In this chapter we will concentrate only on payment by Letters of credit. A letter of credit is the payment method in which the exporter bears less risk than most of the other types of payment methods.
A letter of credit is a written promise to pay There are several kinds of letters of credit. The most frequently used in international trade is the confirmed irrevocable letter of credit which is a promise of payment that cannot be cancelled without the consent of all parties concerned: banks, the importer and the exporter. This type is considered to be the safest method of payment for the beneficiary(the exporter) and also for the importer. The exporter can be certain to get payment for the consignment he despatched and the importer can be sure that he will get goods in time.