Documentary credit refers to the letter of credit paid by draft with shipping documents or only shipping documents. Most of them are Documentary Letters of credit used in international trade settlement.
Letter of credit is the certificate used by the bank to ensure that the buyer or importer has the ability to pay. It is the certificate that the bank conditionally guarantees payment. It has become a common settlement method in international trade activities. According to the general provisions of this settlement method, the buyer shall first deposit the payment with the bank, and the bank shall open a letter of credit, notify the opening bank of the seller in other places to inform the seller. The Seller shall deliver the goods according to the terms stipulated in the contract and the letter of credit, and the bank shall pay for the buyer on behalf of the buyer.
First, the letter of credit is not attached to the sales contract. When reviewing the documents, the bank emphasizes the written authentication of the separation of the letter of credit from the basic trade. Second, the letter of credit is payable against documents, not subject to the goods. As long as the documents are consistent, the issuing bank shall pay unconditionally. Third, the letter of credit is a kind of bank credit, which is a guarantee document of the bank. Letter of credit (L / C) refers to the written guarantee document issued by the issuing bank to a third party at the request of the applicant and in accordance with its instructions, containing a certain amount and making payment against the documents in accordance with the provisions within a certain period of time. Letter of credit is the most important and commonly used payment method in international trade.
DOCUMENTARY LETTER OF CREDIT APPLICATION