A red clause in a letter of credit is a promise by the advising bank to reimburse the seller's bank for loans made to the seller.

Name: A red clause in a letter of credit is a promise by the advising bank to reimburse the seller's bank for loans made to the seller.
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Question

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A red clause in a letter of credit authorizes the advising bank to make an advance payment to the seller before the goods are shipped or services are provided, not to reimburse the seller's bank for loans made to the seller.

A Red Clause in a Letter of Credit Is a Promise