International trade finance: commercial letters of credit and independent payment undertakings
Commercial letters of credit, the most frequent method of payment for goods in international trade transactions, have frequently been described as the lifeblood of international commerce. However, it can be argued that another related method of payment is of equal importance, namely the independent or "on-demand" payment undertaking. This form of payment encompasses standby letters of credit, independent or on-demand bank guarantees and performance bonds. This article reviews the different types of trade finance payment instruments.