ABSTRACT
This chapter examines three uses of letters of credit in international sales transactions. First, the letter of credit is used as a device to guarantee buyer's payment obligation to the seller in a documentary transaction. Second, the letter of credit is used as a standby to guarantee a performance obligation. Third, the letter of credit is used to help finance the exporting or importing of goods. One form of trade finance is the banker's acceptance in which the issuing or conforming bank guarantees payment by placing a stamp on the time draft. The time draft is then referred to as a banker's acceptance and can be sold on the secondary market. The method of payment and the requirement that the buyer provide a letter of credit to guarantee payment in an international sale of goods is, of course, a matter for the parties to negotiate.
