In: Accounting
What may happen in a foreign exchange transaction if the details in the bill of lading do not agree with the letter of credit?
Explanation :
1. Letter of credit : refers to a letter being issued by the
banks as a promise of payment to a transaction between buyer and
seller.
The main purpose of letter of credit is international transactions.
Letter of credit is obtained by buyer in his own country from
banks.
2. Bill of lading : refers to document of title for goods
transported into the country by transportation entity. The bills of
landing entitles the receiver to take possession of goods from
shipper. The bill of landing is used by seller to receive payment
from his own Bank for goods sold.
Effect that may happen when the letter of credit do not agree with
the bill of landing are as follows.