A letter of credit in the shipping industry serves the purpose of securing legal transactions between the importer and exporter in the cases of international shipping. Since cross-border trade is a prominent way to boost the national economy, it must be secured in all forms. Therefore, both the importer and the exporter, along with a third party, the letter issuing bank, come into a contract that minimises losses caused due to fraud from any of the parties involved. Let us learn more about the documentary credits issued by the bank.
What is a letter of credit in shipping? The dynamic manufacturing and distribution of goods to fulfil consumer demands help maintain a proper flow of the global supply chain. The trade industry flourishes through importing and exporting goods internationally and transcontinentally. Countries actively conduct trade businesses to enhance trade relations with other countries and boost their national economy. The shipper and buyer of the goods contract with each other for secure and legal shipping of goods to their destination. To avoid the risks of fraud at the last moment, a letter of credit is signed to ensure that the supplier does not come across any issues in receiving the payment upon the delivery of goods. A legal, financial contract signed between the bank, the supplier, and the buyer guarantees the supplier will receive the agreed payment on time. Who is involved in the letter of credit? The letter of credit is the buyer's contractual commitment to ensure that the supplier receives his payment once the consignment gets delivered. For this,
Types of Letters of Credit
Use of letter of credit
The various types of letter of credit help in offering flexibility, reliability, and credibility to buyers and suppliers in carrying out international trade. LOTUS Containers is a leading seller and leaser of different types of shipping containers. We offer both new and used shipping containers in various sizes to suit the cargo requirements.
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