Letter of credit

In the case of irrevocable letter of credit, the customer often irrevocably instructs his bank in foreign transactions to instruct the supplier's bank to transfer the agreed letter of credit (or invoice amount) to the supplier's bank when handing over the loading documents. The supplier sends the cargo (by ship, train, truck or plane) and receives the relevant documents, which are passed on to the buyer's bank.

This gives the customer the assurance that the goods have been handed over to a third party (the person carrying out the transport). The buyer's bank transfers the money to the supplier's bank. This means that there is sufficient security for both sides.

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