Document background
A Letter of Credit in Shipping is a specialized financial instrument extensively used in international maritime trade. It provides security to both buyers and sellers in cross-border transactions by involving banks as intermediaries who guarantee payment against document presentation. Under U.S. jurisdiction, these documents are governed by federal banking regulations, state-specific Uniform Commercial Code provisions, and international rules like UCP 600. The document is particularly crucial when dealing with overseas partners without established business relationships, high-value shipments, or when required by regulatory authorities. It includes detailed specifications about payment conditions, required shipping documents, vessel requirements, and timing of document presentation, while ensuring compliance with maritime law and international banking standards.
