Letter of Credit

Irrevocable bank undertaking against compliant documents.

Definition

The LC is transmitted via SWIFT MT 700 (Issue), MT 707 (Amend), MT 754 (Advice of Payment). Types: Sight LC (payment at sight), Usance LC (deferred), Standby LC (guarantee). UCP 600 and eUCP 2.1 for electronic transmission. Typical documents: Bill of Lading, Commercial Invoice, Insurance.

Origin

UCP 600 published by ICC (International Chamber of Commerce) in 2007.

Example in context

A French importer opens a sight LC via BNP Paribas in favour of a Chinese exporter for EUR 2M.

Related terms

• Documentary Collection — alternative instrument.