payments

Understanding Letters of Credit (LC) for African Trade

A Letter of Credit (LC) is a bank guarantee that ensures payment to the seller once specific conditions are met. For African trade, LCs are essential for building trust between unfamiliar parties. ## How Letters of Credit Work 1. **Buyer requests LC** from their bank 2. **Issuing bank** creates the LC and sends to seller's bank 3. **Seller ships goods** and presents documents 4. **Banks verify documents** match LC terms 5. **Payment released** to seller ## Types of Letters of Credit - **Irrevocable LC**: Cannot be changed without all parties' consent - **Confirmed LC**: Additional guarantee from seller's bank - **Sight LC**: Payment upon document presentation - **Usance LC**: Payment after a specified period (30, 60, 90 days) ## Key Documents Required - Commercial Invoice - Bill of Lading - Packing List - Certificate of Origin - Insurance Certificate - Inspection Certificate (if…