In international trade it is almost impossible to mach payment with physical delivery(实际交货) of the goods, which constitutes conflicting problems for trade, since the exporter prefers to get paid before releasing the goods and the importer prefers to gain control over the goods before paying the money. The letter of credit is an effective means to solve these problems. Its objective is to facilitate international payment by means of the credit-worthiness of the bank. This method of payment offers security to both the seller and the buyer. The former has thesecurity to get paid provided (假如) he presents impeccable（没有缺陷的）documents while the latter has the security to get the goods required through the documents he stipulates in the credit. This bilateral security is the unique and characteristic feature of the letter of credit.“Letter of credit” is often shortened as L/C or L.C. and is sometimes referred to as “banker’s commercial letter of credit”, “banker’s credit”, “commercial credit” or simply “credit”. Modern credits were introduced开始采用in the second half of the 19th century and hadsubstantial development after the First World War. The credit is a letter issued by a bank at the request of the importer in which the bank promises to pay upon presentation of theIt is actually a conditional bank undertaking（承诺）of payment.The operation of the letter of credit starts with the importer. He instructs his bank to issue an L/C in favor of the seller（以…为收益人）for the amount of the purchase. Here the importer is called the applicant （开证申请人）, or opener, principal etc., the bank that issues the credit iscalled the opening bank, the issuing bank or the establishing bank, (开证行) and the exporter in whose favor the credit is opened is called the beneficiary（受益人）. The opening bank sends the credit to its correspondent bank（往来行）in the exporter’s country, who will, after examining（检查）the credit, advise （通知）the exporter of its receipt. Here the correspondent bank is called the advising bank（通知行）. The exporter or beneficiary will make a careful examination（仔细检查）of all the contents of the credit and will request the opener to makeamendments修改to any discrepancies （不一致）in the credit so as to ensure safe and timely payment. Sometimes the exporter may require a confirmed letter of credit (保兑信用证) either because the credit amount is too large, or because he does not fully trust the opening bank. The bank that adds its confirmation（保兑）to the credit is called the confirming bank which is undertaken（承担）either by the advising bank or another prime （big）bank. When everything with the credit is in order, the exporter will prepare the relevant documentsbased on the credit and dispatch the goods to the importer. Then he will present the draft and the accompanying documents to the advising bank that pays or accepts (承兑) or negotiates（议付）the bill of exchange. The advising bank then also becomes the paying bank which acts as the agent of the opening bank and gets reimbursed（pay back）by the opening bank after paying the beneficiary. If a bank, either nominated （指定）by the opening bank or at its own choice, buys the exporter’s draft submitted to it under a credit, it is called a negotiatingbank (议付行). The draft and the documents will then be sent to the opening bank for reimbursement（偿付）.Letters of credit are varied in form, length, language, and stipulations. Generally speaking, however, they include the following contents:1. The number of the credit and the place and time of its establishment.2. The type of the credit.3. The contract on which it is based.4. The major parties relevant to the credit, such as the applicant, opening bank, beneficiary, advising bank. etc.5. The amount or value of the credit.6. The place and date on which the credit expires（失效）.7. The description of the goods including name of commodity, quantity, specifications, packing, unit price, price terms, etc.8. Transportation clause（条款）including the port of shipment, the port of destination, the time of shipment, whether allowing partial shipments or transshipment（转船）.9. Stipulations relating to the draft.10. Stipulations concerning the shipping documents required.11. Certain special clauses if any.e.g. restrictions on the carryingvessel（承运船只）and the route.12. Instructions to the negotiating bank.13. The seal or signature of the opening bank.14. Whether the credit follows “the uniform customs and practice for documentary credits”.The letter of credit provides security to both the exporter and the importer. However, it only assures payment to the beneficiary provided the terms and conditions of the credit are fulfilled. It does not guarantee that the goods purchased will be those invoiced or shipped. It isstipulated in Article 4 of the uniform customs and practice for documentary credit that “in credit operations all parties concerned deal in documents, and not in goods, services and/or other performance to which the documents may relate”. That is to say the banks are only concerned with the documents representing the goods instead of the underlying contracts. They have no legal obligation whether the goods comply with the contract. They will be considered as having fulfilled their responsibility so long as all the documents comply with thestipulations of the credit. The quality and quantity of merchandise shipped, although specified in the documents, ultimately depend on the seller who has manufactured, packaged, and arranged shipment for the goods.If the importer finds any problems with the goods, e.g. inferior quality or insufficient quantity, he has to contact or even take legal action against the exporter instead of the bank so long as the documents are “proper” on their face.。