This is provided only as an overview in which I use Local Bank as the bank nearest the shipper, and Destination Bank as the bank in the consignees’ country. Basically Put into very basic terms, a letter of credit is a method of guaranteeing that the shipper gets paid, and the purchaser gets a shipment – or at least, this is what the intent is all about. The reality is not always quite so well defined. The letter of credit is only a good method of providing payment for freight – it is not a solid guarantee of receiving full payment, or that what was ordered is what gets shipped!
Read more about the Letter of Credit?
