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Letters of Credit
What is a Letter of Credit (LC) in banking terminology?
A Letter of Credit is a written undertaking by an issuing bank, on behalf of the buyer (applicant), to pay the seller (beneficiary) a specified amount provided the seller presents documents that comply strictly with the terms and conditions of the LC.
What is an irrevocable Letter of Credit?
An LC that cannot be amended or cancelled without all parties' consent.
Which international rules primarily govern Letters of Credit?
Letters of Credit are primarily governed by the Uniform Customs and Practice for Documentary Credits (UCP 600), published by the International Chamber of Commerce (ICC), which came into effect on 1 July 2007.
What is the role of the issuing bank in an LC transaction?
It opens the LC on behalf of the applicant and guarantees payment to the beneficiary.
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