Letters of Credit

Letter of credit stands for a commitment of payment given by the L/C opening or confirming bank to exporter in return for submission of shipping documents with specified conditions to the bank on or before the due date in accordance with the terms and conditions of the letter of credit.

In letter of credit transactions, exporter gets a guarantee of payment if the goods are shipped in accordance with the terms and conditions of the letter of credit, while importer gets a guarantee of shipment of the goods in strict compliance with the agreed upon L/C conditions.