Reply To: Brief on who provides the letter of credit.

[Anonymous]

A contract that the bank agrees to take responsibility for the buyer’s payment to the seller is called a Letter of Credit (LC). A letter of credit states that the seller will be paid for their goods once the shipment reaches the buyer. Usually, banks accept to produce LC only when the seller has evidence of the shipment of the goods and specified documents. When the buyer opens an LC with its bank, the seller will present the essential documents required for an LC to the issuing bank. Once the bank verifies the documents and evidence of shipment, it will pay the seller and produce the documents to the buyer. The buyer can claim the carrier for their goods upon receiving the documents. LC is the most commonly used payment method in international trade but less used in domestic trade.