Letter of Credit : A document issued by the bank of the buyer or the importer which states the conditions and circumstances that seller or exporter will be paid against. The bank will release the agreed amount of money to the seller/exporter against a certain documents that should be presented with compliance to this document. The Letter of Credit has more than one type such as :
  • Irrevokable Letter of Credit : This document can not be amended, canceled or revoked unless the benificiary agrees to these actions.
  • Confirmed Letter of Credit : In this case the bank in the exporter/seller country have already agreed to the L/C before processing.
  • Discrepancy Letter of Credit : With this document not the issuing bank nor the confirming bank are obliged to pay the money to the benificiary.
  • Under Reserve Letter of Credit : Discrepancies in this case can be negotiated and the negotiating bank takes the reight to take back the funds from the exporter if this discrepancy(s) is/are not acceptable.