Documentary Letter of Credit for Secure Trade Transactions

The documentary credit is a financial instrument for payment that differs from a free transfer in that it mitigates the risks borne by the parties in a transaction.

The documentary credit is independent of the contract of sale or any other contract.

In trade, the buyer often pays in advance, in which case they take the risk of not receiving delivery on time or the quality of the goods not being as agreed. In other cases, the seller first dispatches the goods and then awaits payment, taking the risk of the payment being late or there being other issues with it.

The documentary credit is an irrevocable undertaking by the issuing bank to pay the seller if the seller complies with the terms of the documentary letter. In order for the issuing bank to make the payment, the beneficiary (seller) must present the stipulated documents as proof that the goods have been delivered within the time frame and in the manner specified in the documentary credit.

The banks deal only with documents and not with goods, services, customs, carriers, freight forwarders, etc.

If you frequently require bank guarantees and/or documentary credits, you may apply for a credit line for their issuance or for a framework agreement for financing.

Example:

A company imports goods from abroad. If the company has no previous dealings with the Exporter and/or if the company has concerns regarding its trustworthiness, the issuance of a documentary credit may be negotiated in order to ensure that both parties will comply with the agreed terms. In this way, the Importer will have assurance that it will receive the ordered goods as per the agreed parameters, while at the same time the Exporter will have assurance that it will receive its payment.

Frequently Asked Questions

Payment shall be made upon presentation of the documents stipulated in the credit in accordance with its terms.

It allows the beneficiary to transfer all or some of its rights to draw down the amount under the documentary credit to a second beneficiary.

Confirmation of a documentary credit constitutes an additional payment commitment to that of the issuing bank upon the presentation of valid documents.

Where the documents presented do not comply with the terms and conditions of the documentary credit, they are not consistent with each other or with the applicable international rules.

The consent of the issuing bank, the confirming bank (if any) and the Beneficiary is required for the cancellation or amendment of the documentary credit.

Phone:

0700 170 70

Short phone:

*7000

International line

+359 700 170 70

Documentary credit

Frequently Asked Questions