It is a kind of payment promise made by the Bank to foreign exporter upon the application of the domestic importer. It promises to fulfill the responsibility of paying the exporter when all articles specified in the letter of credit are met.
1. Improvement of credit. After issuing the letter of credit, the Bank undertakes the first payment responsibility. Your payment promise will be improved from common commercial credit to bank credit. You can dominate the negotiation and obtain proper price or other favorable conditions;
2. Safe trade. The Bank involves in the trade to make the trade process more standard. According to the requirements of letter of credit, you can effectively control the cargo right, transportation mode, shipment date, cargo quality, etc.
3. Less fund occupation. As for the importer with letter of credit which is issued based on the credit line, during the period after issuing the letter of credit and before payment, less fund of the importer is occupied. During payment, in case of shortage of funds, the importer can apply the import bill advance, refinancing and other short term financing business.