Letter of credit

Letter of Credit LC): It is also named the "letter of credit," a document representing the Bank's pledge that the buyer will pay the seller some goods on time for the expected amount. The Bank pays on behalf of the buyer provided that documents proving the seller's shipment of goods to the buyer are submitted. The buyer's Bank usually requests certain guarantees such as a mortgage or any acceptable assets and costs a fee for issuing the letter of the credit by the Bank.

A Documentary Letter of Credit

Documentary authentication letters of credit are used in international trade, mainly when importing, and their mechanism of action is as follows:

  • The buyer's Bank issues the letter and sends it to the seller's Bank.
  • The seller's Bank meets and ascertains the amount.
  • Suppose the amount is identical to the contract. In that case, the seller charges the contracted goods and gives the shipping policy with all other documents such as the record of origin and insurance papers to the buyer's Bank.
  • When the goods and their contract-matching documents arrive, the buyer's Bank pays the letter of credit to the seller's Bank, which deposits the value in the seller's account. PRO GCC UAE will assist you in obtaining a Letter of Credit from the Bank. Let us know of any query you have in your mind.