Posted by Carol on January 29, 1999 at 05:57:02:
JOhn, We use letters of credit in intl trade all the time. I can only suppose that domestically they are the same. The letter of credit -confirmed by a bank - basically says that, upon presentation of DOCUMENTS FOR NEGOTIATION, in accordance with the letter’s terms, payment will be made.
The idea being that a financial institution is confirming to the seller that the buyer is capable, and WILL come thru in the deal if the terms of the letter are met.
A word about them - it is ALL PAPER. What I mean is, if the proper documents are submitted, payment WILL be made by the bank, so include your documents wisely.
In my ‘day job’ one could imagine that all documents might be in order but that the product shipped from (for example) China to Argentina WAS NOT ACTUALLY as the documents indicated. The payment is based on DOCUMENTS, not on concrete reality. So have someone write an L/C that knows how to do them.
In REI I could imagine similar slights of hand - and frankly , I hate the d%*%