When buying from a supplier in France, an Ontario-based company has arranged for its bank to pay the supplier the cost of the desired material when it has passed customs in Canada. Which of the following terms is this type of bank promise called?

Question

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This type of bank promise is called a letter of credit. It is an agreement between the buyer's bank and the seller's bank that ensures payment once the goods have been received and verified. The letter of credit serves as a guarantee to the supplier that they will be paid, and to the buyer that they will receive the goods they ordered.

When Buying from a Supplier in France, an Ontario-Based Company