1.

What can you say about Letters of Credit How does it help the importer and
exporter? Is this similar or different from the ordinary credit transactions in
the bank.

 A letter of credit is a document from a bank that guarantees payment.

There are several types of letters of credit, and they can provide security
when buying and selling products or services.
If a buyer fails to pay a seller, the bank that issued a letter of credit must
pay the seller as long as the seller meets all of the requirements in the
letter. This provides security when the buyer and seller are in different
countries. Letters of credit can also protect buyers. If you pay somebody
to provide a product or service and they fail to deliver, you might be able
to get paid using a standby letter of credit. That payment can be a penalty
to the company that was unable to perform, and it’s similar to a refund.
With the money you receive, you can pay somebody else to provide the
product or service needed. Banks act as "disinterested" third parties. The
bank doesn’t take anybody's side, and banks release funds only after
certain conditions are met. Letters of credit are common in international
trade, but they are also helpful for domestic transactions like construction
projects.

2. Who are the immediate parties in LC transaction?

The major parties involved in a letter of credit are discussed below. We can
classify mainly eight main parties involved in a Letter of Credit:
I. Applicant of Letter of Credit.
Applicant is one of the main parties involved in a Letter of Credit. Who is an
applicant under Letter of credit?
Applicant is the party who opens Letter of Credit. Normally, buyer of goods
is the Applicant who opens letter of credit. Letter of credit is opened as per
his instruction and necessary payment is arranged to open Letter of credit
with his bank. The applicant arranges to open letter of credit with his bank as
per the terms and conditions of Purchase order and business contract 
 II. LC Issuing Bank
Issuing Bank is one of the other main parties involved in an LC. Who is an
Issuing Bank under Letter of credit?
Issuing Bank is the bank who opens letter of credit. Letter of credit is created
by issuing bank who takes responsibility to pay amount on receipt of
documents from supplier of goods (beneficiary under LC).
III. Beneficiary party
Beneficiary is one of the main parties under letter of credit. Beneficiary of
Letter of credit gets the benefit under Letter of credit. Beneficiary is the
party under letter of credit who receives amount under letter of credit. The
LC is opened on Beneficiary party’s favor. Beneficiary party under letter of
credit submits all required documents with is bank in accordance with the
terms and conditions under LC.

IV. Advising Bank

Advising bank is another party involved under LC. Advising bank, as a part
of letter of credit takes responsibility to communicate with necessary parties
under letter of credit and other required authorities. The advising bank is the
party who sends documents under Letter of Credit to opening bank.
 
V. Confirming Bank
Confirming bank is one of the other parties involved in Letter of Credit.
Confirming bank as a party of letter of credit confirms and guarantee to
undertake the responsibility of payment or negotiation acceptance under the
credit.
 
VI. Negotiating Bank
Negotiating bank is one of the main parties involved under Letter of Credit.
Negotiating Bank, who negotiates documents delivered to bank by
beneficiary of LC. Negotiating bank is the bank who verifies documents and
 confirms the terms and conditions under LC on behalf of beneficiary to
avoid discrepancies
 
VII. Reimbursing Bank
Reimbursing Bank is one of the parties involved in an LC. Reimbursing
bank is the party who authorized to honor the the reimbursement claim of
negotiation/ payment/ acceptance.
 
VIII. Second Beneficiary
Second beneficiary is one of the other parties involved in Letter of Credit. 
Second beneficiary who represent the first beneficiary or original beneficiary
in their absence, where in the credits belongs to original beneficiary is
transferable as per terms.

3. Give concrete example of the product being course to the banks.

For providing this service, banks tend to charge a fee, often a percentage of
the size of the LC, and will ask buyers to promise collateral, in the form of
cash or other securities, in the event if something goes wrong with their
trade deal.
4. Product being transacted in the LC in the banks are there involvement of
other foreign banks in abroad?
Yes, there is a back-to-back letter of credit involves two letters of credit to
secure financing for a single transaction. These are usually used in a
transactions involving an intermediary between the buyer and seller. Back-
to-back letters of credit are used primarily in international transactions.