A customer in Thailand has offered to pay us using a usance letter of credit by a customer in Thailand. What does this mean?

Generally letters of credit are paid by the bank at sight of compliant documents. A usance credit is not paid at sight but either against acceptance of a bill of exchange payable at a future date to be calculated, eg 30 days from bill of lading date or by a deferred payment term within the letter of credit, eg 45 days from invoice date. Be careful to establish a payment date that is calculable and indisputable, you can even put a specific payment date (eg 4 August 2009), so you are not in dispute with your customer or bank over when payment is due. If you agree to a usance credit you can always negotiate early payment with the bank but they will take a negotiation fee. If you have never dealt with a letter of credit before, ensure you get someone to help you understand how important it is to present documents that are 100% accurate. 

 

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