11. Documents in Foreign Trade

A letter of credit is an undertaking between the issuing bank and the beneficiary to pay, accept bill(s) of exchange and make payment on maturity provided the beneficiary fulfils the requirement under a credit. The applicant requests the bank to issue a letter of credit to ensure that he receives the right quality and quantity of goods from the supplier. Banks do not deal in goods but only with documents. The issuing bank requires the beneficiary to present the documents evidencing the quality and quantity of the goods dispatched by him to meet the requirement of a letter of credit. Therefore, both the applicant and the issuing bank should be clear about the type of documents required and the significance of each document.