Letters Of Credit
Letters Of Credit

Letters of Credit

A letter of credit is a document issued by a financial institution, or a similar party, assuring payment to a seller of goods and/or services provided certain documents have been presented to the bank. These are documents that prove that the seller (beneficiary) has performed the duties under an underlying contract (e.g., sale of goods contract) and the goods (or services) have been supplied as agreed. In return for these documents, the beneficiary receives payment from the financial institution that issued the letter of credit. The letter of credit serves as a guarantee to the seller that it will be paid regardless of whether the buyer ultimately fails to pay, provided the documents they present to the bank are in compliance with the letter of credit terms and conditions. In this way, the risk that the buyer will fail to pay is transferred from the seller to the letter of credit's issuer. The letter of credit can also be used to ensure that all the agreed upon standards and quality of goods are met by the supplier, provided that these requirements are reflected in the documents described in the letter of credit.

Letters of credit are used in international transactions to ensure that payment will be received. Due to the nature of international dealings including factors such as distance, differing laws in each country and difficulty in knowing each party personally, the use of letters of credit has become a very important aspect of international trade. The bank also acts on behalf of the buyer (holder of letter of credit) by ensuring that the supplier will not be paid until the bank receives a confirmation that the goods have been shipped. Most letters of credit are governed by rules promulgated by the International Chamber of Commerce known as Uniform Customs and Practice for Documentary Credits (UCP 600 being the latest version). They are also used in the land development process to ensure that approved public facilities (streets, sidewalks, storm water ponds, etc.) will be built. The parties to a letter of credit are the supplier, usually called the beneficiary, the issuing bank, of whom the buyer is a client, and sometimes an advising bank, of whom the beneficiary is a client. Almost all letters of credit are irrevocable, i.e., cannot be amended or canceled without the consent of the beneficiary, issuing bank, and confirming bank, if any.

Why Letters of Credit:

1. Accepting Letters of Credit (LC) from buyers makes a seller's payment safer, an LC is considered the safest transaction for shipment besides payment in advance. Your payment is secured provided the documents comply with the LC terms and conditions.
2. By using LC's the seller can increase sales, simply by giving credit to buyers so that they have capacity to buy more.
3. In a letters of credit transaction, the bank guarantees payment even if your buyer fails to pay or goes bankrupt provided the seller's documents comply with the LC terms and conditions.

Why RHDC for your Letters of Credit:

1. Banking statistics show that 80-85% of initial LC presentations to banks are discrepant (documents do not comply with the LC terms).
2 In today's competitive business environment, the documents you create speak as much about your organization as the services you provide. Let RHDC provide professionally prepared documents that help you get paid faster from your bank.
3. Over 35 years of experience in Letters of Credit services in US
4. Experienced and trained staff is available for trade consultancy as well as document preparation.
5. We prepare all documents required in the shortest possible time.
6. All documents are being prepared as per International Banking Practices and UCP rules and banking standards.
7. Proofing of documents issued by third parties i.e. shipping company, chamber of commerce, insurance company etc.
8. Direct coordination with shipping company or their agents, airlines or their agents, chamber of commerce, insurance company or other third parties in preparing LC documents.
9. We follow up with banks on exporters behalf for payment.



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