Document background
The Documentary Letter of Credit (LC) is a fundamental instrument in international trade finance, particularly crucial when parties are operating across different jurisdictions and legal systems. Under United States law, specifically UCC Article 5, and international banking practices (UCP 600), this document provides a secure payment mechanism that protects both buyers and sellers in international transactions. It is typically used when parties don't have established trading relationships, when local regulations require LCs for import/export, or when the transaction value or risk level necessitates bank involvement. The document contains detailed specifications for required documentation, payment terms, and conditions that must be met for payment to be released. It represents an irrevocable commitment by the issuing bank to pay the beneficiary upon presentation of compliant documents, making it a preferred method of payment in international trade.
