Documentary Credit Transaction - Case Study Example

Only on StudentShare

Extract of sample
Documentary Credit Transaction

As there is a risk of non payment by the importer, sellers can enter into an agreement with the importer's bank through a letter of credit ( lc).When there is a "documentary credit clause" in the agreement between the buyer and the seller, a letter of credit is issued by the buyer and the bank makes the payment to the seller.An lc is issued by the customer's bank naming the seller as the beneficiary, and as soon as the conditions mentioned in the lc are met by the seller, the payment is made by the bank. A bank in the country of the buyer issues the LC and is referred to as the Issuing Bank. A bank that advises the LC to the Seller is called the Advising Bank and is generally in the country of the Seller.
While lcs are a safe, speedy and convenient method of payment for exporters, there might be a few pitfalls that the seller might have to consider before signing the contract.The risk shifts from the actual buyer to the bank.Since presentation of documents to the bank within the stripulated time frame is the only criteria for payment, ...
Download paper


Globalization and technology have shrunk the world to a great extent. International trade has grown extensively in the past few years and this had led to various improvements in payment methods to speed up the whole process. One of the most commonly used form of payment for cross border trade today is through a documentary credit or letter of credit.
Author : fhaag

Related Essays

Case study Case Study
An order for specific performance of the contract was appropriate because of two reasons: 1) the Wirraway was not at the time in flying condition, and 2) the plane was in a hangar owned by a third party.
6 pages (1506 words) Case Study
Effect of recession or credit crunch on telecom companies case study ORANGE
The cascading effect has made the companies to think about the ways and means to handle the crisis. The telecom sector which initially gave indications of defying the recessionary trends has also started feeling the pinch. Saverio Romeo, the ICT analyst at Frost & Sullivan recently said that, the IT sector is going to be hit mainly in two ways1;
3 pages (753 words) Research Proposal
PayPal Case Study
Lots of paypal sellers do not receive payment for items sold through paypal due to credit card fraud and blame paypal for it. Likewise, many buyers do not receivee the goods ordered and paid via paypal as the merchant was bogus and hence blame paypal for not verifying the sellers.
2 pages (502 words) Essay
Documentary Credit Transaction
The economic activities have accelerated in the current century, the economic opportunities have been explored, and wealth proportion has expanded instead of getting more concentrated. The trade partners therefore adopted a policy of variance, aimed at adaptability towards economic progression. The economic expansion and rapid circulation of wealth intensified the activities of the banking sector, and for the procurement of its share, the trade partners broadened the horizon of its banking facilities. The requirements and the expectations of the consumers revolutionized, and for this purpose...
9 pages (2259 words) Essay
Principles of Entrepreneurship class, Extra credit case study
s market segment based on their discretionary incomes (pertaining to the young professionals which constitute a significant portion of 40% of the target market segment). Some financial data can also be obtained on the rest of the target market, which are the college students (40%) and the local music scene enthusiasts (20%) on how much they can spend on some of these discretionary entertainment expenditures, which can evaporate if there is a recession.
3 pages (753 words) Case Study
Got a tricky question? Receive an answer from students like you! Try us!