A bank issuing a letter of credit on behalf of an importer is obligated to make the payment due under the letter of credit regardless of the importer's willingness or ability to pay.

Question

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This is the fundamental purpose of a letter of credit - to provide a secure payment mechanism for the seller, regardless of the importer's financial situation. The bank is obligated to honor the letter of credit as long as the seller has met the terms and conditions outlined in the letter.

A Bank Issuing a Letter of Credit on Behalf of an Importer