Letter of Credit

This is a document issued by a buyer’s bank guaranteeing the seller’s bank will be paid when the goods are delivered in good condition.

When people in different countries want to trade they don’t want to deal with differences in contract law from one country to another. When the seller gets this letter of credit, he feels confident sending his goods across the border because he knows he is going to be paid.

https://accounting.uworld.com/cpa-review/lc/accounting-dictionary/term/letter-of-credit/