What are letters of credit in international trade? A contract between an importer and an exporter may call for payment under a letter of credit, often abbreviated as L/C or LC. A letter of credit is a written commitment by a bank to make payment at sight of a defined amount of money to a beneficiary (exporter) according to the terms and conditions specified by the importer (applicant). An international letter of credit (L/C) is a method of payment that is particularly suited to high value/high risk transactions. It is one of the four traditional methods of payment and is quite complex. The decision to trade under L/C terms is usually the result of either a foreign government regulation or a lack of trust between the trading parties. Letter Of Credit In International Transactions Law Commercial Essay An International trade transaction begins with the buyer and seller identifying each other and contracting as to the goods to be sold, quantity, unit price, place, time of delivery, mode of payment and warranty period.