What is a documentary letter of credit?
Documentary credits are a payment method that ensures that the exporter receives payment immediately after the goods have been sent. Documentary credits are a guarantee. The bank issuing the documentary credit guarantees that the exporter will receive payment once the terms of the documentary credit have been met.
The International Chamber of Commerce (ICC) in Paris has drawn up the Uniform Customs and Practice for Documentary Credits. This set of rules is recognized worldwide and specifies the payment obligations of banks and their obligations to handle documents under documentary credits.
The bank is only responsible for handling documents and is not responsible for the goods or the project to which the documents relate.
Advantages for the importer:
Advantages for the exporter: