What is LC in international payment?
That is a letter of credit, or letter of credit – English is Letter of Credit (abbreviated as LC or L/C).
Letter of credit is a letter of credit issued by a bank which, at the request of the importer, undertakes to the seller to pay a certain sum, within a specified period of time, if the seller presents a set of credits. valid documents, in accordance with the provisions of the LC.
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In short, LC is a letter of commitment from the bank to pay the exporter.
Payment LC, or documentary credit method is commonly used in international trade. It ensures a relatively harmonized benefit and safety for both the buyer and the seller.
Through this method, the importer applies international payment standards (currently: UCP 600 – Uniform Documentary Credits Rules and Practices issued by the International Chamber of Commerce).
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You can see sample L/C as shown below.
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Types of L/C
Here are some of the more common types of Letters of Credit:
Irrevocable letter of credit (Revocable L/C)Irrevocable letter of credit (Confirmed L/C)Confirmed letter of credit (Transferable L/C) Back to Back L/C Revolving Letter of Credit Standby Letter of Credit Reciprocal L/C Conditional Letter of Credit Red Clause L/C
Main contents of L/C
Number, location, date of opening L/C L/C type Name and address of related parties: L/C requestor, beneficiary, banks…Amount, currency Validity period, payment term money, and delivery term Delivery terms: terms of delivery facility, place of delivery… Contents of goods: name, quantity, weight, packaging… Documents the beneficiary must present: bill of exchange, commercial invoice, bill of lading, insurance document, certificate of origin… Commitment of bank to open letter of creditOther contents
For a more detailed answer to the question What is an LC, you can refer to the Letter of Credit (L/C) Essay.
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