Documentary L/C

A documentary letter of credit (Documentary L/C) is a written guarantee issued by a bank at the request of the buyer (the applicant) to the seller (the beneficiary), promising to pay for the goods after the seller submits a full set of documents complying with the terms of the L/C (such as commercial invoice, bill of lading, insurance policy, packing list, etc.). Its core feature is "payment against documents"; the bank deals with documents rather than goods. Therefore, the issuing bank assumes primary payment liability, which provides relatively strong payment security for the seller, while enabling the buyer to control title to the goods through the documents. It is mostly used in international trade when the buyer and seller are cooperating for the first time, when the amount is relatively large, or when the counterparty's credit is unclear. Points to note: the seller must strictly ensure "compliance between documents and the L/C, and among documents themselves," otherwise payment may be refused; the buyer should ensure that the L/C terms are consistent with the contract and avoid soft clauses. The difference from a clean letter of credit (Clean L/C) is that the latter is paid only against a draft or receipt and does not require accompanying shipping documents; compared with telegraphic transfer (T/T), an L/C is safer but more expensive and involves a more complex process.