Cash vs Letter of Credit?

What is the difference between Cash versus Letter of Credit. Specifically, in import and export business, which method is advantageous for the seller? Which method is better for the buyer? Which one would usually have the higher negotiated price?

Cash vs Letter of Credit?mortgage rate

A letter of credit is an instrument of financing and it deals with the paperwork associated with an international transaction, as opposed to actual goods or services. The terms and conditions of letters of credit are governed by the Uniform Customs and Practice for Documentary Credits, 1993 Revision, International Chamber of Commerce Publication No. 500. INCOTERMS2000 defines the responsibilities and liabilites of both the buyer and seller. Look up the definitions for FOB (FREE ON BOARD), CANDF (COST AND FREIGHT), CIF (COST INSURANCE AND FREIGHT), EXW (EX WORKS) at http://www.iccwbo.org/incoterms/wallchar...

This is the web site for the International Chamber of Commerce.

A cash transaction does not offer the buyer any level of security in a transaction, and it will invariably be the buyer who gets the fuzzy end of the lollypop. You pay someone half a world away $500,000.00 for a product or service - he takes your money and runs - what do you have left? A half million dollar hole in your bank account.

Your last question is a moot point since the letter of credit comes after the price negotiations.

Cash vs Letter of Credit?

loan

Cash in advance (prior to shipment) is probably the best for the seller, and might be the worst for the buyer.Shipment might never leave the port of export.

An irrevovable Letter of Credit is good for the seller.

A stand-by Letter of Credit is good also, which can be invoked after the shipment arrives, is probably about as good as the buyer can do.

The best one for the buyer is Net 30 days after shipment arrives, but those terms hardly ever happen. (No L/C involved)