When it comes to international trade, the letters of credit (LC) and export sales agreements are two crucial documents that play distinct and separate roles.
The LC is a financial instrument that guarantees payment to the exporter by the importer`s bank. It ensures that the exporter will receive payment for their goods or services, provided that they meet the conditions set out in the LC. The LC also protects the importer, as payment is only released once the importer receives the goods or services as agreed upon.
On the other hand, an export sales agreement is a legal contract that outlines the terms and conditions of the sale between the exporter and the importer. It covers details such as the price, quality, quantity, delivery terms, and payment terms.
While both the LC and export sales agreement are important documents in international trade, they have different functions and are separate documents. The LC guarantees payment, while the export sales agreement outlines the terms and conditions of the sale.
It`s important to note that a company can issue an LC without having an export sales agreement in place. However, it`s ill-advised to ship goods without an export sales agreement, as it protects both parties and ensures that the terms of the sale are clear and agreed upon.
In conclusion, the LC and export sales agreement serve separate roles in international trade. The LC guarantees payment to the exporter, while the export sales agreement outlines the terms and conditions of the sale. It`s essential to have both documents in place to protect both parties involved in the transaction.