The Creator of the innovative Export Master® program

Is a Letter of Credit (L/C) a good payment method?

Yes and no.  It is a safe way to get paid if it is the right type of LC, issued properly and the rules are followed according to the contract. However, it is limited in its flexibility and costs both parties money.  It is normally recommended for larger shipments, especially if there is a long time between order and shipment. If the local payment methods are questionable, you will want an irrevocable letter of credit payable at your bank.

There is also a revolving Letter of Credit allowing for continuous shipments. If the supplier does not completely comply with the LC, it is worth nothing. If you ship more or even less than the LC stipulated, it is considered void. If the LC states no transhipments and you do not follow that rule, the LC will be void.