Letters of Credit

Letters of credit are conditional payment undertakings provided by the importer's bank to the exporter, usually through the intermediation of the exporter's bank. Under normal circumstances, the exporter receives the letter of credit prior to production or shipment of the goods. The exporter is paid upon providing documentary evidence of the shipment of goods in accordance with the terms of the letter of credit.

Letters of credit, so called LCs, can be nominated in different types such as revocable- and irrevocable LC's, payable or at sight or usance LC's, with or without advance payment clauses and with or without the confirmation of the advising bank, revolving and/or transferable.