Understanding International Trade Finance: Letter of Credit

Welcome to our guide on International Trade Finance! In today's video, we'll dive into an essential financial tools used in global trade: Letters of Credit. We'll explore it's significance, and how they facilitate smooth transactions across borders.

Topic 1: Letter of Credit

Let's begin with Letters of Credit, often abbreviated as LCs. Imagine you're a buyer purchasing goods from another country. A Letter of Credit acts as a guarantee from your bank to the seller that assures payment once the agreed-upon conditions are met.

For instance, if you're buying machinery, the LC ensures that payment is made once the machinery is delivered as per quality, quantity, and other specified terms. This mitigates risks for both parties involved, fostering trust and security in the transaction.
LC is governed by ICC guidelines UCP600, ISBP, eUCP and URR.

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