Letter of credit advantages

Import Letter of Credit supports importers by reducing performance risks associated with buying goods and services from foreign suppliers. An importer can be more secure, knowing that the exporter must comply with the terms of the Letter of Credit in order to be paid.

Letter of credit benefits for the importer

  • The importer can monitor the time period for shipping of the goods, thereby the business can continue smoothly as planned;
  • Importer can be confident that imported goods will be as specified and delivered at the agreed time and place;
  • By using letter of credit, the importer demonstrates his solvency; - It may enable the importer to defer the payment and negotiate at better price and terms;
  • Providing a letter of credit allows the importer to avoid or reduce pre-payment;
  • Importer can refuse to pay when exported goods do not meet all necessary requirements under LC terms and conditions with presentation of compliant documents;
  • Less legal risk by adhering to ICC “Uniform Customs and Practice” rules.

An exporter, may be concerned with the risks of selling to an international customer, especially a new one. An Export Letter of Credit gives the exporter a measure of security and the assurance of payment, once products are shipped and comply with the terms of the letter of credit.

Letter of credit benefits for the exporter

  • The exporter has the obligation of importer's banks to pay for the shipped goods;
  • Reduces the production risk, if the importer cancels or changes his/her order;
  • The opportunity to get financing from the bank in the period between the shipment of the goods and receipt of the payment (especially, in case of deferred payment);
  • The exporter is able to calculate the payment dates to efficiently manage cash flows;
  • Upon presentation of compliant documentation under the letter of credit, the importer will not be able to refuse the payment of the underlying goods;
  • Less legal risk by adhering to ICC “Uniform Customs and Practice” rules.