Letter of credit

A - B - C - D - E - F - G - H - I - J - K - L - M - N - O - P - Q - R - S - T - U - V - W - X - Y - Z
What is a Letter of Credit?

The Letter of Credit is an operation by which a bank undertakes, on behalf of its importing client, to pay an exporter:

  • within a certain period,
  • within a certain amount,
  • in return for the exporter's submission of documents recognized as strictly conforming (to those requested for the opening of the documentary credit),
  •  justifying the value of the shipment of goods or the provision of services.

The Letter of Credit is irrevocable.

It can be confirmed (the confirming bank, which is in contact with the exporter, adds its confirmation, i.e. it takes over the country risk and the risk on the issuing bank).

Who is involved in a Letter of Credit?
  • The principal: the importer;
  • The beneficiary: the exporter;
  • The issuing bank: the importer's bank;
  • The notifying or confirming bank: the bank in contact with the exporter.
How can a Letter of Credit be executed?
  • Payable at sight,
  • Payable at term,
  • Executed by negotiation,
  • Effected by acceptance of a bill of exchange.