Legal Definitions - export letter of credit

An export letter of credit is a type of letter of credit used in international trade. It is issued by a foreign bank at the request of a foreign buyer in favor of a domestic exporter. The letter of credit guarantees payment to the exporter as long as they meet the specified conditions.

For example, let's say a company in the United States wants to export goods to a company in China. The Chinese company requests an export letter of credit from their bank, which is issued to the U.S. exporter's bank. The U.S. exporter ships the goods and presents the required documents to their bank, which then sends them to the Chinese bank for payment.

The export letter of credit provides security for both the buyer and the seller in an international transaction. The buyer knows that the goods will be shipped and the seller knows that they will be paid as long as they meet the conditions of the letter of credit.