Key principles

By their very nature, documentary credits are an independent payment mechanism, separate from the contracts of sale or other agreements on which they may be based (see UCP 600, Art. 4).

Under a documentary credit transaction, the parties involved deal with documents rather than with goods, services and/or other performances to which the documents may relate (see UCP 600, Art. 5).

Instructions to open a documentary credit must be complete and precise. Too detailed specifications should be avoided.

The advising bank is obliged, among other things, to verify the apparent authenticity of the documentary credit (see UCP 600, Art. 9b).

The banks concerned assume no liability or responsibility for the form, sufficiency, genuineness or legal effect of the documents or for the description, quantity, weight, quality, existence, etc. of the goods represented by said documents (see UCP 600, Art. 34).

The expiry date and place of presentation for the documents must be stipulated (see UCP 600, Art. 6).

Only the submission of proper documents can assure an exporter due receipt of payment.

A documentary credit is not only a means of effecting payment, it can also serve as a credit instrument.