I (Meaning and importance of Exports) Unit Structure

ADVANTAGES OF LETTER OF CREDIT 
Letter of credit is beneficial to the exporter and importer. 
These are as follows. 
A) ADVANGAGES OF THE EXPORTER
A letter of credit offers a number of advantages or benefits to 
the exporter. 
1) No Blocking of Funds 
 
 
Once the exporter fulfills all the conditions of L/C and 
presents the documents for negotiation to his bankers, he receives 
payment as per the terms of L/C. the exporter is entitled to receive 
the full payments of the exports. 
2) Clearance of Import Regulations 
 
 
When the opening bank issues the L/C indicates that the 
importer has fulfilled ass provisions of exchange control regulations 
in his country. Transfer of funds will not create a problem from the 
exchange control authorities. 
3) Free from Liability 
 
In case of confirmed L/C and without recourse clause, the 
liability of the exporter comes to an end as soon as he hands over 
the relevant documents to the bank. 
4) Pre-shipment Finance 

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In India, pre-shipment finance is granted by commercial 
bank on the strength of L/C received by the exporter from the 
importer‟s bank. 
5) Non-refusal by Importer 
The importer may refuse to take possession of goods and 
make and make payment in case of D/P, and D/A bills of exchange, 
but is difficult for him to refuse to take possession of goods and 
make payment against bills dawn under letter of credit. 
6) No Bad Debts 
 
 
As the payment is guarantee by the opening bank, the 
exporter is free from the problem of bad debt. In case the exporter 
holds a confirmed L/C, there is double guarantee by the opening 
bank and the confirming bank.