Letter of credit: the bank pays
A documentary letter of credit (LC) is the buyer's bank promising to pay the seller once the seller presents documents that match the credit's terms: typically the bill of lading, the inspector's certificates of quality and quantity, and the commercial invoice. Most LCs follow the ICC rules known as UCP 600 and are issued over SWIFT. The bank checks paper, not cargo, so every detail of the documents must match.
Standby letter of credit: the bank pays if the buyer does not
A standby letter of credit (SBLC) works as a safety net. The buyer pays the seller directly, usually by bank transfer against shipping documents. The seller draws on the SBLC only if that payment does not arrive. SBLCs usually follow ISP98 or UCP 600. They involve less document handling on every shipment, which suits regular deliveries under a longer contract.
The words that come with them
- Irrevocable: the bank cannot cancel or change the instrument without the seller's agreement.
- Confirmed: a second bank, often in the seller's country, adds its own promise to pay.
- Transferable: the beneficiary can pass all or part of the credit to another party, but only if the instrument says so explicitly.
- Divisible: the credit can be drawn in parts, which matters when a contract covers several liftings.
Which one to use
For a first deal between new partners, an LC gives the seller the strongest protection, because payment depends on documents rather than on the buyer's goodwill. For a running contract with monthly deliveries, an SBLC keeps the paperwork lighter while still covering the seller against non-payment. The real question is not which instrument sounds stronger. It is which one fits how the cargo will move and be paid for.
How Portline works
Portline accepts payment by LC or SBLC. The instrument must be irrevocable, transferable and divisible, and it must be issued for the buyer itself. Instruments transferred to the buyer from another company are not accepted. The buyer sends a draft first, the seller's bank reviews it, and the instrument becomes operative once both banks agree.