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Invoice letter sample for payment for Export

letter of credit in the previous video media mundo explained to Nick who the various payment methods one of which was letter of credit since LC method is an important method of payment we will explain them in more detail here to begin an LC payment involves the buyers bank and Nico's bank payment is made when seller submits the documents such as invoice Bill of Lading etc to her bank as proof of shipment the LC protects the seller against payment default by the buyer an LC also protects the buyer since no payment obligation arises until the goods have been shipped by seller as promised who are the parties involved in a letter of credit the applicant is the buyer who approaches its bank to issue an LC in favor of the seller the buyers bank is called the issuing bank niku the seller is the beneficiary in whose favor the LC is issued advising bank is the bank which receives the LC from the issuing bank for the beneficiary besides the advising bank that can also be nominated bank and a conforming bank on behalf of the beneficiary what are the steps in a letter of credit buyer and niku agree to the terms such as means of transport period of credit offered the last shipment date acceptable etc fire applies to the issuing bank for the issue of LC bank then evaluates the bios credit standing etc on assuring the LC the issuing bank sends it to the advising bank through mail or electronic means such as Swift advising Bank informs niku Nick who checks the conditions mentioned on the LC against the agreement nickel ships decodes and puts together the documents like Bill of Lading etc called for in the LC and submits to the advising bank advising bank checks the documents against the LC a found correct it pays niku and forwards the documents to the issuing bank issuing bank debits the payment from the buyer and releases these documents to the buyer what are the benefits of letters of credit letters of credit are legally binding and all parties must honor it so they offer less risk for the fire and makuu they reduce ambiguity and increase transparency for both sides as the details about the Goodes its delivery etc are all well defined in an LC letter of credit operations are governed by UCP rules framed by the International Chamber of Commerce that is ICC LCS are internationally used it provides forms confidence to trade in unfamiliar markets with unfamiliar suppliers what are the different types of letters of credit a revocable letter of credit a revocable LC can be changed or cancelled by the issuing bank on its own on the other hand an irrevocable LC can be changed or cancelled only when all parties that is the buyer seller and the mediating banks agree niku should always try for an irrevocable LC confirmed letter of credit this provides additional security for the seller sure another Bank other than the issuing bank acts its guarantee if the bios bank fails to make payment this can form in bank will guarantee payment yusin's letter of credit your payment is released at a later date and not immediately on received of documents back-to-back letter of credit this is usually open by a middlemen who would buy from niku and sell to a buyer the original LC open by the buyer for the middleman the middleman then opens a back-to-back l/c for niku against the security of the original LC this gives security of transaction to the pyre middlemen and also to niku transferable letter of credit these again are used when middlemen are involved under this LC the middlemen can request the nominated bank to transfer the payment directly to niku standby letter of credit unlike a standard LC a standby LC allows seller to obtain payment even when the buyer has failed to pay as per the bond this is similar in nature to a bank guarantee red cross letter of credit this allows the seller to receive partial payment prior to shipment when taking an LC Nick who should make sure to check the conditions on the LC she should also check the credibility of the issuing bank further she should note that LC is still subject to risks such as change in buyer country's policies or risks of fraud etc by the buyer hope this video helps licoo in finalizing n LC myriad banda wishes niku all the best