Use Case Trade Finance Letter of Credit

Trade Finance Letter of Credit:

A letter of credit is a document, typically from a bank (Issuing Bank), assuring that a seller (Beneficiary) will receive payment up to the amount of the letter of credit, as long as certain documentary delivery conditions have been met. In the event that the buyer (Applicant) is unable to make payment on the purchase, the Beneficiary may make a demand for payment on the bank. The bank will examine the Beneficiary's demand and if it complies with the terms of the letter of credit, will honor the demand. The letter of credit states what documents the Beneficiary must present, what information they must contain, and the place and date it expires. Beneficiaries who sell goods and utilize a letter of credit as the method of payment have the assurance of the issuing bank that if they present the documents stated in the letter of credit, the issuing bank will honor their demand for payment. Bill of Lading: A bill of lading is a document generated by a shipping line or its agent, giving details of a shipment of merchandise. Alongside this principal purpose, the bill of lading also certifies that the goods have been shipped aboard a vessel (and in some cases certifies the condition of the goods at the point of loading), assigns title to the goods, and requires the carrier to release the merchandise to the holder of the title or a named party at the destination port.