International Payments

In what types of situations is an advised letter of credit typically used?

An advised letter of credit is a desirable (albeit expensive) payment method for a company that is buying a product internationally, and a desirable (albeit expensive) payment method for a company that is selling a product internationally. The buyer who uses this payment method can be assured that the issuing bank will assess the seller's performance before the issuing bank pays the seller under the letter of credit. Consequently, the buyer can feel comfortable that the seller will not be paid under the letter of credit if the seller does not perform exactly as the letter of credit requires. The seller, on the other hand, should also feel comfortable with an advised letter of credit transaction in that the seller knows that it will be paid under the letter of credit if it performs in accordance with the terms and conditions that are specified by the letter of credit.

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