Documentary Credits (Letters of Credit)
The documentary credit---letter of credit, documentary letter of credit, or commercial letter of credit---is an arrangement whereby the applicant (the importer) requests and instructs the issuing bank (the importer's bank) or the issuing bank acting on its own behalf,
Pays the beneficiary (the exporter) or accepts and pays the draft (bill of exchange) drawn by the beneficiary, or
Authorizes the advising bank or the nominated bank to pay the beneficiary or to accept and pay the draft drawn by the beneficiary, or
Authorizes the advising bank or the nominated bank to negotiate, against stipulated document (s) , provided that the terms and conditions of the documentary credit are fully complied with.
For purpose of maintaining uniformity in the text, the words "letter of credit", "credit" and "L / C" are used on this website to refer to the documentary credit.