Letters of Credit or LC’s are used in International transactions in order to facilitate the trade of goods between the buyer and seller (typically importer and exporter).
The LC will be issued by a bank on behalf of the buyer / importer to the seller / exporter with the bank controlling documents and guaranteeing the payments in exchange of goods providing security for all parities.
LC’S can be either at ‘Sight’, meaning payable immediately on exchange of documents and goods OR ‘Usance’ (otherwise known as ‘Time LC”s’), which are to be paid at a fixed future and agreed date after the exchange of documents and goods (for example 90 days or 180 days)
