The letter of credit is a conditional payment guarantee of the Bank. It is a written guarantee issued by the Bank to an exporter (beneficiary) according to the requirements and instructions of the applicant (importer) to pay a certain amount within the specified period according to the specified bill.
High safety: after the exporter delivers the cargo, because the credit of overseas letter issuing bank substitutes the commercial credit of the importer, the cargo money can be collected in time according to the requirements of letter of credit to avoid the export foreign exchange risk.
Enlargement of sales market: if the exporter doesn’t know the credit status of the importer, the import letter of credit can not only ensure the safety of cargo, but also explore and expand the new market to increase the business opportunities.
Have initiative: the characteristic of letter of credit is that the Bank only recognizes the bills instead of cargos. The exporter can have initiative and obtain the payment promise of the letter issuing bank only if the exporter controls the quality of bills.