International trade is very specific and differs significantly from domestic trade.Realities are multiple depending on the sector of activity, the country of the buyer and the type of business case.
If the means of payment and security tools used are not very numerous, confusion can cause problems because of a certain linguistic ambiguity in their designation.
Thus, the letter of credit as it is often named means in reality documentary credit. Letter of credit is not a documentary credit neither a letter of credit stand by, close in words, but totaly different.
Find our tutorials on each of these tools to avoid confusion and make the right choices in your trade negotiations:
- Manage the risk for export business : What are the main risks for export business and tools to mitigate them?
- The documentary credit : zoom on this ancient tool that is always used.
- The letter of credit : documentary credit formalism without security provided by a notifying and confirming bank.
- The letter of credit standby : very different from the letter of credit, it is only a guarantee of payment and not a payment.
- The cash against document : a flexible tool for the seller and the buyer but provides only a very low level of payment security.
- Single risk insurances : specific assurances dedicated to the export business for a significant amount (more than € 1 million).