Irrevocable Letters of Credit for Foreign Trade
Part of the Video Series Foreign Trading Tips & Advice
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Video Transcript
Irrevocable Letters of Credit for Foreign Trade
This is Nikolai Pankratz with American Resource Network for Expert Village. So, there's different letters of credit. The most likely letter of credit that you're going to be use is an Irrevocable Letter of Credit. And what that pretty much means, that once the letter of credit--you have to have--you're the buyer, say, for example, and you have the money in the bank. Now, the bank issues a letter of credit on your behalf, which is irrevocable. That means that once the goods are loaded and shipped, the documentation is mailed to the bank, and the bank reviews the terms of the letter of credit, and makes sure--and there's many, many different things that you can agree upon with the seller--the buyer, the seller agree upon--and then the banker reviews the points in that letter of credit and makes sure that everybody, that the letter of credit and the seller actually did what you required. And at that point, you cannot call it back. The banker, or the bank, releases the funds, which is great, because they actually serve as a custodian for you, and they make sure that the seller gets his money. It could be the other way around. You would be the seller. You want to make sure that you get the money if you ship something. So, a bank acting as an intermediary, is a benefit for both parties or both sides.
This is Nikolai Pankratz with American Resource Network for Expert Village. So, there's different letters of credit. The most likely letter of credit that you're going to be use is an Irrevocable Letter of Credit. And what that pretty much means, that once the letter of credit--you have to have--you're the buyer, say, for example, and you have the money in the bank. Now, the bank issues a letter of credit on your behalf, which is irrevocable. That means that once the goods are loaded and shipped, the documentation is mailed to the bank, and the bank reviews the terms of the letter of credit, and makes sure--and there's many, many different things that you can agree upon with the seller--the buyer, the seller agree upon--and then the banker reviews the points in that letter of credit and makes sure that everybody, that the letter of credit and the seller actually did what you required. And at that point, you cannot call it back. The banker, or the bank, releases the funds, which is great, because they actually serve as a custodian for you, and they make sure that the seller gets his money. It could be the other way around. You would be the seller. You want to make sure that you get the money if you ship something. So, a bank acting as an intermediary, is a benefit for both parties or both sides.
About the Expert
Expert: Nikolai Pankratz is a German born entrepreneur with an impressive background in music, international banking, and foreign trade. Read More
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