In petroleum trading, the major hurdle to overcome is finance. As each transaction entails billions of US dollars, both buyers and sellers are anxious about the credibility of one another, fearing that the other party will not fulfill its commitment.
As such, the letter of credit has become the core issue to address. When a seller agrees to be paid by means of a letter of credit, it is looking at a reliable bank that has an obligation to pay them the amount stipulated in the credit notwithstanding any defense relating to the underlying contract of sale. This is as long as the seller performs their duties to an extent that meets the credit terms. Typically, the documents a beneficiary has to present in order to avail itself of the credit are commercial invoice, bill of lading, insurance documents. However, the list and form of documents is open to imagination and negotiation and might contain requirements to present documents issued by a neutral third party evidencing the quality of the goods shipped.
Nowadays there are several types of letter including revocable, irrevocable, transferrable, confirmed, unconfirmed, back-to-back and standby, though most are irrevocable in reality. However, the applicant is not a party to the letter of credit. The choice of a particular type of letter of credit has a significant impact on the execution of a sales-and-purchase contract.
GKP serves as a platform for transactions. We can accept either standby letter of credit or revolving documentary letter of credit (RDLC) from the issuing bank, and either transfer the RDLC or issue a new standby letter of credit to the advising bank. Our service makes transactions become possible with a practical L/C solution, especially when the buyer and seller come to a stalemate over the terms of the letter of credit.