Following Negotiations on a Transaction and the Use of Letter of Credit

The Next Step in Using a Letter of Credit for Payment

After negotiations on a transaction result in the choice of a letter of credit for payment, the next step is for the exporter to send a pro-forma invoice to the importer.

A pro-forma invoice is a document used to provide an estimate of goods and services that will be provided, before the formal invoice is issued. Once the pro-forma invoice is accepted, the issuing bank can then open a letter of credit, and the importer will make a security deposit in the issuing bank.

After deciding to use a letter of credit, the exporter should ask the advising bank to open a letter of credit. This financial instrument is crucial in international trade, providing security and efficiency to the parties involved in the transaction.