Home » Knowledge » FAQ

Frequently asked questions


A Letter of Credit is an international payment method that offers payment security. A Letter of Credit is also known as an L/ or documentary credit.
A Letter of Credit clearly states which product will be delivered by whom, when and how the transport will take place. It also describes who bears which responsibilities.
The following parties are involved in a Letter of Credit:
  • Importer (as buyer);
  • Exporter (as seller);
  • The opening bank (on behalf of the importer);
  • The advising bank (on behalf of the exporter).
  • The importer goes to his bank to have a Letter of Credit drawn up in favor of the exporter. The importer's bank fixes an L/C amount (credit opening) under specific conditions. The issuing bank then sends the Letter of Credit to the advising bank. The banks use the international means of communication SWIFT for this. The exporter's bank checks the Letter of Credit. If approved, he sends this to the exporter with an advisory letter. This completes the process at the bank. The documents must meet the LC conditions in order to obtain an irrevocable commitment to payment. If the conditions are met and approved by both banks, the payment by the exporter becomes final.
    You use a Letter of Credit if you:
  • Want more certainty about your shipment and its payment;
  • Want to establish clear agreements about certain risks;
  • Want a guarantee of payment.
  • The cost of a Letter of Credit depends on the following factors:
  • The bank's risk;
  • The risk of the country to which the export is taking place;
  • The amount of the Letter of Credit itself;
  • The lead time of the Letter of Credit.
  • The following documents are part of the Letter of Credit:
  • An invoice;
  • A packing list;
  • A transport document;
  • A Certificate of Origin;
  • An insurance certificate;
  • An inspection certificate.