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Introduction to Letters of Credit at Sight

Letters of credit are a payment mechanism, particularly used in international trade. The Seller gets paid, not after the Buyer has inspected the goods and approve the shipment but when the Seller presents certain documents (typically a bill of lading evidencing shipment of the goods, an insurance policy for the goods, commercial invoice, etc.) to his bank. The bank does not verify that the documents presented are true, but only whether they "on their face" appear to be consistent which each other and comply with the terms of the credit. After examination the bank will pay the seller (or in LC terms the beneficiary of the letter of credit).