In international trade it is almost impossible to mach payment with physical delivery(实际交货) of the goods, which constitutes conflicting problems for trade, since the exporter prefers to get paid before releasing the goods and the importer prefers to gain control over the goods before paying the money. The letter of credit is an effective means to solve these problems. Its objective is to facilitate international payment by means of the credit-worthiness of the bank. This method of payment offers security to both the seller and the buyer. The former has the
security to get paid provided (假如) he presents impeccable（没有缺陷的）documents while the latter has the security to get the goods required through the documents he stipulates in the credit. This bilateral security is the unique and characteristic feature of the letter of credit.
“Letter of credit” is often shortened as L/C or L.C. and is sometimes referred to as “banker’s commercial letter of credit”, “banker’s credit”, “commercial credit” or simply “credit”. Modern credits were introduced开始采用in the second half of the 19th century and had
substantial development after the First World War. The credit is a letter issued by a bank at the request of the importer in which the bank promises to pay upon presentation of the
It is actually a conditional bank undertaking（承诺）of payment.
The operation of the letter of credit starts with the importer. He instructs his bank to issue an L/C in favor of the seller（以…为收益人）for the amount of the purchase. Here the importer is called the applicant （开证申请人）, or opener, principal etc., the bank that issues the credit is
called the opening bank, the issuing bank or the establishing bank, (开证行) and the exporter in whose favor the credit is opened is called the beneficiary（受益人）. The opening bank sends the credit to its correspondent bank（往来行）in the exporter’s country, who will, after examining（检查）the credit, advise （通知）the exporter of its receipt. Here the correspondent bank is called the advising bank（通知行）. The exporter or beneficiary will make a careful examination（仔细检查）of all the contents of the credit and will request the opener to make
amendments修改to any discrepancies （不一致）in the credit so as to ensure safe and timely payment. Sometimes the exporter may require a confirmed letter of credit (保兑信用证) either because the credit amount is too large, or because he does not fully trust the opening bank. The bank that adds its confirmation（保兑）to the credit is called the confirming bank which is undertaken（承担）either by the advising bank or another prime （big）bank. When everything with the credit is in order, the exporter will prepare the relevant documents
