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Punta Cana (Letter of Credit?)

Posted By: Perry Gartner
Date: Wednesday, 16 November 2011, at 5:23 p.m.

In Response To: Punta Cana (Letter of Credit?) (Chiva Tafazzoli)

I work with letters of credit in my business, so I a familiar with them. The bottom line is that a confirmed irrevocable L/C is enforceable at the date specifed. It becomes an obligation of the issuing bank rather than the party that has requested the bank to issue it.

The bank pays the L/C to the beneficiary. This means you could have the $100,000 in your possession on the date you need it. But how it happens could be complicated. You would need to open an account in the country to take possession of the funds, or hire a lawyer or agent to do it for you. There are legal ways to handle it, such as the L/C could be voided if the sponsor honors his obligation. It would entail extra expenses in setting up the mechanisms to accomplish what you need to do in a place like Punta Cana or the closest city that has an international bank. You might need to post a bond as the sponsor may not trust you with the money. It would not suprise me if the cost of doing all this is $1000 to $2000 or even more.

An escrow fund is another method of enforcement that works. Again with complications in setting up and disbursal of funds. All of these safeguards add to the promoter's costs.

I have no doubt that the credibility of the sponsor was beyond reproach in your mind before the event had occurred, or you would not have signed on.

Perry

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