A Letter of Credit is a contractual payment undertaking issued by a financial institution on behalf of a buyer of goods for the benefit of a seller, covering the amount specified in the credit, payment of which is conditional on the seller fulfilling the credit’s documentary requirements within a specific time frame.
The primary aim of this instrument is to provide increased assurance to both the buyer and seller of the fulfillment of each party’s obligations in a commercial trade – namely the seller’s obligation to deliver the goods as agreed with the buyer, and the buyer’s obligation to pay for those goods within the specified time-frame.
Some variations to the main Letter of Credit include revolving, escalating, de-escalating, transferable, back-to-back, as well as red and green clause letters of credit.
An issuer will use its customer’s funds to make the payment.
A Letter of Credit (or LC) is a commonly used trade finance instrument used to ensure that the payment of goods and services will be fulfilled between a buyer and a seller. The rules of a Letter of Credit are issued and defined by the International Chamber of Commerce through their Uniform Customs & Practice for Documentary Credits (UCP 600), used by producers and traders worldwide. Both parties use an intermediary, namely a bank or financier, to issue a Letter of Credit and legally guarantee that the goods or services received will be paid for.
We, Meraki Carriers documentation team help and guide you to fill the letter of credit, documentation arrangements to avoid any discrepancies while submitting the documents to the bank. Our expert team simplify the process to prepare the Hundi / Bill of Exchange, Post shipment documents as per the LC requirments.
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