Document background
The Letter of Credit On Sight is a fundamental trade finance instrument used when immediate payment is required upon presentation of compliant documents in international trade transactions. It is particularly relevant in situations where parties don't have established trading relationships or when the transaction value is significant. Operating under U.S. jurisdiction and governed by both the Uniform Commercial Code (UCC) Article 5 and international UCP 600 rules, this document provides a secure payment mechanism that protects both buyers and sellers. The letter specifies all conditions for payment, required documentation, shipping terms, and bank obligations. It's commonly used in cross-border transactions where the issuing bank substitutes its creditworthiness for that of the buyer, thereby minimizing the seller's risk of non-payment. Unlike usance or deferred payment Letters of Credit, the On Sight version ensures immediate payment upon document verification, making it particularly attractive to sellers requiring prompt payment.
