What is a letter of credit ? Why does an exporter need this document?

international-trade
cbse

#1

A letter of credit is a guarantee issued by the importer’s bank that it will honour up to a certain amount the payment of export bills to the bank of the exporter. Letter of credit is the most appropriate and secure method of payment adopted to settle international transactions.
An exporter needs this document because it is a secure method of payment. It is a guarantee by the importers for the pay-ment.