Enter to open, tab to navigate, enter to select
Commercial Letter of Credit Toolkit
Practical Law Toolkit w-018-2660 (Approx. 6 pages)
Commercial Letter of Credit Toolkit
by Practical Law Finance
| Maintained • USA (National/Federal) |
A Toolkit containing resources to assist the parties to a commercial letter of credit transaction, including banks and financial institutions as letter of credit issuers, bank customers and others using commercial letters of credit to pay for goods or services, and vendors as beneficiaries being paid by commercial letter of credit. These resources provide information about the nature and uses of commercial letters of credit, forms to be used in letter of credit transactions, and information for negotiating and determining letter of credit terms.
A commercial letter of credit is a payment mechanism that is used in domestic commerce but is especially useful in international trade. In an international sale transaction, a commercial letter of credit allows the seller in one country to ship goods to the buyer in another country, confident that it will be paid promptly and in full for the shipment. The letter of credit also allows the buyer to ensure that payment is not made to the seller until the seller has complied with all its obligations under the parties' sales contract. These obligations normally include:
- Shipping the goods specified in the quantity and quality specified.
- Ensuring that the goods are shipped in the manner and by the time specified.
- Insuring the goods against damage or loss.
- Obtaining any official documents required by governments regulating the movement of goods across their borders.
A commercial letter of credit is also known as a documentary letter of credit, a documentary credit, a commercial credit, or simply a credit. In international trade, when the term letter of credit is used it is generally understood to mean a commercial letter of credit.