What is an import credit letter?

Import credit letter is a type of guaranteed payment arrangement in international trade carried out by importer or buyers to ensure payment to exporters or sellers. It is known as "documentary credit" because it is a payment based on the presentation of the warranty bank to a set of business documents. The effectiveness of international accreditation is governed by the International Chamber of Commerce and the Commercial Act known as uniform customs and practice for documentary credits.

The procedure for purchasing goods from a trader in a foreign country is quite complex. There are problems with currency and differences in political and economic stability that can affect the flow of money between countries. In addition to the inherent risks of dealing with a foreign country with another financial system, it creates a time period between when the order is placed and the goods received for one of the pages create another risk. Either the buyer has to pay the deck in advance and wait for arrival, risk that the seller will never send goods at all, or the seller must send the goods in advance and waitT for payment after admission, with the risk that the buyer will take goods but never pay.

In order to minimize this transaction risks, the bank acts as an intermediary, guarantees the seller payment and allows him to send his goods without fear of fraud. Importing the credit system of the credit system works almost as a safekeeping service where money and goods are released as soon as the third party is fulfilled by proof of performance. Two banks are involved in the sale transaction. The Bank of the Importer issues an import accreditation and is known as the issuing bank. Exports deal with their own bank, known as a consulting bank, to process a payment with a guaranteed letter of credit.

The ordinary credit letter is Irrevocabable employment of the bank's issuing. As soon as the exporter has a sales contract with an exporter, the buyer will arrange for the document to be drawn to his bank. The credit letter sets out the conditions that need to be satisfied so that the bank can turn offTitu guaranteed money and is given by an exporter who then sends his goods. When it sends the goods, they receive a conosament or a shipping proof.

The exporter will take a convict and an import credit letter along with any other documents needed for his bank. His bank presents documents on behalf of the bank that issues money in exchange for documents. The issuing bank sends the Buyer a law that can use it to pick up their goods from customs.