Letter of credit (documentary credit) for olive oil export

Q: What is a letter of credit for?

In an international sale, the seller wants to be sure of being paid and the buyer wants to be sure of receiving compliant goods . The letter of credit resolves this dilemma by placing the banks between the two: 1. The buyer asks their bank (issuing bank) to open a documentary credit in favour of the seller. 2. The issuing bank undertakes

Q: What is a letter of credit?

It is a bank's undertaking to pay the seller provided they present documents that comply with those required in the credit. The seller then depends on a bank, not on the buyer.

Q: Are a letter of credit and a documentary credit the same thing?

Yes, they are two names for the same instrument . It is also called a "letter of credit" (L/C or LC).

Q: What are the UCP 600?

They are the Uniform Customs and Practice for documentary credits, publication no. 600 of the International Chamber of Commerce. Most LCs are subject to them; they set the framework for examining documents.

Q: Why is it said that banks deal in documents, not goods?

This is the documentary principle of the UCP 600: the bank pays if the documents are compliant, even in the event of a dispute over the goods; it refuses if they are not, even if the goods are perfect.

Q: What is a discrepancy?

A non-conformity of a document against the terms of the LC: inconsistency, typo, expired date, diverging description. It can suspend or block payment.

Q: Irrevocable or revocable LC?

Under the UCP 600 , a credit is irrevocable : it cannot be amended or cancelled without the agreement of all parties. This is the norm and the seller's protection.

Q: Should a confirmed LC be required?

In a higher-risk market , yes: a confirmed LC adds the undertaking of a second bank (often in the seller's country), which covers the risk of the issuing bank.

Q: Which documents does an LC require?

Depending on the credit: commercial invoice, packing list, bill of lading (B/L) , certificate of origin, COA, certificates of conformity, etc. The LC gives the precise list ; all must be provided, compliant.

Q: Why is a "dirty" B/L a problem?

A bill of lading bearing reservations ("dirty") signals a defect in the goods at loading. A bank refuses to honour an LC presented with a non-clean B/L.

The letter of credit (LC), or documentary credit, is the most secure means of payment in international trade: it is a bank that undertakes to pay the seller, provided they present compliant documents. The seller no longer depends on the goodwill of the buyer, but on a bank's undertaking. Still, you need to understand how it works, the UCP 600 rules that govern it, and the documents required. This page explains the LC, its standard structure, the common mistakes, and offers a factsheet to download.

Free PDF factsheet: structure of the letter of credit, required documents and compliance checklist. Get it by email »

Important notice: this page is educational. The LC is a complex banking instrument: seek support from your bank and a lawyer. This is neither legal advice nor financial advice.

In brief

The letter of credit = a bank's undertaking to pay the seller against compliant documents.
It is governed by the UCP 600 (Uniform Customs and Practice of the ICC, publication 600).
Key principle: banks deal in documents, not goods.
The slightest documentary discrepancy can block payment.
An irrevocable and confirmed LC offers the seller the best security.
Check each required document with the export documents checklist.

What is a letter of credit for?

In an international sale, the seller wants to be sure of being paid and the buyer wants to be sure of receiving compliant goods. The letter of credit resolves this dilemma by placing the banks between the two:

The buyer asks their bank (issuing bank) to open a documentary credit in favour of the seller.
The issuing bank undertakes to pay the seller if the latter presents the required documents, compliant and within the deadlines.
The seller ships, gathers the documents, and presents them to their bank (often a confirming/advising bank).
If the documents are compliant, payment is made.

The seller therefore no longer depends on the solvency or good faith of the buyer, but on the bank's undertaking — hence the value of the LC in higher-risk markets.

The UCP 600: the rules of the game

Documentary credits are governed by the UCP 600 ("Uniform Customs and Practice for Documentary Credits", publication no. 600 of the International Chamber of Commerce). Two principles underpin everything:

Autonomy of the credit: the LC is independent of the underlying sales contract. The bank pays on the basis of the LC, not the contract.
Documentary principle: banks examine documents, not goods. If the documents are compliant, they pay — even if a dispute exists over the goods; if they are not, they may refuse, even if the goods are perfect.

This is why strict compliance of the documents is vital: a simple typo, an expired date or an inconsistency between the invoice and the B/L constitutes a discrepancy that can suspend payment.

Details and elements of a letter of credit

An LC typically specifies:

The type of credit: irrevocable (the rule under UCP 600), confirmed or not.
The applicant (buyer) and the beneficiary (seller).
The issuing bank and, where applicable, the confirming / advising bank.
The amount and the currency, with a possible tolerance.
The description of the goods: olive oil, category, HS code 1509, quantity, Incoterm.
The required documents: commercial invoice, packing list, bill of lading (B/L), certificate of origin, COA, certificates of conformity, etc.
The deadlines: shipment date, date and place of presentation of documents, expiry date of the LC.
The special conditions and the statement of submission to the UCP 600.

Common mistakes to avoid

Non-compliant documents (discrepancies): inconsistency between invoice / packing list / B/L, typo, diverging description — the leading cause of refusal of payment.
Missing the deadlines: presenting the documents after the deadline, or shipping after the shipment date, invalidates the presentation.
"Dirty" B/L (with reservations): a bank refuses to honour an LC presented with a non-clean bill of lading.
Describing the goods differently from the LC: the invoice must reproduce the exact description stated in the credit.
Forgetting a required document (COA, certificate of origin, etc.): the LC lists the documents precisely; one missing = refusal.
Not requiring confirmation in a higher-risk market: an unconfirmed LC leaves the issuing bank's risk in place.
Confusing the LC with the contract: the LC is autonomous; settle the substance in the sales contract.

Standard structure of a letter of credit

Block	Content
Type & submission	Irrevocable, confirmed/unconfirmed, submission to the UCP 600
Parties	Applicant (buyer), beneficiary (seller)
Banks	Issuing bank, confirming/advising bank
Amount	Amount, currency, possible tolerance
Goods	Description, category, HS 1509, quantity, Incoterm
Required documents	Invoice, packing list, B/L, certificate of origin, COA, certificates of conformity
Deadlines	Shipment date, date/place of presentation, expiry
Conditions	Special conditions, payment instructions

"Letter of credit" factsheet to download (free)

Get by email the PDF factsheet "Olive oil export letter of credit": structure of the LC, required documents, and a UCP 600 compliance checklist to avoid discrepancies. Simple sign-up (double opt-in), no spam.

Get the PDF factsheet »

To check that every document required by the LC is gathered and consistent, use the export documents checklist.

Educational factsheet. The LC is a banking instrument: seek support from your bank and a lawyer. No financial advice.

FAQ — Export letter of credit

What is a letter of credit?

It is a bank's undertaking to pay the seller provided they present documents that comply with those required in the credit. The seller then depends on a bank, not on the buyer.

Are a letter of credit and a documentary credit the same thing?

Yes, they are two names for the same instrument. It is also called a "letter of credit" (L/C or LC).

What are the UCP 600?

They are the Uniform Customs and Practice for documentary credits, publication no. 600 of the International Chamber of Commerce. Most LCs are subject to them; they set the framework for examining documents.

Why is it said that banks deal in documents, not goods?

This is the documentary principle of the UCP 600: the bank pays if the documents are compliant, even in the event of a dispute over the goods; it refuses if they are not, even if the goods are perfect.

What is a discrepancy?

A non-conformity of a document against the terms of the LC: inconsistency, typo, expired date, diverging description. It can suspend or block payment.

Irrevocable or revocable LC?

Under the UCP 600, a credit is irrevocable: it cannot be amended or cancelled without the agreement of all parties. This is the norm and the seller's protection.

Should a confirmed LC be required?

In a higher-risk market, yes: a confirmed LC adds the undertaking of a second bank (often in the seller's country), which covers the risk of the issuing bank.

Which documents does an LC require?

Depending on the credit: commercial invoice, packing list, bill of lading (B/L), certificate of origin, COA, certificates of conformity, etc. The LC gives the precise list; all must be provided, compliant.

Why is a "dirty" B/L a problem?

A bill of lading bearing reservations ("dirty") signals a defect in the goods at loading. A bank refuses to honour an LC presented with a non-clean B/L.

Does the LC replace the sales contract?

No. The LC is autonomous: it is a means of payment. The substance of the sale (quality, tolerances, disputes) remains governed by the sales contract.

How do I avoid my presentation being refused?

Follow the terms of the LC to the letter: exact description, all required documents, consistency between invoice/packing list/B/L, and presentation deadlines. Use the documentary checklist.

Can I download a letter of credit template?

The LC is issued by a bank, not a document you draft yourself. Our PDF factsheet above explains its structure and compliance checklist — prepare with it, then work with your bank.

Take action

A documentary presentation with no discrepancy means secured payment.

Export documents checklist » — check every document required by the LC.

Request a free quote » — dated quotation + documentary support.

Data as of July 2026, indicative and to be re-checked before any commitment. Educational page; seek support from your bank and a lawyer. Sources: UCP 600 (Uniform Customs and Practice for Documentary Credits, ICC publication no. 600), international trade banking practices.