In letter of credit transactions, the seller gives the goods to the buyer and the buyer then pays the seller's bank to retire a loan (the letter of credit) taken out by the seller to cover the production costs of the goods.

Question

Quizplus · Accepted Answer

In letter of credit transactions, the seller receives payment from the buyer's bank once the selling conditions are met, not to retire a loan taken out by the seller. The letter of credit is a guarantee of payment issued by the buyer's bank.

In Letter of Credit Transactions, the Seller Gives the Goods