Is a Letter of Credit (LC) a secure financial instrument in international trade? Discuss.

A letter of Credit (LC) is a written instrument issued by a bank (importer's bank) at the request of its customer (importer) whereby the bank promises to pay exporter (beneficiary) for goods or services provided that the exporter presents all documents called for exactly in compliance to stipulated conditions and instructions in LC and meets the other conditions of LC. Yes, LC is a very secure document available in international trade as it removes the risk of non realisation of the money by the exporters and it removes the risk of buyers (importers) non receiving the goods / services An LC is a commitment by an issuing bank on behalf of the buyer that the payment will be made to beneficiary (exporter) on the execution of complied presentation of documentary evidence to successful performance of the contract. Bank deals in documents hence documents becomes the basis of successful relations of payments. The buyer is also protected as no payment obligations arise till the documents proving the despatch of goods or delivered as promised. In nutshell; L/C is safe mode of payment subject to documentary compliance.