AllFrontierGlobal · lexicon

Letter of Credit

Trade Finance

A bank's written undertaking to pay the seller a specified amount upon presentation of complying documents within a stipulated time.

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Sources

  1. International Chamber of Commerce — Trade finance rules iccwbo.org accessed 23 September 2026
The authority here is named, and its text is not free. Instruments of this kind are governed in practice by the ICC’s Uniform Customs and Practice for Documentary Credits, UCP 600, referred to by the International Chamber of Commerce on the page cited. The ICC publishes those rules as a paid edition, so no rule or article is quoted on this page and the definition above is this lexicon’s working summary. A credit or collection is in any case subject to whichever rules the instrument itself incorporates, and to the terms the bank issues — read those, not a glossary.

Common questions

What are the most common LC discrepancies?

Common discrepancies that cause LC rejection: (1) Late presentation (documents presented after LC expiry or after 21 days of shipment date), (2) Description of goods does not match exactly, (3) Short shipment (quantity less than LC amount), (4) Missing endorsement on B/L, (5) Insurance cover insufficient or incorrect currency, (6) Inconsistency across documents (invoice and packing list amounts differ). Always use an experienced customs house agent to prepare documents.

What documents are required for a typical India-EU LC?

Standard documents for India-EU LC: (1) Commercial invoice, (2) Packing list, (3) Bill of Lading (negotiable, full set 3/3), (4) Certificate of Origin (from EEPC/FIEO/EIC/Chambers), (5) Packing certificate, (6) Insurance certificate (if CIF), (7) Inspection certificate (if required), (8) Phytosanitary/sanitary certificate (for agro-food). Additional documents vary by product and buyer requirements.

Related terms

From the AJG lexicon archive (July 2026).

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