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Steps for LC (Letter of Credit) Payment in Agri Exports

Published on March 22, 2026 • By M Sai Satya Abhilash

In international agricultural trade, trust is paramount. Buyers want to ensure they receive the exact quality and quantity of goods they ordered, while sellers want to guarantee they will be paid. A Letter of Credit (LC) bridges this gap perfectly. Here is a simple guide on how LC payments work when importing agricultural products from India.

What is a Letter of Credit?

A Letter of Credit is a financial document issued by the buyer's bank guaranteeing that the seller will receive payment in full, provided that the seller meets all the terms and conditions outlined in the LC (usually by presenting specific shipping and quality documents).

Step-by-Step Process for LC Payment

  1. Sales Contract: The buyer and exporter (seller) agree on the price, quantity, quality, shipping terms (FOB/CIF), and document requirements. The exporter issues a Proforma Invoice.
  2. LC Issuance: The buyer goes to their bank (Issuing Bank) and applies for an LC in favor of the exporter, based on the Proforma Invoice.
  3. LC Notification: The Issuing Bank sends the LC to the exporter's bank (Advising Bank) in India. The Advising Bank verifies its authenticity and forwards it to the exporter.
  4. Shipment of Goods: The exporter reviews the LC. If all terms are acceptable, they manufacture, pack, and ship the goods. They also obtain necessary third-party certifications (e.g., SGS inspection, Phytosanitary certificates) as required by the LC.
  5. Document Presentation: The exporter presents the required shipping documents (Bill of Lading, Commercial Invoice, Packing List, Inspection Certificates, etc.) to their bank.
  6. Payment: The exporter's bank forwards the documents to the buyer's bank. The buyer's bank checks the documents against the LC terms. If everything matches, they release the payment to the exporter's bank and hand the documents to the buyer so they can clear the goods at their destination port.

Why We Prefer Irrevocable LC at Sight

At Budha Global Exports, we commonly work with Irrevocable LC at Sight from top-tier international banks. "Irrevocable" means the terms cannot be changed without the consent of all parties, and "at Sight" means payment is made as soon as the compliant documents are presented.

This provides 100% security for both the buyer and us. The buyer knows they are paying only for goods that have been inspected and shipped, and we know our payment is secure.

Have questions about our payment terms? Contact our sales team for a consultation.