# Letter of Credit (LC) in Freight Transactions

*Last updated: 2026-06-25*

> A Letter of Credit (LC) is a payment undertaking issued by a bank on behalf of an importer, guaranteeing the exporter will receive payment provided the stipulated documents are presented within the agreed timeframe.

A Letter of Credit (LC) is a payment undertaking issued by a bank on behalf of an importer, guaranteeing the exporter will receive payment provided the stipulated documents are presented within the agreed timeframe. In freight transactions, these documents typically include a bill of lading, a commercial invoice, and a packing list – the exact requirements are specified in the LC itself. The buyer pays only against documentary proof of shipment; the seller bears no credit risk from the buyer, as the bank stands behind the obligation. LCs are governed internationally by the Uniform Customs and Practice for Documentary Credits (UCP) published by the International Chamber of Commerce (ICC). Compared to open account trading or documentary collection, the LC offers the strongest payment security for the exporter, but also the heaviest administrative load for all parties involved.

**Source:** [https://iccwbo.org/business-solutions/ucp-600/](https://iccwbo.org/business-solutions/ucp-600/)

## Quick Facts

| Property | Value |
|---|---|
| Term | Letter of Credit (LC) in Freight Transactions |
| Language | EN |
| Word count | 137 |
| Last updated | 2026-06-25 |
| Source | https://iccwbo.org/business-solutions/ucp-600/ |

---

*Logistics Glossary — Freight Academy: [https://www.freight-academy.com/en/glossary/letter-of-credit-lc-in-freight-transactions](https://www.freight-academy.com/en/glossary/letter-of-credit-lc-in-freight-transactions)*

*Markdown mirror: [https://www.freight-academy.com/api/md/glossary/en/letter-of-credit-lc-in-freight-transactions](https://www.freight-academy.com/api/md/glossary/en/letter-of-credit-lc-in-freight-transactions)*

*JSON summary: [https://www.freight-academy.com/api/v1/glossary/letter-of-credit-lc-in-freight-transactions/llm-summary?lang=en](https://www.freight-academy.com/api/v1/glossary/letter-of-credit-lc-in-freight-transactions/llm-summary?lang=en)*