Under a letter of credit, the exporter will not ship the goods until the buyer has remitted payment to the exporter.

Question

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Under a letter of credit, the buyer's bank provides a guarantee of payment to the exporter once the exporter meets the terms and conditions specified in the letter of credit. This allows the exporter to ship the goods before receiving payment, as long as they comply with the requirements outlined in the letter of credit. The payment is then made by the buyer's bank to the exporter's bank, and ultimately to the exporter.

Under a Letter of Credit, the Exporter Will Not Ship