Letter of credit is a bank obligation that a certain amount will be paid to the seller of goods or services, on condition that the stipulated document indicating that the goods have been loaded or the service has been performed within the specified period. Briefly, the letter of credit is a conditional bank guarantee.

In international trade, the parties are under mutual distrust and risk since they do not familirize to each other and different exchange regimes are applied in different countries.

The seller aims to collect the price of the goods he sells, and the buyer aims to receive the goods specified in the contract on time. If the seller does not comply with the terms of the letter of credit, the bank will not pay under no circumstances. This is an assurance factor for the buyer. For this reason, the letter of credit is a type of payment option that provides the highest level of assurance to both parties.

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