Documentary Credits (DC) DCs, more commonly known as letters of credit are a widely used method to effect payments in domestic and international trade. A written undertaking is issued by a bank (usually referred to as the issuing bank) on the instructions of the buyer of goods to the seller. The payment is made under conditions stated in the undertaking. Payments are always upto a stated limit and against stipulated documents. The use of a DC provides enough safeguards for the parties involved. The seller is ensured payment, provided he complies with terms he agreed to while the buyer can include all terms and conditions within the DC that satisfy him on the quality and quantity of the goods without having to sight / inspect the goods themselves. Since banks act as trustworthy third parties/ intermediaries, the issues relating to trust between the buyer and the seller are taken care of. DCs can be either sight or usance depending on whether credit period is extended to the buyer by the seller. Important aspects to check for when you receive a DC are:
Payment terms Availability of the DC Acceptability of issuing bank Terms of shipment Feasibility of complying with terms of the DC Workability of the DC Bank charges to whose account Confirmation to a DC enhances security under the DC and mitigates any existing issuing bank and/ or country risk since the same are taken over by the confirming bank. The schematic below elucidates Documentary Credit transaction flow :
When a beneficiary has requested the transfer of a documentary credit to a second beneficiary, this message is sent by the bank authorised to advise the transfer of the documentary credit, to the bank advising the second beneficiary. It is used to advise the Receiver about the terms and conditions of the transferred documentary credit, or part thereof.
it's a business transaction done between 02 parties and a bank holding credit
Documentary credit usually l/c (letter of credit) issued by importer bank to exporter through exporter bank, a guarantee to pay upon accomplishing the terms mentioned in the letter of credit. To establish a l/c, buyer has to approach his bank with the seller contract/proforma.
Yep that's it
disadvantage of documentary credit payment method of international trade advantage and disavantage of advance payment method of international trade advantage and disavantage of bills of collection payment method of international trade
MT707, Amendment to a Documentary Credit
Yes
documentary credit
Revolving Documentary Letter of Credit
When a beneficiary has requested the transfer of a documentary credit to a second beneficiary, this message is sent by the bank authorised to advise the transfer of the documentary credit, to the bank advising the second beneficiary. It is used to advise the Receiver about the terms and conditions of the transferred documentary credit, or part thereof.
check tour answer
the importer, buyer of the goods
MT710 is "Advice of a Third Bank's Documentary Credit"
A DOCUMENTARY credit is frequently the agreed method of settlement for international trade. The buyer's bank reimburses the seller against presentation of documents drawn in compliance with conditions stipulated in the documentary credit by the buyer. There are advantages to both the buyer and seller when settlement is arranged by documentary letter of credit. First, the buyer knows that payment will only be made if the documents received comply strictly with the terms and conditions of the credit as stipulated by the buyer. Second, the seller knows that payment will be received provided the terms and conditions of the credit are strictly complied with.
Mr Minh Tue
IRDLC and RDLC are both types of documentary letters of credit. An IRDLC (Documentary Irrevocable Letter of Credit) can not be changed or canceled by the buyer. Payment must be issued by the buyers bank. These are very common. An RDLC (Documentary Revocable Letter of Credit) can be changed or canceled by the buyer at any time without notifying the seller. These are very rarely used.
it's a business transaction done between 02 parties and a bank holding credit