INTERNATIONAL TRADE LAW Essay Example | Topics and Well Written Essays - 2000 words

supranational TRADE LAW - Essay Examplep570) . A letter of cite instrument is generally issued by a bank against two types of bills, they are demand bills and usance bills (Massood, A. 2008).To decrease the reliance risk to sellers in both domestic as well as foreign trade practice is the most essential purpose of letter of creed.. When a bank issues a letter of credit in favor of a customer, it surrogates its creditworthiness for that customer (Borcky. R. 1999).There are two types of letter of credit they are standby letter of credit and documentary letter of credit. Documentary letter of credits dirty dog again be categorized into reversible and irrevocable. The revocable letter of credit is particularly rare in usage. Irrevocable letter of credit dissolve be confirmed or unconfirmed letter of credit. Every type of letter of credits has its advantages as well as its disadvantages for the buyers and sellers. The charges of each type of letter of credit may vary according to its characteristics. The more(prenominal) the bank assures payment, higher will be the charges of it (Borcky. R. 1999).Without an agreement between the concerned parties, an irrevocable letter of credit cannot be cancelled before a particular date. A revocable letter of credit can be changed anytime without previous discussions by the bank which issues it. A confirmed letter of credit includes backing by the issuing bank and its correspondents promising payments of all drafts. At the same time an unconfirmed letter of credit will not have any guarantee that the bank will make payments on drafts in case of non payment from the buyer. A stand by letter of credit is a conditional covenant by the issuing bank that it will make payment to the chosen beneficiary if the banks client fails to race as per the terms of the contract (Letter of credit. 2009).Letters of credit are more or less disperse transactions. They are totally different from bank guarantees. The