The problem every instrument solves
A seller does not want to ship before being paid. A buyer does not want to pay before receiving. Every instrument in this market is a way of putting a bank between them so neither has to trust the other.
Documentary Letter of Credit
A bank undertakes to pay the seller against documents — bill of lading, quality certificate, quantity certificate — that conform exactly to the terms. The bank checks the paperwork, not the cargo. This is the workhorse of physical trade.
Standby Letter of Credit
A guarantee rather than a payment method. It pays only if the buyer fails to. Cheaper to establish, and weaker: the seller is relying on the buyer paying normally, with the standby as a fallback.
Cash Against Documents
The seller's bank releases the shipping documents to the buyer's bank against payment. Simpler and cheaper than a credit, with no bank undertaking to pay — so the seller carries the risk that the buyer refuses the documents.
Telegraphic Transfer
A direct bank transfer. Fast and cheap, and offers neither party any protection. Used between counterparties with an established relationship, or for a first small trial cargo where the exposure is acceptable.