Answer (D) is correct . The letter of credit and bill of lading transaction is used to assure that the seller will be paid. After the seller and buyer enter into an agreement for the sale of goods, the buyer arranges with a bank or other issuer to obtain a letter of credit. The buyer’s bank arranges for a bank in the seller’s city or country (the correspondent) to issue or confirm the letter of credit to the seller. The seller draws on the letter of credit by writing drafts. The seller is paid when the bill of lading is presented to the correspondent bank.
Answer (A) is incorrect because The bill of lading is issued to the seller when (s)he delivers the purchased goods to the transporting company.
Answer (B) is incorrect because The buyer receives the bill of lading after the seller is paid. The buyer does not pay the seller.
Answer (C) is incorrect because The buyer’s bank, not the seller’s, receives the bill of lading.
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