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What is a Letter of Credit?

What is a Letter of Credit?

Letter of Credit is a paying method that is widely used in international trade, usually in sales contracts today.

Why Is the Letter of Credit Needed?

One of the biggest challenges in international trade is reliability. Because it may be easier to search for a company or person you will trade with in your own country. You can master the company’s history, investments and guarantees, partnership structure and the legal rules of your country much more easily. However, when it comes to international trade, you may face many problems from the rules of law to be applied in case of dispute to enforceability. In order to partially overcome these problems, a letter of credit paying method has emerged and it is Decisively aimed to balance the relationship of trust between the parties.

How Does the Letter of Credit Work?

A letter of credit is a guarantee that the person who wants to import goods, the bank where he works, guarantees to pay the seller or the seller’s bank the cost of the goods when the delivery of the goods takes place without defects and on time. Thus, it is aimed that both the buyer and the seller can trade in confidence.

In this way, when the seller delivers the goods on time and without shame, I wonder if I will be able to pay? Out of concern.

If the buyer has paid my payment, can’t I get the goods delivered? It will get rid of his anxiety.

Can I Use the Letter of Credit in My Domestic Sales Transactions?

There are no legal obstacles to the use of the letter of credit in domestic sales transactions

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