Irrevocable Letter of Credit

An Irrevocable Letter of Credit (LC) is a financial instrument that is commonly used in international trade to reduce the risk of non-payment by the buyer. It is a commitment by the buyer’s bank to pay the seller a specified amount of money upon receipt of certain documents, such as a bill of lading or commercial invoice. The LC is irrevocable, meaning that once it is issued, it cannot be canceled or amended without the agreement of all parties involved. In the shipping industry, an irrevocable letter of credit provides security to both the buyer and the seller and helps facilitate international trade.