A letter of credit is a written undertaking given by a bank to pay the seller (the beneficiary) an amount of money within a specified time, provided that the beneficiary presents specified documents that are in compliance with the terms of the letter of credit. This lowers the risk of non—payment of the import or export of goods for both the importer and exporter, while verifying the precise terms and conditions that must be met in order to obtain payment and when that payment will be received.
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