CSEET · Business Communication · Common Business Terminologies
A 'letter of credit' issued by a bank in an export transaction chiefly serves to:
A letter of credit mainly assures the exporter of payment. The issuing bank promises to pay when the seller presents the documents the credit requires, which reduces the risk of non-payment by an overseas buyer.
- AAssure the exporter of payment if the stated documents are presentedCorrect
- BReduce the customs duty payable on the goods
- CGuarantee that the goods are of good quality
- DGive the buyer free credit for an unlimited period
Explanation
A letter of credit is a bank's undertaking to pay the seller once the documents specified in it are presented in compliance. It does not reduce duty or certify quality, and it is tied to defined terms and amounts, not unlimited credit.
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