V. Translate into Russian (in writing)

Date: 2015-10-07; view: 455.

Letter of credit (L/C) is an order from a bank to a bank abroad authorizing payment to a person named in the letter of a particular sum of money or up to a limit of a certain sum. L/C are often required by exporters who wish to have proof that they will be paid before they ship goods, or who wish to minimize delay in payment for the goods. L/C, unlike Bill of Exchange, are not negotiable, but being cashable at a known bank, are immediately acceptable to the seller in the exporting country.

The following types of letters of credit are usually used: irrevocable, confirmed and revolving.

• An irrevocable L/C is one which can neither be modified nor cancelled without the consent of the party in whose favour it has been opened.

• A confirmed L/C is an irrevocable L/C, payment under which is guaranteed by a first class bank in case the opener of the L/C (i.e. the Buyers) or the bank effecting payment defaults, or is unable to make payment.

• A revolving L/C is one under which its value is constantly made up to a given limit after payment for each shipment, which saves the charges on multiple letters of credit.

The Letter of Credit is the most frequently used method of cash payment because it is advantageous and secure both to the Exporter and to the Importer though it is more expensive than payment by transfer. It overcomes the gap between delivery and payment and gives protection to the Sellers by making the money available for them on the fulfilment of the transaction and to the Buyers because they know that payment will only be made against shipping documents giving them the title for the goods.

This method of payment is often used in dealings with developing countries.