Commercial Letters of Credit

Reduce your risks when doing business internationally

Protect your bottom line with commercial letters of credit

Commercial letters of credit are designed to ensure that payments to or from overseas sources are transmitted and received on a proper and timely basis—so you can keep your business moving forward.

How It Works
What you need to know about commercial letters of credit

Typical conditions

Conditions involving commercial letters of credit typically involve the presentation of documents showing shipment has been made (i.e., negotiable bills of lading), insurance documentation, invoices and inspection certificates.

Two forms of letter of credit payments

Sight payments demand immediate disbursement when the required documents are presented, examined and approved. Time payments delay payment until a future date following document approval and release.

Specific details about commercial letters of credit

Commercial letters of credit also specify details on the purchase or sale of goods including price, required shipping documents, payment terms, shipping terms, time frames and other transaction details contained in the underlying contract.

Import letters of credit

The issuing bank substitutes its credit standing for yours or that of your business, resulting in enhanced purchasing power, reducing the seller's risk and improving cash flow.

Export letters of credit

The foreign bank substitutes its credit standing for that of your buyer, reducing your risk and improving cash flow.

We Can Help
What we can do

We can make your international transactions easier and more efficient with commercial letters of credit.

  • Issue import letters of credit, ensuring compliance with international trade practices
  • Carefully examine all documents to ensure compliance with the terms and conditions stipulated in the commercial letters of credit
  • Make payment only when documents conform to the terms and conditions in the commercial letters of credit
  • Consult with you on the proper structure of commercial letters of credit and relevant documentation
  • Provide you with competitive rates and industry expertise

Application and Agreement

Commercial (Import) Letter of Credit Application

View the Commercial (Import) Letter of Credit Application PDF , Opens in a new tab

Application Instructions

Commercial (Import) Letter of Credit Application Instructions

View the Commercial (Import) Letter of Credit Application Instructions PDF , Opens in a new tab

Amendment Request

Commercial Letter of Credit Amendment Request

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Amendment Instructions

Commercial Letter of Credit Amendment Request Instructions

View the Letter of Credit Amendment Request Instructions PDF , Opens in a new tab

Commercial Letters of Credit FAQ
People often ask us

Commercial letters of credit, often referred to as trade letters of credit or documentary letters of credit, are bank-issued documents that help buyers ensure suppliers get paid the purchase price of goods during an international sale. It also assures a supplier that they'll be paid as long as they comply with the terms and conditions of the letter of credit, regardless of the buyer's ability to pay.

Commercial letters of credit may be used during international trade transactions to help reduce risk and ensure timely payment. Buyers and sellers don't always know one another, so a commercial letter of credit helps to establish assurance. For importers, a commercial letter of credit may ensure that your business only pays for goods after the supplier has provided evidence of shipment.

Once the application is complete and an approved credit facility is in place, the letter of credit can be issued within 24 to 48 hours.

The exact cost of a letter of credit can be influenced by the buyer's creditworthiness, the transaction complexity and the political and economic stability of the countries involved. Some costs you should expect include:

  • Document examination/negotiation fee
  • Application fees
  • Advising fees charged by the beneficiary's bank
  • Amendment fees
  • Confirmation fees
  • Wire transfer costs

An irrevocable letter of credit can only be canceled or modified if the buyer, seller and issuing bank all agree.

You can take several actions to minimize your risk.

  • Review the letter of credit terms
  • Make sure you comply with all requirements
  • Choose a reputable issuing bank
  • Conduct due diligence on your trading partner
  • Maintain open communication with your trading partner and issuing bank
  • Use a reliable freight forwarder

A commercial letter of credit is a payment mechanism that is meant to be drawn upon for payment. A standby letter of credit is based on a contractual agreement or other obligation and is drawn upon by the beneficiary only when the applicant fails to meet the underlying obligation.

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