Documentary credits in export operations

A payment security - if used correctly

If used properly, documentary credits offer the exporter a whole host of benefits. They should provide you with the security you require. To do this, they must be issued on a sound contractual basis and it must be possible to comply with the terms and conditions.

We will outline the things you need to bear in mind in particular and the potential implications of discrepancies in the documentation. If you have any questions in this connection, our specialists will be happy to advise you.

The advantages

The bank will effect payment in the form stipulated in the credit regardless of the buyer’s willingness to pay.
The buyer cannot withhold payment on any pretext.
If the buyer wishes to enforce a notice of defects, he must do so outside of the documentary credit. As such, the exporter is in a stronger position as far as the negotiations are concerned.
Any delays, such as can occur when sending bank credits, are largely eliminated.
Payment is generally effected more rapidly under a documentary credit.
Once complying documents have been presented, payment is effected or the bank specifies a fixed payment date (acceptance, negotiation, deferred payment).
If the credit in question is confirmed, the proceeds of a credit which matures after sight can generally be discounted or advanced against payment. Thus, the exporter can obtain credit on favourable terms.

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