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Letter of Credit, also known as Documentary Credit, is a written commitment by an importers bank, known as the issuing banks, on behalf of its customer (the importer) promising to pay the beneficiary (exporter) up to a specified amount of money within a time limit and against stipulated documentation. The International Chamber of Commerce publishes it under the Uniform Custom and Practices brochure number 500.

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types

There Are Many Types of L/Cs:

Revocable and irrevocable letter of credit (L/c).

Without the consent of the exporter, a Revocable Letter can be cancelled. A Revocable Letter of Credit can’t be cancelled or modified without consent from all parties, including the exporter.

Sight & Time Letter for Credit

The Sight Letter of Credit is used to refer to payment that is made at the time of the presentation of the document. Banks are permitted to spend the time necessary to verify the documents in this instance.

The Term Letter of Credit is used to refer to payments that are due after a specific time period, as specified in the draft.

Confirmed Letter Of Credit (L/c).

The Sight Letter of Credit is used to refer to payment that is made at the time of the presentation of the document. Banks are permitted to spend the time necessary to verify the documents in this instance.

The Term Letter of Credit is used to refer to payments that are due after a specific time period, as specified in the draft.