Letter of Credit - A financial document issued by a bank at the request of the consignee guaranteeing payment to the shipper for cargo if certain terms and conditions are fulfilled. Normally, the letter of credit contains a brief description of the goods, documents required, a shipping date, and an expiration date after which payment will not longer be made.

In international trade, buyers and sellers can not trust each other. The buyer is worried about the seller would not arrange cargo delivery if payment advanced; The seller is also worried about the payment after cargo or submission of shipping documents delivered. Therefore, the two banks as buyers and sellers need a guarantor to pay on behalf of a single payment to bank credit instead of commercial credit. The DOC in such Bank activities is the letter of credit.

Elements: 
(1) a description of the letter of credit itself, such as its type, character, duration and maturity location. 
(2) the requirements of the goods. According to contract description.
(3) transportation requirements.
(4) documentation requirements, that is, goods receipts, transport documents, insurance documents and other relevant documents. 
(5) Special requirements. 
(6) the issuing bank draft to the beneficiary and holder of the responsibility to ensure payment terms of the motion. 
(7) to permit the majority of foreign countries are filling: \u0026quot;Except as otherwise provided, this license under the International Chamber of Commerce\u0026quot; with a single

Characteristics: 
First, the credit is not dependent on contract for the sale, the bank stressed in a single trial is based on trade credit and formal separation of the written certification; 
Second, letter of credit is the voucher payment 
Third, letter of credit is a bank credit, which is a bank guarantee documents.