Create a trade crisis between the uk and russian firms

Reference no: EM13935488

Letters of credit. Channel Traders (UK) is a firm based in Grimsby, that specializes in seafood exports and commonly uses letters of credit (L/Cs) to ensure payment. It recently experienced a problem, however. Channel Traders had an irrevocable L/C issued by a Russian bank to ensure that it would receive payment upon shipment of 16 000 tons of fish to a Russian firm. This bank backed out of its obligation, however, stating that it was not authorized to guarantee commercial transactions.

a Explain how an irrevocable L/C would normally facilitate the business transaction between the Russian importer and Channel Traders (the UK exporter).

b Explain how the cancellation of the L/C could create a trade crisis between the UK and Russian firms.

Reference no: EM13935488

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