Letter of Credit Forum

Hello there,

I have several question regarding LC and also, the Documentary collection method in International trade segment. I consider myself as a newcomer to this field so therefore you are expected to observe errors in my post, but I will try my best to be as clear as possible and hopefully, make no mistakes.

Before going further into the topics, I would like to post a few assumptions, which are:

- Buyers = Importers

Buyers take the risk of sellers failing to deliver the goods when the transaction has already been made.

- Sellers = Exporters

Sellers take the risk of buyers failing to deliver payment when the goods have been delivered.

Question 1)

As far as I know, LC is issued by the buyer's bank in order to guarantee that seller will receive the payment in full, as long as strict terms and conditions are met. The issuing bank, in this case, will act on the behalf on the buyer to finalize the trading process.

-> If LC is issued by the buyer, why there are two types of LC, which are Import LC and Export LC? According to my knowledge, it should be just the Import LC to be existed.

Question 2)

Documentary collection is a method to conduct commerce between international parties, in which, the seller consigns to its chosen bank to deal with relevant documents and hand them to the buyer through buyer's representative bank.

This method is considered to be rather simpler than LC, because in this case, the seller and the buyers have had good reputation with each other through past trading activities.

-> Will there be an Import documentary collection and Export documentary collection exclusively? Because in my knowledge, I've read several articles on the Internet that has mentioned the same.

Thank you in advance.