Letter of credit is an agrrement between your bank and theres. You will talk to your bank about the deal. The bank will send there bank a letter of credit saying that once the shipper has fufilled the terms of the agreement payment will be made. The shipper will have to prove to there bank that the product has shipped. Than there bank will send your bank the information. When your bank feels that the transaction is complete than they will pay the funds. Thats is basically it in a nut shell.