True or False: A letter of credit from a legitimate bank guarantees payment for goods to be shipped.

A letter of credit from a legitimate bank does indeed serve as a guarantee of payment for goods to be shipped, provided that specific conditions set within the letter are met. When an exporter wants assurance of receiving payment from a buyer, they may request a letter of credit. This document ensures that the bank, upon receiving the necessary documentation proving that the goods have been shipped in accordance with the agreed terms, will make payment to the exporter.

The conditions around the letter of credit are critical, as they dictate what constitutes "meeting the terms." As long as the exporter provides documentation, such as a bill of lading or commercial invoice, that aligns with the conditions specified in the letter, the bank is obligated to pay.

The notion that a letter of credit only guarantees payment under certain conditions, like loans or customs clearance, does not accurately reflect its general function. It is primarily focused on the shipment of goods under agreed specifications and documentation, not restricted to other factors like loan specifics or customs.