Delios trading is exporting for the first time to japan and has contracted with abe imports in tokyo for an initial order valued at $110,000. delios trading wants abe imports to secure a document from a tokyo bank that would indicate that the bank would pay delios trading $110,000 upon presentation of specified documents by the exporter. what is the name of the document that delios trading is asking for?

Question

Business

Presley Frazier

28 May, 15:35

Delios trading is exporting for the first time to japan and has contracted with abe imports in tokyo for an initial order valued at $110,000. delios trading wants abe imports to secure a document from a tokyo bank that would indicate that the bank would pay delios trading $110,000 upon presentation of specified documents by the exporter. what is the name of the document that delios trading is asking for?

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Answers (1)

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Dominik Moore · Answer 1

letter of credit

Explanation:

A bank letter of credit (LC) is the most common way in which international transactions are carried out since it is regarded as a very secure method of payment for both the seller (Delios trading) and the buyer (Abe imports).

A LC is issued by the buyer's bank and it guarantees the payment to the seller's bank if certain documents and conditions are presented and satisfied. In international trade these conditions are basically that certain amount of a certain good are delivered, delivery must be done by certain date, the goods must conform to certain characteristics.

This way the payment for the transaction is carried out by an independent third party (the bank) after the seller provides all the necessary paperwork that proves that the LC's requirements were met.