The Use of a Third Party

Bank of

New York

Bank of Paris

American

exporter

French

importer

1 Importer orders goods

2 Exporter agrees to fill order

3 Importer

arranges

for letter

of credit

4 Bank of Paris sends letter of credit to Bank of New York

6 Goods shipped to France

13 Importer

pays bank

12 Bank tells

importer

documents

arrive

7 Exporter

presents draft

to bank

10 and 11

Exporter

sells

draft to

bank

5 Bank of

New York

informs

exporter of

letter of

credit

14 Bank of New York

presents matured draft

and gets payment

8 Bank of New York

presents draft to Bank of Paris

9 Bank of Paris returns accepted draft

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