A situation where the parent company in Germany provides a letter of credit to the Montreal branch of Scotiabank and this bank issues a letter of credit on behalf of the German (company’s) Canadian subsidiary to a third party is known as:
Back to back letter of credit
Foreign direct investment
Transfer pricing .
A documentary collection differs from a letter of credit in that
The exporter does not send the documents to the bank
The importer does not receive the documents for a bank
The fees for a documentary collection are greater than the fees for a letter of credit
The exporter cannot transfer risk to a bank .