| The Letters of Credit give importers the most | | | | this sort of trading though. The issuing bank charges |
| extensively used and conventional international trade | | | | the applicant costs for opening the letter of credit. |
| payment means and finance instrument. By making | | | | The fee charged depends on the credit of the |
| Letter of Credit terms to permit Deferred Payment | | | | applicant, and primarily consists of: |
| or Trade Acceptance, a Letter of Credit facilitates | | | | A) Opening Charges: This comprises of promise |
| financing to the importer. It promises payment, | | | | and procedure charges for the time of the letter of |
| provided the seller complies with the terms and | | | | credit. |
| conditions inside the Letter of Credit. The Irrevocable | | | | B) Retirement Charges: This is to be |
| letter of credit can’t be canceled or varied | | | | remunerated when the time of letter of credit ends. |
| without the approval of all parties. | | | | The bank offering the letter analyzes the bill |
| A bank issues an import letter of credit (L/c) on the | | | | according to UCPDC (Uniform Customs and Practice |
| behalf of buyer or importer under the following | | | | for Documentary Credits), and tax charges based on |
| conditions:a) When an importer is importing items | | | | cost of items. |
| within its own nationb) Any act of merchandise | | | | There are few risks also that are connected while |
| where products from the nation is sold to another | | | | opening this sort of account. |
| commerciallyc) When exporter from India who is | | | | - Basic risks consist of: Financial Standing of the |
| executing a contract outside his own nation needs | | | | Importer, the products involved ,the exporter, nation |
| importing items from a third nation to the nation | | | | risk and foreign exchange threat. |
| where he is performing the deal. | | | | - Price risk is another vital factor related with all |
| The first out of these three is the most general basis | | | | forms of international trade. All banks evaluate their |
| to obtain a letter of credit in present day trading. | | | | risks on the above mentioned criteria before issuing |
| There are certain charges and payments related with | | | | the letter of credit. |