particular sum of money in a specified currency, as long as the seller meets the specified conditions and presents the set documents within the agreed timeframe. The prescribed documents include commercial invoice, airway bill and certificate of origin. To institute a letter of credit favoring the seller, the buyer either makes an upfront payment of the specified sum or negotiates with the issuing bank. When the seller or agrees to use the letter of credit, the documents presented (airway bill, invoice and the certificate of origin) ought to be accompanied by a draft. A draft is an instrument used to demand payment. The draft is mainly a check representing the claim for payment, also known as the bill of exchange; it is drawn and signed by the seller (exporter). What is the major difference between â€Å"currency risk† and â€Å"risk of non-completion?† How are these risks handled in a typical international trade transaction? Currency risk is the possibility that the currency chosen for payment of the import fluctuates in value relative to the exchange currency. Take a case where a British firm exporting to France wants payment in pounds while the Importer (French) wants to make the payment in Euros. If the export contractShow MoreRelatedFitt Case Study872 Words   |  4 PagesFITTskills: International Trade Finance Sixth Edition Course Objectives †¢ Define and discuss the â€Å"Four Pillars† of trade finance— payment facilitation, risk management, financing and the provision of information related to a transaction †¢ Describe the impact of technology on trade finance †¢ Describe the major products and services related to trade finance, including the role and requirement of each party to a transaction †¢ Discuss the importance of export credit agenciesRead MoreA Letter Of Credit Analysis1493 Words   |  6 Pagesabout the ability of the importer’s payment under the international sale contract, the mechanism to reduce risk and fear is a letter of credit which the exporter will require the importer to arrange for the cost. A bank has an obligation under a letter of credit to pay an exporter the cost of commodities shipped by the exporter to the importer. The risk of the importer unsucceed to pay the contract cost can be reduced by the letter of credit. It is an assurance by a bank of instant or future paymentRead MoreFinancial Aspects Of Terms Of Payment Transactions1292 Words   |  6 PagesIntroduction In our study of different financial aspects, we learnt a very important concept of terms of payment during transactions in trade. †¢ Cash-in-advance †¢ Letters of credit †¢ Documentary Collections Now, let us discuss in details each of these types so that we are able to decide which will be the most suitable at what time (Mitra, 2005). Cash-in-advance Cash-in-advance payment method is the most secure method in the perspective of an exporter as it eliminates the default risk on the partRead MoreThe International Trade, It Is Necessary1465 Words   |  6 PagesTo do the international trade, it is necessary to know the fundamentals of contact law. There are also ancillary contract for the international sale of goods transaction, which are individual contracts between one of the main contracting parties and a third party. These are mostly in the areas of financing, transportation, and insurance. To trade internationally first we should have information of the transportation methods; Unimodal that uses one specific mode of transportation, Multimodal whichRead MoreNew Zealand Is A Potential Exporter And Exporter Essay1230 Words   |  5 Pagespotential exporter and importer in the international market. There are many commodities which New Zealand imports and exports on an adequate scale, where the country is lining up with other count ries. New Zealand is well known for their sheep farming and there are lot of companies who are owning such industries. After an adequate research on the industry, I choose to select the most popular company of New Zealand called New Zealand Wool Services International limited. As per the 2013 statics New Zealand’sRead MoreInternational Business factor1439 Words   |  6 Pagesï » ¿Since the Second World War, international business appeared as the main economic factor responding to postwar needs. Nowadays, globalisation has increased the facility of international exchange and has risen the multicultural needs.The increase in demand for international products has resulted in large possibilities to do business abroad. However, it is really complicate to import or export without knowledge in this area. Global business is all of the commercial exchanges which involve more thanRead MoreEssay On Accomplishment832 Words   |  4 Pagescollection of over $2,536,967.51 in standby l etter of credit fees. CoBank issued over 307 standby letters of credit, 694 standby amendments, 47 Documentary letters of credit and processed 138 standby letter of credit payments. I review documentation for accuracy and completeness. I make sure the outstanding letters of credit expiration dates are within expiration of loan agreements and that the fees billed are processed correctly in GTS (Global Trade Services). I am an important contributor toRead MoreForeign Agriculture Service : Foreign Agricultural Service870 Words   |  4 Pagesdollars to see where the U.S. would benefit the most when selling our products to other countries and promoting these products at trade shows in Europe, the Middle East, Latin America, and Asia. According to the Foreign Agricultural Service , the actions of the Foreign Agricultural Service benefits foreign countries because they provide agricultural trade policies and trade agreements with those countries. These agreements allow the foreign country to sell their products in the United States and giveRead MoreImpact Of Globalization On International Trade928 Words   |  4 Pagescounties, local companies have become the international companies, well - known banks have been known in many countries and so on. Financial advances have also changed the way of international trade, making transaction in international trade is more convenient and comfortable than in the past. Buyers and sellers can make a payment although they are not in the same country, money is transferred cross country in a short time. So, in the international trade context, there are four different ways toRead MoreInternational Trade As A Tool For International Business1707 Words   |  7 Pagesfourteen asks some very important questions regarding international trade as SME and MNE evolve globally due to technology. Therefore as international business continues to evolve companies are find easier ways to find importers and exporters from the comfort of their offices without the costly methods of travel and due diligences trying to find reputable companies to handle their needs. Using a variety of sources I will analyze international trade through the use of websites and go into detail about