What Is a Letter of Credit?

A letter of credit is a bank guarantee that pays the exporter once specified documents are presented. For food imports, it adds trust between Indian suppliers and buyers in Asia, Africa, the Middle East, and Europe.

Core LC Documents

Typical documents include the commercial invoice, packing list, bill of lading, certificate of origin, fumigation certificate, phytosanitary certificate, and quality inspection report. Ensure all documents match the LC exactly to avoid rejection.

Common LC terms

  • Confirmed or unconfirmed: choose based on counterparty risk
  • Sight LC vs usance LC: pay on presentation or after credit term
  • Partial shipment: allowed if the contract and LC permit
  • Transshipment: confirm if permitted in the LC wording

Avoiding LC Discrepancies

Even minor mismatches in invoice numbers, shipment dates, or document phrasing can cause discrepancies. Work with your Indian supplier and bank to align the purchase contract, LC wording, and paperwork before shipment.

Tip: Use a standard contract annex that maps each required document to an LC clause. This helps banks and suppliers avoid unnecessary amendments.

Why Buyers Use LCs for Food Imports

Buyers choose letters of credit for food imports because they offer payment security, transparent documentary control, and better negotiation power on quality terms. That is especially valuable for perishable food, pulses, rice, spices, and oilseed shipments.