Documents used in foreign trade - SS1 Commerce Lesson Note

·         Mail Transfer: A mail transfer is a method of sending money from one bank account to another via postal mail. The sender fills out a form with their bank details and the recipient's bank details, along with the amount they wish to transfer. The form is then sent by mail to the sender's bank, which processes the transfer.

·         Documentary Credit: A documentary credit, also known as a letter of credit, is a guarantee issued by a bank on behalf of a buyer that ensures payment will be made to the seller upon certain conditions being met. Essentially, the buyer's bank promises to pay the seller once they receive documentation that proves the goods or services have been delivered as agreed.

·         Letter of Hypothecation: A letter of hypothecation is a legal document in which a borrower pledges collateral (such as property) as security for a loan. The lender holds the right to seize the collateral if the borrower fails to repay the loan as agreed.

·         Foreign Bill of Exchange: A foreign bill of exchange is a financial instrument that allows for the transfer of funds between parties in different countries. It is a type of promissory note that sets out the terms of payment for goods or services being traded internationally.

·         Travelers Cheque: A travelers cheque is a form of prepaid currency that can be used like cash when traveling. They are typically purchased in a specific currency and can be exchanged for local currency at banks and other authorized locations. Travelers cheques are considered safer than carrying cash because they can be replaced if lost or stolen.

·         Telegraphic Transfer: A telegraphic transfer, also known as a wire transfer, is a method of electronically transferring funds from one bank account to another. The sender provides the recipient's bank details and the amount they wish to transfer, and the funds are then electronically transferred from the sender's account to the recipient's account. This process is typically faster and more secure than a mail transfer.