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In 2011, cross-border trade reached a value of around US$18.2 trillion. Most of this activity—80 to 90 percent—was settled on open account terms, meaning that the buyer received the shipment before paying the seller. Open account trade has clear benefits for buyers of goods, but it puts sellers at some risk that the buyer might not pay. This can be especially troublesome when a company first begins selling to a new buyer in an unfamiliar region of the world. The traditional method for mitigating counterparty risk in such a situation is the letter of credit (L/C), a paper document issued by a bank that assures payment once the bank receives documentation that the shipment has fully met the contract terms.

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