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The Letter of Credit – Summary
Letters of Credit
A Letter of Credit is an international “escrow”.  Reimbursement by the negotiating bank is made in exchange for the documents required in the credit, which evidences movement, value and content.
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The formal definition of a Letter of Credit is a “conditional payment mechanism under which the issuing bank irrevocably promises to pay the seller if presented documents comply with all of the Credit’s terms and conditions.”
In diagram form, a Documentary Letter Credit plus the bill of lading, invoice, and packing list equals money.
Or in other words, the Documentary Letter of Credit plus evidence of movement, value and content equals money.  Credit do not deal with goods or services, on documents in paper or electronic records.