First National Bank opened a letter of credit in favor of ABC Co., a U.S. company, for ABC's sale of goods to Country X, a foreign country that participates in a boycott. The letter of credit contains no boycott provisions, but First National Bank knows that ABC Co. has agreed to supply a certification to Country X that ABC has not dealt with any blacklisted firms as a condition of receiving the letter of credit in its favor. What should First National Bank do?

Question

Quizplus · Accepted Answer

First National Bank should not implement the letter of credit because they know that ABC Co. has agreed to supply a certification to Country X that ABC has not dealt with any blacklisted firms. This means that ABC Co. may violate the anti-boycott regulations, and First National Bank could potentially be liable for participating in the boycott. Therefore, it is best for the bank not to implement the letter of credit.

First National Bank Opened a Letter of Credit in Favor