Letters of Credit

Unit 4.5-Letters of Credit

An international manager needs to be able to understand the different types of letters of credit available for use in international transactions along with the risks, costs and benefits of each. The international manager must be able to communicate these opportunities to their accounting/finance department and often to their customers. The use of these types of letters of credit may be critical in meeting both the business and collection goals of an organization.

Unit Objective

The goal of this material is to introduce you to the different types of letters of credit that are available to use for international business transactions, their risks and opportunities. This information will provide you with an understanding of the benefits of each type of letter of credit and the support they provide in obtaining timely payments for the sales of goods and/or services. By the end of this unit you will be able to

• identify the different types of letters of credit.
• identify the risks and opportunities for each type of letter of credit.
• identify the appropriate transactional scenario when each could be implemented.

Unit Outline

• Introduction
• Letters of Credit
• Types of Letters of Credit
• Summary
• Resources
• Activities
• Assessment

Correlation: Materials from this unit correlate with NASBITE CGCP's Knowledge Statement 04/04/05: Knowledge of types of letters of credit (e.g., confirmed/unconfirmed, irrevocable, transferable, standby, with a time draft)

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