Import Export Specialist Question:

Documentary credits is letters of credit are the most secure method of payment (other than payment in advance). Your customer arranges a letter of credit with its bank which pays a corresponding bank domestically – the advising bank – once you submit all the necessary documentation.

An accurate and authentic “irrevocable” letter of credit, verified by your bank, carries little credit risk. Documentary credits are typically used for exports to customers you have not sold to before, and for customers and countries that present particular credit risks.